7 Things about personal finance that none tells you
Everyone who is working knows a little bit here and there about personal finance. Most of us are aware of the fixed savings instruments, investment through insurance, provident fund, share markets. Though not in detail but at least we have heard or read about the names of these investment avenues through television channels, magazines, websites, newspapers etc.
If you look at the definition of personal finance from YourDictionary, it says “Personal finance is defined as the management of money and financial decisions for a person or family including budgeting, investments, retirement planning and investments.”
I have started my journey towards personal finance around a decade ago. I have also made my share of mistakes during this journey. I sincerely feel if someone had informed me about certain key things in the beginning, I would have certainly not made some of the silly mistakes.
Based on my own personal experience, I am listing down few points which none will tell you about personal finance
- Building wealth will always take time:
Building wealth takes time and persistent efforts unless you get some windfall or some inheritance. If you wish to be a millionaire, you have to plan it well and execute it well too. There are no shortcuts, and one needs to put in sustained efforts.
Remember, there are no quick rich schemes on the way to wealth creation. My own experience so far says that the journey towards building wealth is fun if you learn to enjoy it.
- Early bird gets the worm:
The sooner you start taking control of personal finance, you have better chance of wealth creation. We all know the concept of compounding. An early start towards personal finance can make compounding work in favor of you which in turn will help you in amassing wealth.
Also when you start early, you have the time factor working in your favor. When you give time to your investments, they can grow comfortably and with lesser risk.
- Look ways to increase income if you want to save more and invest more:
Passive income such as income from house, income generated through doing freelance jobs in your field of expertise and through freelance consulting adds up and go a long way in creating wealth quickly.
Also, a better paying job increases your chance to save more, invest more and move quickly towards wealth creation.
- Budget and cut out the excess spending:
This is one of the crucial step in wealth creation. If expenses are more than income, one will always be in negative month on month. With the help of a budget, once you start listing down your expenses, you will be surprised about the crap expenses taking place in your day to day life.
I was surprised when I started listing my expenses sincerely. I must accept that budgeting has helped me a lot in freeing up the additional money for investments.
Here is how you can start working with a simple budget
- Consumer loans are killer:
Though they look cheap, consumer loans are big dampener in your wealth creation journey. The “easy monthly installment” syndrome forces one to buy more and more. The thirst to gather more and latest never ends because the loans are handy and CHEAP.
Try avoiding consumer loans as they are a big hindrance in your journey to wealth creation.
Read: Consumer loans & personal finance
- You can not build wealth with a salaried job:
Yes, you read it right. Most of us somehow pull ourselves out of bed each day and go to job. Because job is the only source of income, you must go as there are bills to be paid for the upmarket home you bought last year or for the swanky new car you purchased. If you do not go to the job, how you will generate money to pay the cost of groceries, household expenses?
With only one stream of income, it’s tough to build wealth. One must work on creating multiple sources of income. Be it some freelance work in your field of expertise or an additional income from an additional floor of your house. Multiple income sources work favorably when you are out creating wealth.
- Learn the basics of investing and work on your investments:
No matter how the term “investments” is terrifying to you as a layman, one must start learning the basics of investments. Remember, it is not a rocket science. Surely it will take some time to learn the “know how” but you must do it as it will help you in managing your own investments. You should know and work on your investments as it is your own money which is being invested. If you leave it on someone, they may not be honest in working with your money because of the conflict of interest.Financial agents, bank employees, investment advisers are most likely to recommend what works for them, not what works for you.
Once you make these points a habit, you will reap the benefits in the time to come. If you can work around on certain pitfalls mentioned here, the journey towards wealth creation would be slightly more smooth and joyful.
Happy Investing !!!