Finance

10 essential rules of personal finance that you should follow

Published

2 years ago

January 27, 2024

10 essential rules of personal finance that you should follow

Insurance and retirement planning are key components, ensuring financial security in the long run. Understanding tax implications and continuous learning about financial matters contribute to a solid foundation. Personal finance empowers individuals to make informed choices, build wealth, and achieve a secure financial future.

In the dynamic landscape of personal finance, navigating the complex terrain of income, expenses, and investments can be challenging. However, adopting a set of tried-and-tested rules can pave the way for financial success and stability. In this blog, we’ll explore ten personal finance rules, aiming to empower individuals to make informed decisions and build a secure financial future.

Budgeting is key: One of the fundamental pillars of personal finance is budgeting. Creating a monthly budget helps individuals track their income, categorise expenses, and identify areas for potential savings. In the Indian context, where diverse spending patterns and cultural nuances exist, a well-crafted budget serves as a roadmap for financial discipline. Allocating a portion of income towards essential expenses, savings, and discretionary spending ensures a balanced financial life.

Emergency fund: In a country where economic uncertainties are prevalent, having an emergency fund is crucial. Unforeseen events like medical emergencies, job loss, or unexpected expenses can disrupt financial stability. Aim to save at least three to six months worth of living expenses in a dedicated emergency fund. This financial cushion acts as a safety net, providing peace of mind during challenging times.

Insurance is a necessity: Insurance is often overlooked but plays a pivotal role in safeguarding one’s financial well-being. Health insurance, life insurance, and property insurance are essential components of a comprehensive financial plan. Adequate coverage ensures that unforeseen events don’t lead to financial ruin, providing financial protection for you and your family.

Clear debts strategically: Managing debt is a critical aspect of personal finance. While not all debts are harmful, it’s essential to prioritise and clear high-interest debts like credit card balances. With the burden of interest rates, clearing such debts should be a priority. In contrast, low-interest debts like home loans may be managed strategically, considering their potential tax benefits.

Invest early and wisely: The power of compounding works best when time is on your side. Start investing early, even if it’s a small amount. Understand the risk-return tradeoff and diversify your investments across various asset classes. Options like mutual funds, Public Provident Fund, and Equity-Linked Saving Schemes (ELSS) can be explored based on individual risk profiles and financial goals.

Retirement planning: In a culture that traditionally emphasises familial support, planning for retirement can sometimes take a back seat. However, it’s essential to build a retirement corpus to maintain financial independence in the later years. Invest in retirement-focused instruments like the Employees’ Provident Fund (EPF), Public Provident Fund (PPF), or National Pension System (NPS) to secure a comfortable post-retirement life.

Stay informed about tax planning: In India, the tax landscape is intricate and ever-changing. Staying informed about tax-saving instruments and exemptions is crucial for optimising your financial plan. Leverage tax-saving options like the Equity-Linked Saving Scheme, National Pension System, and tax-saving fixed deposits to minimise your tax liability while maximising your savings.

Continuous learning: Financial literacy is an ongoing process. Stay informed about the latest market trends, investment opportunities, and changes in financial regulations. Attend workshops, read financial literature, and seek advice from financial experts to enhance your knowledge and make informed decisions.

Plan for big life events: Whether it’s buying a home, funding your child’s education, or planning a dream vacation, financial goals vary widely. Create a roadmap for achieving these goals by setting realistic timelines and saving systematically. Explore investment options that align with your goals, ensuring you’re financially prepared for significant life events.

In conclusion, mastering personal finance requires a combination of discipline, knowledge, and strategic decision-making. In India, where cultural and economic factors play a significant role, adopting these ten personal finance rules can pave the way for financial success. From budgeting to strategic investments, each rule contributes to building a secure financial future. By embracing these principles, individuals can navigate the complexities of personal finance with confidence, ultimately achieving their financial goals and aspirations.

Rohit Gyanchandani is Managing Director at Nandi Nivesh Private Limited

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Published: 27 Jan 2024, 12:39 PM IST

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HOLYOKE — The City Council has advanced plans to create a finance and administration department, voting to send proposed changes to a subcommittee for further review.

The move follows guidance from the state Division of Local Services aimed at strengthening the city’s internal cash controls, defining clear lines of accountability, and making sure staff have the appropriate education and skill level for their financial roles.

On Tuesday, Councilor Meg Magrath-Smith, who filed the order, said the council needed to change some wording about qualifications based on advice from the human resources department before sending it to the ordinance committee for review.

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On Monday, Mayor Joshua Garcia said in his inaugural address that he plans to continue advancing his Municipal Finance Modernization Act.

Last spring, Garcia introduced two budget plans: one showing the current $180 million cost of running the city, and another projecting savings if Holyoke adopted the finance act.

Key proposed changes include realigning departments to meet modern needs, renaming positions and reassigning duties, fixing problems found in decades of audits, and using technology to improve workflow and service.

Garcia said the plan aims to also make government more efficient and accountable by boosting oversight of the mayor and finance departments, requiring audits of all city functions, enforcing penalties for policy violations, and adding fraud protections with stronger reporting.

Other steps included changing the city treasurer from an elected to an appointed position, a measure approved in a special election last January.

Additionally, the city would adopt a financial management policies manual, create a consolidated Finance Department and hire a chief administrative and financial officer to handle forecasting, capital planning and informed decision-making.

Garcia said that the state has suggested creating the CAFO position for almost 20 years and called on the City Council to pass the reform before the end of this fiscal year, so that it can be in place by July 1.

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Vacon said then the treasurer’s office was “a mess,” and that the city should “fix” one department before “mixing it with another.”

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Holyoke had a history of late filings. For six of the past eight years, the city delayed its required annual financial report, and five times in the past, the state withheld aid.

Council disputes over job descriptions, salaries and reforms also stalled progress.

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