What is personal finance?

According to Wikipedia- Personal finance is the financial management that an individual or a family unit performs to budget, save, and spend monetary resources over time, taking into account various financial risks and future life events.

According to us- Personal finance is the process of making money, managing money, and growing money to gain financial freedom and a sense of how much you spend, save, get into debt, and invest.

The buzzword from 2020- “personal finance”- have you ever wondered, if personal finance is so personal- why does it get talked about so often?- “finance jokes”!

So, what does one need to be great at personal finance?- It’s very easy- so easy, you can start today- Just follow these 5 simple steps-

1- Clear out all your debts- 

Repeat after me- Debts are the enemy of my Finacial goals!- Good- See, if you have any outstanding credit lines, loans, or any type of EMI- your first and foremost objective should be to get rid of those first, as you cannot expect to build a massive portfolio of stocks, cryptos, and all the cool wealth creators if you are giving away thousands of rupees every month to credit card companies.

A very common practice most of us have fallen prey to is “minimum due”- all credit card companies give a feature of paying a minimum due amount which is usually 5-10% of the total due amount and after paying the amount- we can use the full card limit (remaining card limit), but the trick is hidden here when the minimum due is paid, the interest cycle doesn’t stop, you are being charged as high as 36% per month on your total bill. So, Clear out your debts before going on your personal finance journey.

2- Create emergency funds-

Before you start investing your money, you should be cleared with creating an emergency fund, which should be ideally- 6x your monthly expenses, meaning if you have a household expense of 25k per month, you should have at least 3 lakhs in the bank for any emergency cases. 

Some extra funds available for emergencies is an essential component of your overall financial well-being. The best way to create an emergency fund is to set aside a portion of your salary in a different bank account, as soon as it arrives.

3- Follow 60-30-10-

You must have heard about 50-30-20, what is 40-40-20, it is something, which we have devised, We believe- in today’s high-growth, high-risk scenario, especially if you are just starting your career, you can afford to invest more and keep your demand at lowest. Idea is to live frivolous today to lead a financially free life tomorrow- so, we suggest investing 60% per month, religiously- 30% for your needs and 10% for wants.

4- Build passive income-

One of the not-so-often talked points, when we talk about building a great personal finance repo, is to build passive income. See, the whole idea of good personal finance is to be financially free and for being financially free, you should have built passive income sources. Invest in skills, create a business out of your skills- if you are good at writing, you can write for blogs, if you are good at designing, you can design social media posts, if you are good at coding, you have unlimited opportunities or the most basic suggestion- build a dividend income

5- Avoid bad loans/debts-

Is there something good debts and bad debts, yes there are!- If i could explain by giving an example- it would be an education loan is a good loan because it may increase your earning potential which will give you massive returns in the future while a loan taken to buy a luxury car which you can't afford today, is a bad loan. So, in short- try to avoid bad loans as much as possible, and don’t go swiping your credit card at every mega sale offer and discount.

So, there it is- a mini guide to ace Personal finance- try to stick to that guide for at least 6 months, and you will definitely see the difference in your overall financial wellbeing!