PERSONAL FINANCE !!! - INTRODUCTION

Our education system focusses more on earning than teaching us about the expenditure part of it. Main aim for 99% people is to get a job and earn. What we miss out on is management of the earnings. The term PERSONAL FINANCE is almost unknown to many people earning handsome amount of money. That's when the regulatory bodies have to come up with the ads and slogans like " Mutual Fund Sahi Hai". Many simply dont know the importance of Personal finance management. So, let's dig deep into the term PERSONAL FINANCE MANAGEMENT.

Personal Finance is learning how to manage our money (investing, spending, saving) and optimize the returns of the money earned. Personal finance concept mainly focuses on key terms - Income, Spending, Savings, Investing and retirement planning.  

Income: It's the amount of money a person makes. Ultimate goal of the daily hustles is the earnings. Without income, rest of the terms don't make any sense.

Spendings: Everybody has to spend the money on two things. The "needs" and the "Wants". Needs are the expenses those are sort of mandatory and cannot be avoided such as Rents, groceries, electricity bills etc. Wants are the expenses those are sort of luxuries like memberships of Gyms/hotels, travel, movies, dining out. 

Savings: Income minus expenses (Spendings) is the savings of an individual. 

Image courtesy- Mintmotion.com 

There is this basic budgeting rule: 50/30/20 rule. essential Expenses ideally should not be more than 50% of income, discretionary spendings should not be more than 30% of income and most importantly savings should not be less than 20%.

Personal finance focuses on getting optimum returns out of income, and mostly the returns are generated on the savings. Optimizing the savings will definitely yield more returns and hence the concept of investing arises. 

Investing: The savings should be invested in financial instruments to yield more returns on the savings. As we know Greater the risk, greater the rewards. Hence investment also needs the risk management. 

Retirement planning: Earnings will eventually stop one day by virtue of retirement. And once you retire, you should be having the life planned for it. Person should have income/investments planned which will generate enough revenue income to support lifestyle of the individual. 

So, we have discussed the personal finance management, and the basic terminology involved. The detailed blogs covering major things will be dealt in upcoming blogs.

As usual, kindly make sure you consult your financial advisor before taking any decision about finances as FINANCE MATTERS and it matters for everyone😇.

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SACHIN GOSWAMI.