Does your YouTube search history look like – “Personal finance for beginners”, “personal finance planning” or “finance advisor”? Do you wish to master your personal finance and stay on top of things? At Nourish Me, we have collated five ways to improve personal finance!
What is personal finance and why is it important?
Personal finance is a practice which enables you to reach your financial goals. Whether it is to own a home or a car, or to travel across the world, personal finance can help you manage your money effectively and fulfil your needs and dreams. Good personal finance is extremely important as it dictates your relationship with money. If kept in check, it can help you achieve financial independence. No need to work for 10 hours every day – and maybe even retire early! Sounds amazing right?
But, managing your finances efficiently is not an easy task for everyone.
What people don’t realise is that personal finance requires a lot of discipline. Keeping expenses in check will help you sacrifice frivolous spending by encouraging the habit of questioning every transaction before you make it. This results in curbing unnecessary purchases, and instead using that money to save each month for emergencies or the more important things in life.
What are the five main components of personal finance?
Just like any other concept, personal finance has its fundamentals too. The five main pillars of personal finance are as follows:
- Saving
Saving money is crucial as this helps in managing expenses for rainy days.
- Investing
Investing money is important to make it grow in value. This helps with beating inflation which can devalue your money over time.
- Financial protection
Financial protection basically refers to safeguarding finances by investing in instruments like life and health insurance. This can assist in cases of chronic illnesses and unforeseen death.
- Tax saving
Tax saving is crucial as governments levy taxes on all activities. Using smart tax saving techniques can help put more money in hand without paying boatloads of taxes.
- Retirement planning
Retirement planning is the main reason for which people save money. Enjoying retirement without financial worry is the end goal for many people.
The aforementioned components can make or break your journey towards financial freedom.
How can I improve my personal finance?
Did you overspend this month? Does it worry you to breach your budget every time? Financial planning can be brought on track by following some simple steps:
1. Track expenses
Tracking expenses is an underrated way of improving finances. Once you start tracking your transactions, you will get an insight into your spending habits. This can assist you in cutting down on frivolous expenses and fixing the leaks in your finance pot. Tracking expenses can also help in determining fixed and variable costs of everyday goods and services, which can help with budgeting as well. Use a personal finance tracker or expense tracking apps to get started.
2. Save
Saving a fixed sum from your monthly income can prove beneficial in the long run. This sum can help with creating an emergency fund, which will help you in those days when things seem bleak. Having a cushion during tough times is underrated. Saving a fixed amount monthly also puts you into a habit of keeping aside some money, which will discourage you from spending your whole paycheck. More savings, less worries.
3. Create financial goals
Working towards a goal keeps us motivated and gives us a reason to continue our saving journeys. Similarly, establishing financial goals help us understand the reason behind our rigorous financial planning and acts as a catalyst. These goals also help us in curbing any greed which may arise once a goal is met, as the need to continue would be diminished.
4. Find alternative Investments
Similar to savings, sound investments are imperative for achieving financial goals. However, investing in the same asset classes as your peers may provide nominal returns, making the outcome goal seem far fetched. Looking for alternate investment tools can fetch better results than those on the same journey and can give you an edge. Asset classes like cryptocurrencies, watches, collectible cars, etc. provide a hedge against pre-existing investment tools, in case everything crashes or when markets are in a downcycle. These assets can also attract high returns depending on the market conditions.
5. Review regularly
Reviewing your portfolio regularly is one step which most of us forget. This step can help us review investments which may not be performing well. However, reviewing a portfolio is not limited to investments and can also include budgets and expenses, which can change over time. This can prevent cases wherein people save less as they forget to factor in new expenses, and remove old expenses in order to balance the budget. Personal budgeting apps assist in reviewing this information at regular intervals.
When should I get started?
You can get started with your personal finance journey at any time as this journey has no prerequisites. Though it may seem daunting at first, it gets easy once you start doing it for a few months, and soon it becomes a natural habit. So let us know on our socials when you start and how it affected your journey towards financial freedom!
Other Articles
The trending skincare ingredients of 2022 and what they do
High protein foods to keep you full for longer
