Wallet Wisdom: Top 5 Rules to Fix Your Finances

Introduction: –

Hey, are you the one who doesn’t track your spending, spends more than you realize and takes the financial advice from your friends, parents or a colleague?

Then, this is time to sort out your personal finances and start your investment journey.

Remember, money makes possible the enjoyment of the best the earth affords, and you need not to be an expert to handle your personal finances. There is a lot of information available on the internet, financial influences on social media and podcasts that claim to make you rich. But, neither of them guarantees your success. Hence, just cut the crap around you and start with few personal finance books to help you understand the basics of Money and how it works.

Remember, books are your best friends!

Money Management and investments seems to be professional work, but this is not the case. Warren Buffett said,

This quote well explains that there is no age to understand money and start investing and  it’s never too late to mend your ways. Even if you are in your twenties, you can start your investment journey, and the best time is now.

Hello! I am an Indian professional, i.e., Company Secretary who is qualified from Institute of Company Secretaries of India and we are taught Financial Management. I also hold the certificate from National Institute of Securities Market, i.e., Mutual Fund Distributor. Don’t’ worry, this article does not focus on any financial products to invest in, rather it focuses on learning the famous concepts that will help you save money and achieve financial freedom.

Remember, everything will be easy, but you must be ready to learn. There is no shortcut to success!

Tips to sort out finances: –

It doesn’t matter that you are a salaried employee or a businessman or an entrepreneur, the below mentioned tips will help you manage your money efficiently and start your investment journey in such a way that generate passive income and make your retirement fortunate and convenient.

1) Basic rule of budgeting- 50:30:20 rule: – S. Sen. Elizabeth Warren popularized the 50-20-30 budget rule in her book, “All Your Worth: The Ultimate Lifetime Money Plan.” This 50-30-20 rule involves division of your after-tax income into three categories, i.e., 50% goes to needs, 30% goes to wants, and 20% goes to savings. This rule not only help you save 20% straight of your income but enables you to become mindful of your spending habits. Savings should be top priority, and it should be done through investments. You need to keep in mind the following formula: – Expenses= Income- Saving. Just spend what is left after saving.

Remember, this rule applies on people who are starting their investment journey. Once a person stabilises his lifestyle, he/she can fund more towards Saving.

2) The 85 Percent Solution: – I read this rule in book, “I will teach you to be rich”. Let’s explore in depth. The author in this book emphasis on getting started. The idea is to put aside the excuses and act. Just thinking without acting is useless. You need to take one step at a time to start acting. The author says, “I would rather act and get it 85% right than do nothing. Once your money system is good enough or 85% of the way there, you can get on with your life and do the thing you really want to do.”

Remember, action is the key.

3) Rule of Frugal Living – Frugal means economical as regards to money or food. Frugality is about resourcefulness and resistant. A person who is resourceful has wisdom of spending money. Nowadays, social media influencers advertise thousands of products that can be purchased online but a resourceful person knows how to fix things rather than buying new products or paying someone else to fix for them. Second is Resistant. If you are restraint, you will resist buying random stuff, shop smartly with coupons and vouchers and would be happy of your possessions.

Practising frugal living is not easy. You can start with tracking your expenses in different categories like Household expenses, travel expenses, credit card bills, medical bills, loan EMIs, utility bills, etc. At the end of month, you just need 20-30 minutes to make analysis of expenses and discover the expenses that could have been eliminated.

Remember, practising frugal living will aid in more savings in the long run.

4) Rule of Debt -Free life: – Nowadays, consumption has increased so drastically that people purchase things with options of EMI. Almost everything is available on EMI, whether it is a smart phone, laptop, Washing machines, Air conditioner, vehicles, games, houses and what not. Staying debt free is most important factor to attain financial freedom. Continuous loop of EMIs can be very dangerous if one loses his job, meets with an accident or his/her business crashes drastically. Try to build a life where there is no debt. Debt free life brings peace, harmony, freedom and opportunity to invest mindfully.

Remember, it’s okay if you get home loan to have your dream home but pilling up of debt due to luxurious living that you can’t afford can make you bankrupt too.

5) Rule of Investment: –Investment is a concept where your money works for you. A strategy where you earn even while sleeping. It can be investment in Gold, Equities, Debt instrument or in Real estate. Investments are backbone of your financial kit. You need to organise your funds in such a manner that you have emergency fund for contingencies, medical and life insurance and investments that not only generate a passive income like interest and dividends but also take care of retirement. Investment principles are not hard to learn. As earlier said, books are your best friends, you just need to understand basic of investing and yeah! you need not to be an expert.

Remember the quote by Warren Buffett: –