Personal finance: Financial management can help you have a better understanding of where and how you are spending your money.
Even if you are earning lakhs of money and not managing your personal finance meticulously, you may find yourself with an empty hand. Hence, it is important to learn financial management to reach your financial objectives. It can help you have a better understanding of where and how you are spending your money.
Here are five suggestions to assist you in managing your finances:
1. Budgeting
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Budgeting is the process of creating a plan to spend your money. It is crucial to write down all your expenses and allocate funds to them, balancing your expenses with your income.
This plan allows you to determine in advance whether you have enough money to meet your expenses and potential shortfalls.
2. Save before you spend
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Investor Warren Buffett says "Do not save what is left after spending, but spend what is left after saving". While savings will help you meet your daily expenses, they are better utilised when they are invested in long-term investment opportunities.
An important aspect of financial management is to set an investment objective based on your priorities in life.
3. The power of compounding
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Compounding is basically a long-term investment strategy and it benefits the most when one starts early. The longer your money is invested, the more time it has to grow.
The power of compounding adds the profit earned back to the principal amount and then reinvests the entire sum to accelerate the profit-earning process.
4. Talk to experts
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Talk to financial advisors and make the right decision based on your needs. Whatever stage of life you`re in right now, having a prudent plan for personal finance management is a must and it matters because it will help you live a good life now and in the future.
5. Choose safe lending options
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Sudden unplanned expenses or emergencies can sometimes mean we may not be able to meet our financial needs at all times. While being cash-strapped between pay cycles can be alluring to take payday loans but these loans can cost you severely.
Paydays lenders often charge high-interest rates and fees and have significantly higher penalty/late fee charges. Other options such as credit cards and Buy Now Pay Later programmes can provide convenience but also charge interest and late fees that can be expensive.
Instead, opt for solutions like Salary On-Demand that lets you access your earned but unpaid salary instantly without any loans or high fees.
(With inputs from IANS)
