Introduction
You must have noticed that some people always have sufficient money to meet their financial liabilities while a few others struggle to get through the last few days or months. You might be wondering how it is possible? You might be thinking that maybe he or she would be having better salary or income. But it is not true. It is not about the paycheck but the management of funds. Always remember that effective financial management is crucial for the good cash flow. There are ready tips related to personal finance for beginners online shared by experts. It can help plan your financials within your budget and make the most out of your income.
You cannot deny with the fact that if you do not plan your personal finances in your early twenties or thirties, then definitely you are going to experience hard time and struggle to meet your varied obligations in your life. There are many things you can do to enjoy free cash flow all the time. The importance of personal finance is limitless, and we need to understand it. Here we are going to discuss about the 5 Most Important Things You Should Know About Personal Finance.
Read through the content carefully. It will help you a lot and do a better financial planning.
Below are the key aspects of your personal finances:
• Document your earning and spendings
• Disciplined Saving
• Investing
• Reinvesting
• Financial security
• Tax planning
• Retirement planning
• Diversify your investment portfolio
Below we will discuss in detail the top 5 aspects of personal finances:
Number 1: Disciplined Saving
Life is uncertain and so the need for money can arise anytime. There can be several unexpected reasons for money like loss of job, sudden car breakdown, medical emergency, etc. So, there is the need not only for saving but disciplined saving. It means you need to seriously follow and maintain your saving schedule. Generally, the fund for emergency need should be the amount equal to your three to 6 months saving.
There are certain options that can help you meet your emergency fund needs like a fixed deposit in a bank or with a NBFC. Debt instruments such as Liquid Funds can prove to be a good choice. Disciplined saving help you deal with emergency situations and enjoy free cash flow. The personal finance for beginners is of utmost importance and should be taken seriously if you wish to take the advantage of hassle-free cash flow in your life.
Why prefer liquid funds?
• These funds are considered the best for its high liquidity feature. You are allowed to withdraw your invested money any time after seven days.
• Liquid funds are known to offer you a bit better return in comparison to your saving account in a bank. Remember that there is no guaranteed return in liquid funds.
• Your investment in liquid funds is considered safe as they carry negligible interest and credit risk.
Number 2: Commence Investing
At many times, we waste our precious years thinking or planning for saving. Experts say it is better to start saving early. The early you start your investment journey the better you yield and at an early age. Saving and investing are two different things. People very often get confused when you need to understand saving is keeping a particular amount aside to meet unexpected need of money while investing money is buying or putting your money in bonds, shares, mutual funds, SIPs, and other options to ensure your money grow.
If we talk about investment instruments, mutual funds are a good option to make your money grow with less risk. It can help you earn better return if managed well. Bonds are a safe and preferred investment option for risk-averse people. It is known to offer fixed, stable, and predictable income with minimal risk. Also, you can choose to buy bonds of your choice from the many types of bonds available for investment on online platforms like bondsindia.com and others. Some funds or investment avenues are more productive while a few others are less productive. The return on your investment depends on several factors like duration, type of investment option, and principal amount. So, you can plan your financial goals keeping in your mind your long-term and short-term goals in life.
Read carefully to understand better a few good options below:
• Short term goals
Short term goals are the goals that need to be achieved within three years. You may need fund to buy a phone, a two-wheeler, a watch, or a jewellery and the same comes under short-term goals. the best options for it can be ultra-short-term funds, liquid funds, fixed deposit, and corporate bonds with short duration maturity.
• Mid-term goals
Mid-term goals can be the need of funds within three-to-five-year duration. For example, arranging down payment to buy a house, to buy a car, and more. The best investment choices to achieve your mid-term financial goals can be Short Term Debt funds, ELSS, Hybrid Funds, etc.
• Long term goals
The crucial events of life like education of your children, marriage of your kids, buying a house, and retirement comes under long term plans and for the same long-term financial goals is necessary. The early you start, the sooner you enjoy the returns. The period above 5 years can be considered long term. Some of the best suited investment avenues can be bonds, life insurance, SIP, large cap funds, multi cap funds, NPS (only for retirement), and more.
The below table will help you enhance your knowledge about financial goals:
