Whether it is small or big, rich or poor, child or old, employed or businessman, who has learned to use his money properly, he is a truly happy person.
In today’s time, it is easy to earn money but it is very difficult to manage that money. Most people cry about a lack of money even after earning money. Despite a good job, he remains in debt of lakhs.
In this technological age, along with earning money, we should also be able to manage our money well, only then we will be able to become capable.
In this article we are not going to tell you anyway to earn money, the purpose of this article is to make you aware of money so that you can come out of your debt-filled life, and add money for the bad times to come.
I am writing this article for you based on my personal experience as well as the things told by financially successful people from all over the world on money management.
Let us first know what is personal finance,
What is Personal Finance?
Personal finance is about managing your wealth in such a way that you can save money along with meeting all your expenses.
Understand in simple words, managing your income or earnings in such a way that along with all your expenses, you can save money for bad times or old age is known as personal finance
Mistakes you do with money
We often make many mistakes regarding money and as a result, we have to pay heavy brunt for it.
We often make many such mistakes regarding money, let us know about their main mistakes of them and take a pledge that from today onwards these mistakes will not be repeated.
- Spending more than you earn
- buy expensive stuff
- spending too much on your home or car
- Not making an emergency budget/fund
- Not having medical/health insurance
- Not having life insurance
- Taking a loan for non-essential work
- being a victim of a credit card scheme
- not investing for your retirement
- not having a financial budget plan
How To Manage Your Money Wisely
1. Make Your Budget:- You need to make your budget every month, making a budget is not as difficult a task as you think.
You have to write your income in a copy and then you have to set your budget accordingly, for this you can also follow the 50-30-20 rule.
For Example, if You earn 20 thousand rupees in a month, Your monthly budget will be like this:-
| Money | Category | Work/Item |
| 10000 (50%) | Necessary | groceries(3200), Vegetables(2300), Room Rent + Electricity bill (3500) Cylinder (1000) |
| 4000 (20%) | Emergency Fund | Medical, & saving for crises |
| 3000 (15%) | Investment | Mutual Fund, insurances, Donation |
| 2000 (10%) | Learning | Books, Online Courses |
| 1000(5%) | Fun | Party, Junk Food, Recharges |
Similarly, you can also set your budget for every month, if in the beginning, if your income is less and your needs are more, then you can spend more money on necessary work.
2. Track Your Spending:- Every month you should track your expenses and see what unnecessary expenses you can reduce. You need to have a list of the things on which you are spending money and after that, you also have to brainstorm whether it was necessary to spend money on those works or not.
After making the budget, also notice whether you are spending according to the budget you have made or not.
3. Saving:-It is not only necessary to save money, it also depends on where it is being saved and how much return is being received from it.
You should be able to use the power of compounding properly, only then you will be able to get better returns than that, as well as if you belong to a middle-class family, then it is very important to have health insurance for your family and life insurance for the householder.
4. Plan to Pay off Debt:- Avoid taking loans, but if you are already in debt, then you should try to repay them first. Plan and see how much time you can get rid of debt.
If you are living in a rented house and you have taken your own house on loan, then you will give the rent money in EMI, and in a few years your home will be loan free and you will not need to pay rent to anyone, but if If you take an expensive car in EMI then it will be a wrong deal for you.
5. Establish Good Credit Habits:- Avoid wasteful expenditure, use a credit card properly, and do not do expensive shopping from the budget due to discounts.
6. Make Money From Your Money:- Within one to two years of following good financial habits, you will also start generating passive income from your savings and investments.
You can invest in real estate, the stock market, index funds, mutual funds, crypto, etc.
Tips To Improve Your Finance
- Educate Yourself
- Pay Your Debt First
- Pay Your bills on time every month
- Don’t fall into a trap of an attractive scheme
- Save For bad/Rainy days (Prepare for the unexpected)
Financial Resolution
- Review Your Credit Report every month
- Pay Down Your Credit Cards before the date
- Say no to loans
- Tax planning in advance
- invest 20%-30% of every personal income
- update your goals every month
- Optimize your portfolio
- Acquire new skills to boost your income
Need Vs Wants
| Needs | Wants |
| Limited | Unlimited |
| Necessity | Desire |
| Essential | Inessential |
| Something you must have | Something you wish to have |
| for survival | not essential for survival |
| Items / Activity | Need | Want |
| Food | Healthy Diet | Junk Food |
| House | Basic home | Expensive Plat |
| Phone | According to your budget & need | I phone 14 max Pro |
| Car | According to your budget & need | BMW / Audi / jagure |
Learn the Power of Compounding
The rich get richer and the poor get poorer, this is because the rich man knows the power of compounding, he earns money from his wealth, and he increases his wealth every year. and if you want to become rich now, then you also have to understand the power of compounding very well.
You will not understand the power of compounding in a single day, you will have to give time to understand it, today there are many free and paid sources available from where you can learn to compound money very easily. You will get online free courses, eBooks, and YouTube videos very easily, you can also take paid courses, books, and one-on-one mentorship.
With the following formula, you can calculate how much compound interest you will get in your invested amount. You will also find many calculators online that will allow you to quickly calculate your compound.
- FV=Future value
- PV=Present value
- i=Annual interest rate
- n=Number of compounding periods every year (cycles)
Books on Personal Finance
You will find thousands of books related to finance online and offline. And if you want to become rich, to be happy, to be successful, then you must read at least one book in a month.
I am telling you a list of some good books related to personal finance, wealth, and compounding, which you must read.
- Rich Dad Poor Dad
- The One-Page Financial Plan
- The Intelligent Investor
- The secret of Millionaire Mind
- The Total Money Makeover
- I Will Teach You To Be Rich
- The Financial Diet
- The Warren Buffett Way
FAQ | Personal Finance
What’s the 50 30 20 budget rule?
You should spend 50% of the monthly income on your essential expenses, 30% you should invest and 20% you should save for emergency.
What are the 3 Financial Skills?
1. Understanding of Wants & Needs
2. The Importance of Saving for Emergencies
3. Understanding Nothing is Guaranteed
Money management Tips for Students
1. Don’t Spend on show off
2. Avoid Debt/loans
3. Start saving Earlier
4. Start Investing If Possible
5. Keep a track of all your Expenses
6. Take advantage of Student Discounts
7. Invest in Yourself
Final Words on Personal Finance
If you don’t learn from the mistakes you made in your past, then one day again you are the victim of the same mistakes. That’s why by taking lessons from whatever financial mistakes you’ve made in the past, follow a better financial habit from today onwards and make sure you grow your finances, avoid unnecessary expenses, and invest in your learning.