4 Easy And Workable Tips For Sound Personal Finance

By BankBazaar | March 20, 2019

Do you think your finances need a nudge? These practical tips are sure to help turn your financial life around.

The approach you have towards your finances determines how satisfied you are with your money matters. Having sound personal finances is a recipe for stress-free living. Besides boosting your purchase power, it fosters your creditworthiness.

If your finances are in the dumps, here are a couple of ways to take charge of the situation. In this article, we’ll talk about a few thumb rules that we can vouch for. When followed responsibly, these tips will ensure that you’re not bogged down by financial crunches.

Rule 1: Become debt-free before you consider investing

The debt-monster has a way of haunting you to the grave. Before you can begin investing, be sure to free yourself from the clutches of debt.

If left unpaid, your outstanding balances will multiply over time. Not to mention, the high interest that tends to eat into your monthly budget. Pay off your Credit Card debt or loan equated monthly instalments (EMIs) before you can invest your money.

Additional Reading: Handling Debts 101: Ways To Become Debt-Free

Rule 2: Set aside at least 10% of your monthly income

We know this can be quite relative. While 10% of your income may just be peanuts, yet over time it will accrue into a sizeable fund.

Saving 10% of your income is a great way to start an emergency fund. For starters, you can set up an automatic depositing system that deposits an amount decided by you from your salary account into a Savings Account on a monthly basis.

This ensures that you have a contingency fund in case of a financial emergency besides working as a long-term savings scheme. Automating your savings is a great way to prevent you from falling off the saving wagon!

Additional Reading: Money Management Tips That Will Change Your Life

Rule 3: Borrow only what you need

The credit you are eligible for and the amount that you can afford to pay are two different things. Often, if you’re eligible for a considerable amount of credit, it becomes difficult to resist borrowing a higher sum even though you probably might have no need for such a huge amount.

Your bank only factors in your monthly income, outstanding debts, and assets when determining the loan amount you qualify for.

Before borrowing credit ask yourself these questions. Is this amount more than what I need for my financial commitments? Will this loan hamper my monthly budget? In how many years will I be able to repay it?

It’s wise to factor in your cash flow, fixed expenditures, and other additional costs. If you’re unsure about the EMI to be paid each month, use our Personal Loan EMI Calculator.

Pro Tip: We’ve got a bunch of Personal Finance Calculators to help simplify your finances!

Additional Reading: Facing A Bankruptcy? Here’s How You Can Set Things Right

Rule 4: Haven’t used it in two years? You’d better sell it or consider donating

This is the ultimate road to financial minimalism. If your wardrobe is bearing the brunt of your hoarding skills, consider de-cluttering. Now how do you do it?

First, identify things in your house that you haven’t made use of in two or more years. These are easy to spot. They’ll often be left forgotten in corners, collecting dust.

Secondly, give a good thought on whether you really need it. Think of someone who has greater need of it than you.

Thirdly, consider putting it up for sale. Or, you could give it away to someone who’s in need of it. Try incorporating this into your routine at least once a year.

This will give you a clear picture of the things you are more likely to buy impulsively. Also, the proceeds from the sale can be used to clear off debt!

Additional Reading: Recovering Credit Card Addict | What Not To Do

Building a strong foundation for your personal finances is about following time-tested principles that inevitably lead you to a better financial state.

When followed diligently, these financial habits will have a profound impact on your life in general. Even if you don’t see an immediate and obvious change, in a few months the difference made will be quite perceptible.

Additional Reading: How To Spend A Money-free Weekend?

If you’re on your path to financial freedom, you’re at the right place. We’ve got a range of financial products such as Credit Cards, Personal Loan, and Life Insurance and many others for you to choose from!

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