Personal Finance: – In short, it is the judicious handling of your own money. It involves all financial decisions and activities of an individual or household – the practices of earning, saving, investing and spending.
If you have a basic knowledge about finance then in this article you can get all the tips for a good Personal Finance Planning: –
Plan a budget: –
“Do not save what is left after spending; instead spend what is left after saving.”
― Warren Buffett
Having a budget is the first mandatory step to save money. It acts as a roadmap for what you have to do. The best method for this would be 50/30/20 breakdown:
- 50% of your income should be used for things such as rent, home loan, utilities, groceries and transport
- 30% should be allocated to lifestyle expenses such as dining out, clothes shopping etc.
- 20% should go towards future security such as paying down debt and saving both for retirement and for emergencies
Create an emergency fund: –
- It’s important that you understand, you pay for yourself first, so you should ensure that you have to set aside money for unexpected expenses–medical bills, rent if you get laid off, etc.
- Between three to six months of living expense is the ideal safety net.
Limit the amount of debt
- This is a thing that everyone knows but it turns out that it’s not as simple as it sounds. Because you need to avoid debt getting out of your hand.
- One thing that can be done for this is spent only according to how much you earn.
Wise use of your credit cards
- This credit card acts as one of the major reasons for a majority of debt traps. But, in spite of that not only they are crucial to establishing your credit rating, they’re a great way to track spending – a big budgeting aid.
- Credit balance should ideally be paid off every month. One more option to this is the usage of debit cards.
Regular monitoring of the credit score
- A credit card is the main source through which your credit score is usually built and maintained.
- So, if you make sure that your spending in credit card is under control then your credit score will also be good.
Credit scores are calculated between 300 and 850. Here’s one rough way to look at it:
- 720 = good credit
- 650 = average credit
- 600 or less = poor
Payoff student loan
It is one of the most important types of loans which should never be ignored as they can rise very fast and would act as huge debt and also will affect your credit score drastically.
- It would be better if you go for federal loans instead of private ones as they are comparatively better.
- Some federal and private loans are even eligible for a rate reduction if the borrower enrols in auto pay. Flexible federal repayment programs worth checking out include:
- Graduated repayment – progressively increases the monthly payment over 10 years
- Extended repayment – stretches the loan out over a 25-year period