Basics of Personal Finance
Steps to Personal Finance is a blog for you to unearth the basics of it to make it work for you. Personal finance is a subject which needs a lot of discussion in society but to date, it is a bit ignored and people hesitate to talk about it because they don’t think it is that important to talk. And the reason given is quite simple that everybody knows how to use or manage their hard-earned money. You must have a habit of tracking your income, expenditure, savings, and usage which is a prerequisite for you to be financially free.
If we go in some more depth we can easily replace the saving part with that of investment by which I simply mean that your saving should earn for you rather sitting idle in the bank or deposit.
Baic Steps to Personal Finance
To enjoy the fruit of budgeting at a later stage in your life two things you must focus upon:
a. Time to Dive in to investment or saving.
b. Amount of investment or Saving
Time to Dive in investment:
In general, when somebody asked about his investment or savings, People tend to make excuses like its just the start of their carrier, or lets first enjoy life initially. But I must assure you that your timing of investment is the biggest factor in your wealth generation and you must start investing as early as possible. The more delay you make in starting an Investment, the more you lose in the long term.
Many people simply waste their precious time by thinking about the best options to invest in or where to invest in among those options. While doing so they got confused themselves and in turn got distracted from the aim of starting to invest early!
People generally miss the golden opportunity and the opportunity is starting years of life they have when investment would have created wonders for them.
Starting an Investment in the early days of life have maximum effect and maximum chunk out of total asset generated over the years. But it requires the right choice, dedicated time, and hard work from your side to create wonders for you. Early investing is the best way to make sure that you are not burdened later in your life.
Amount of Investment:
Simply means how much you can dedicate towards investment easily. Many people think that starting an investment with a small amount will not be of much use and can not generate any wealth for them. But I must assure you that the early you start investing more it generates for you as discussed above. In the starting years, you have less responsibility and less expenditure so you can save more. You can start an investment with a basic minimum like 500 or more, but you must start that is the golden yardstick.
A little amount of investment can contribute maximum to your wealth over a long time provided you started timely. The investments made in the early years of your life will have the effect of compounding with itself. As per this Compounding effect, your investments made in an asset will generate returns for you. The returns generated by your assets will be so great that your contributions will look small in comparison.
Albert Einstein is credited with the statement compounding is the eighth wonder of the world, He who understands it earns it… he who doesn’t… pays it
Because there are two ways by which there is an accumulation in your wealth. The first one will be your contribution which you dedicated to the investment part. The second part will be the returns generated on the wealth you contributed which is nothing but because of the compounding effect.
Investments made in the early years by you will give you relaxed and stress free time in the future by investing less for same returns. Because investment added to your basket in the starting years will pave for a major chunk in your net asset in future as it has maximum contribution.
So the effect of investments made at the starting of tenure is sizeable and if at all you reduced or even stopped the investment in the last years of tenure, there will be no major difference in outcome at the end of tenure.
So in a nutshell, it is advisable to start investing today if not initiated to date because it is better to save little now than save the maximum in the future. Investments made in present have a scope of growth in the future with compounding effect which will fruits you in a good asset.
But it is, in general, a problem for one who recently started his or her carrier to save something for investments. And he or she will have enough reasons or can say excuses for that. But to manage all these you must go through my other blog on personal finance.
How to save to invest
Now how to save or take out something for saving to make it as your first investment, you can go like:
⇔ Manage you unnecessary expenses.
⇔ List out all your income and expenses and their sources, by which you will come to know which spending you could have easily averted.
⇔ Don’t buy things when you cannot afford it because buying an elephant is easy but to maintain the same elephant is really tough.
⇔ Choose the vehicle after due consideration and if it ok go for two-wheeler till the time there is no dire need of four-wheeler.
⇔ Make a habit of walking and don’t be a slave of auto or taxi for close distance
⇔ Do prepare a list of all items of shopping and check for discounts and if possible join membership for the same it will provide you with attractive discounts.
⇔ Use plastic money i.e Credit cards or Debit cards wisely.
⇔ There is a difference between Credit and Debit cards which you should exploit and use it in your favor.
⇔ You can plan your vacation trips in off seasons when there is no competition.
⇔ While planning your trip you can check out tips on how to book cheap hotels.
These are some tips just to help you manage your extra and avoidable expenditures easily and there are many more ways you can think upon depending on lifestyles you follow.