Top 5 Personal Finance Tips for 2019

Most of us earn money in the form of a monthly salary. Then we spend it in buying necessities and luxuries. If there is anything left over, we save or invest it in some ‘safe’ avenues, take out a life insurance policy, buy a house and car along the way, and oh yes, a lot of gold jewellery too. For most of us, it is a matter of just about making ends meet with some extras thrown in such as holidays, eating out etc. In this piece, we will be exploring some important personal finance tips.

How many of us actually plan our lives so that we get the maximum out of our financial resources and assets and lead a comfortable existence, prepared for unforeseen situations and doing all the things in life that we want? How many of us actually plan for our retirement or for old age when we may not be as productive as we are now?

The problem with the ad hoc way of living is that when an emergency (involving financial outlay) strikes us, it throws us and our lives, out of kilter and it takes us a while to bounce back from it.

Like everything else, managing money is also something that we have to work at. It does not require too much effort but it involves some amount of discipline, a lot of awareness and a will to stick to a schedule. After some time it becomes a habit and managing money will then be not more troublesome than say, brushing your teeth every morning and night.

In fact, when we talk about personal finance tips, we are talking about money management. Here we will give you the five rules, which if you follow diligently, will ensure that you need never worry about your financial health ever. These personal finance tips should become your habits and be part of your life.

That sounds rather highfalutin, but really it’s not. Let’s explain.

Personal finance is not just about earning money and spending it. There is a lot more to it than that. As a starting point to managing money, you need to sit down and take stock of how much you are worth in terms of your financial and other assets.

Mathematically speaking, your net worth is the difference between what you own and what you owe. So list down all your assets — cash, house, investments, etc. Now, list out your liabilities — how much debt you have to pay in the form of loan repayments etc. The difference between the two will be your net worth. You have to do this exercise periodically — preferably every quarter — because your financial circumstances keep changing from time to time. Monitoring your net worth is like doing a physical health check; it gives you a good idea of your financial health. You can immediately identify what you need to do in case your net worth is negative (your liabilities exceed your assets or you are just about breaking even).

The next rule is to create a budget, which you can follow. Budget is an exercise where you track your expenses and find out where your money goes. The advantage of having a personal budget is that it helps you to develop a spending plan so that you make the best use of your cash inflows and do not find yourself out of pocket, before the end of the month.

Here is how a budget would help you:

You can also include income and expense projections and estimates in your budget.

Ideally, your incomes should exceed your expenses. If you find that your expenses are overshooting your income and you keep having to borrow, then its time you made some changes in your life, such as reducing your expenses or adding to your income.

What do you want to do in life? Where do you see yourself five years from now? Ask yourself these questions to set goals.

The answers to questions such as the above will help you to set goals towards which you can work.

You have to put aside money to meet the goals that you have identified above. The surplus you get from your budgeting exercise has to be saved and invested in such a way that the returns you get should exceed the inflation rate and enable you to have a comfortable life.

Life is not about doing one task after another or filling the hours with entertainment. Implement these top 5 personal finance tips and give your mind a break.

By Amit kaushik

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