Personal Finance Rules of Thumb-You should know
Personal Finance Rules of Thumb, Let’s see what the rules are.
Money is one of the biggest influences on our lives. Money can be considered an integral part of our daily lives so if we manage money well we can lead a good life.
This is a sad fact that is often overlooked in the field of personal finance education. We need to make sure that children especially understand its functions.
What is Personal Finance?
Personal finance refers to income, savings, investments, loans, and goal planning.
Remember wealth is built on savings. No one can invest without savings.
You need to make sure that your expenses are limited to at least 50% of your income in order to acquire and invest wealth in the long run.
No matter how small the fixed savings, it can have a huge impact when invested in the long run. At least Rs 500 per month is enough to start an investment. You will get better results as the compounding method works irregularly.
Personal Finance Rules of Thumb,
One of the key factors in investing in a lifestyle is controlling the desire to pursue a more luxurious lifestyle.
Try to save and invest 90% of every salary / income increase you get.
Create an emergency fund and turn it into something that can sustain your 1-year base expenses. Efforts to minimize the risk of returns of e-funds.
Minimize your risk by getting adequate health / term insurance. This is enough to take care of your loved ones in your absence.
Understand the difference between good and bad EMI. Do not fall into the 0% EMI trap, as the processing fee is often around 14%. Your EMIs should not exceed 25% of your net income.
Prepare and maintain a monthly budget. There are many online and Excel based budgeting tools available to help you keep track of your expenses.
Prioritize your goals, and your investments should be for that only.
Equity One thing you need to know before you start investing is to understand that equities are very volatile instruments and can give you negative returns in the short term.
You better manage short-term fluctuations through SIP. Understand that equities are best if you have an investment horizon of more than 5 to 7 years.
Monitor / review your investments at regular intervals and re-balance.