Try making a budget - Deepstash

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Financial planning for Beginners - Top 10 Golden rules

Try making a budget

  • Create a full inventory of expenses in front of you: Categorize them into fixed and variable; urgent and non-urgent; necessities and luxury; avoidable and unavoidable.
  • You can create a hierarchy of needs and decide which one’s to address first. It’s all about prioritizing. 
  • Accept that you have limited resources and unlimited wants. But you have to manage your resources. The sooner you accept this fact, the better you can control your impulses towards avoidable expenditures.

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Financial planning for Beginners - Top 10 Golden rules

Financial planning for Beginners - Top 10 Golden rules

https://cleartax.in/s/beginners-financial-planning

cleartax.in

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Key Ideas

Financial planning

 ...is the process which provides you a framework for achieving your life goals in a systematic and planned way by avoiding shocks and surprises.

Maintain a personal balance sheet

It’s a statement wherein you can jot down your assets and liabilities.

  • Pull together your bank statements and other proofs of the liabilities
  • List down your assets like the bank balance, all investments, home value, and value of other assets.
  • Take a sum of all the assets to arrive at the total value of your assets.
  • List down your liabilities the (car loan, home loan, credit card balances etc.)
  • The sum of all the liabilities will show the value of the money you owe.
  • When you subtract the value of liabilities from assets, you get your Net Worth.

Planning for Retirement

What you don’t know is that the earlier you start, the richer you retire. It happens due to the “magic of compounding”.

While planning for retirement, you need to clarify a few points like deciding an age at which you want to retire. Along with that estimate how much money you will need every month to meet your post-retirement expenses.

Manage your Debt wisely

In case you have a lot of debt to shoulder, start paying off the most expensive one. 

The credit card has been regarded as the most expensive form of debt. As soon as your salary gets credited each month, pay off your credit card balances in full. Don’t fall for the lure of paying off the minimum balance. 

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SIMILAR ARTICLES & IDEAS:

Investing defined

Investing is about laying out cash or assets now, in the hope of more cash or assets returning to you tomorrow, or next year, or next decade.

Most of the time, this is best achieved th...

Productive assets explained
  • Productive assets are investments that internally throw off surplus money from some sort of activity. 
  • Each type of productive asset has its own pros and cons, unique quirks, legal traditions, tax rules, and other relevant details.
  • The three most common kinds of investments from productive assets are stocks, bonds, and real estate.
Investing in Stocks
  • It means investing in common stock, which is another way to describe business ownership or business equity.
  • When you own equity (the value of the shares issued by a company) in a business, you are entitled to a share of the profit or losses generated by that company's operating activity.
  • Equities are the most rewarding asset class for investors seeking to build wealth over time without using large amounts of leverage.

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Saving on Transport

Cycle or walk to work to save money and get fitter. If you’re on the lazy side, invest in an electric bike to help you up those hills in the morning.

Also, if you normally drive to wor...

Saving On Electricity

Turn your lights off when leaving the room. If you live with forgetful people, place little stickers by the switch to give people helpful reminders.

You can also replace bulbs with energy-saving ones.

Saving On Self-Care

Simplify your beauty regime and ditch expensive creams. All your skin needs is a good diet, plenty of water and hydration.

Also, brush your teeth twice a day and don’t forget to floss. Having teeth issues leads to expensive dental bills.

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Investing

... is the trading of your money today for a lot more money in the future. It is a high yield over the long term.

What happens to your money

Banks don’t like to give away their money. That mindset is reflected in the interest rates of checking and savings accounts of 0,5% and 0.9% avg. annual interest respectively.

When you deposit your money in the bank, the bank turns around and invests that money at 7% a year or more. After they collect their profit, they give a tiny shaving of it to you.

Portfolio and Diversification
  • Your portfolio reflects your long-term wealth building investment strategy – not the short term. It includes everything you own. Your retirement accounts, your investment accounts, even your home are types of investments.
  • Diversification is a way to describe owning multiple types of investment assets. Diversification is smart because you both protect yourself from failure and position yourself to take advantage of multiple robust methods for building wealth.

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