7 Important Things To Remember About Personal Finance Management

Keeping your finance under check is an important decision in today’s era of high inflation. It’s really important to manage your own finance since no one else actually cares more about your money than you do. You don’t need to be a professional to take care of your personal finance as you can easily take care of little things on your own. You can master your money management skills by opting for a financial management course.

The following are the list of simple steps to implement good money management skills and to keep your personal finance management under check-

1. Take up a term plan

Term plan is an important decision especially you are the only working and earning member of your family and you have dependants to take care of. Here you just need to pay small premium to get a bigger coverage. For example in order to get coverage worth Rs 50 lakhs, you just need to give an annual premium of Rs 5000-6000 (approx). Term plan ensures that your family will be protected in case anything happens to you (earning member).

2. Take up a life insurance policy for all family members

Life insurance policy is designed to ensure you and your family are able to maintain a position of financial security in case of any unexpected event so that your loved ones received a proper treatment without worrying about money. Life insurance policy is very important for all your family members as health problems don’t see any age. It is a must for your aging parents or other members who have crossed their mid age.

3. Create an emergency fund

Do you know what’s going to happen the next moment?

The answer is no. Right?

The future is very uncertain and you don’t know what’s going to happen next, hence maintaining an emergency is really important. The fund should comprise of 6-9 months of your monthly household expenses. For instance, if your household expense comes to about Rs 20000 every month, then you should maintain your minimum emergency fund of Rs 1,40,000. You should keep this fund in a safe and liquid account so that it can be used in case of need. Moreover, make sure it is used only in case of emergency like job loss, major illness, accident, etc

4. Avoid using credit card

Unless there is a serious need, try to avoid or limit the usage of credit card as much as possible since credit card if used casually may end up with a big disaster. Your purchase becomes even more expensive due to so high interest cost which might even affect your mental peace.

5. Set financial goals

A proper personal finance training that can help you get an edge and make it easier for you to manage the same. For any successful endeavor, planning is a must and it becomes really important when it comes to money management. It’s similar to a road trip without a map and you really don’t know where exactly you are heading to.

Set a proper financial goal and analyse it over various time frame which includes short term, intermediate and long term to effectively manage your goal. Your goal should be properly quantified and keep it in a place where you can see it on a regular basis so that it motivates you to do your work regularly.

6. Try to reduce your debt

Debt can be a stressful experience especially if it is a big one. No matter what phase of life you are experiencing at the moment, you are obligated to pay it back. The problem with debt is that when it starts pilling up, it becomes more difficult to get out of the debt. Debt in simple words, is like a vicious cycle.

7. Have an established budget

You should have an established budget to have a greater control of your funds. Write down both the outflows and inflows at any place and try to reduce the unnecessary expenses as much as possible. Classify your expenses into fixed (like your rent) and variable expenses (getting a cricket match, buying a watch etc) as it may help you in identifying the expense which you may cut down if you want. If you spend more than your earnings, it may lead you in trouble in the long run.

You should have an established budget to have a greater control of your funds. Write down both the outflows and inflows at any place and try to reduce the unnecessary expenses as much as possible. Classify your expenses into fixed (like your rent) and variable expenses (getting a cricket match, buying a watch etc) as it may help you in identifying the expense which you may cut down if you want. If you spend more than your earnings, it may lead you in trouble in the long run.

Bottom line

It may be a tiring and a painful task to develop a budget once you develop a habit and religiously do it for couple of months, you will understand that how much change it brings in your life. No matter how much you earn, try to develop a money management habit as it is a major problem which most successful people even suffers.

Ankit Jaiswal is a commerce graduate from St. Xavier's college, Kolkata He strongly believes in the following saying-"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it" - Warren Buffett