Too many young people are now coming to the economy; they earn good, sufficient money. But majority of them don’t take personal finance seriously or make mistakes.

Here is a gist of tips or advice to improve personal financial life.

1. Learn the Power of Compounding.

Compound interest is the eighth wonder of the world. He, who understands it, earns it. He, who doesn't, pays it.

Albert Einstein

A simple 5,000 Rupees SIP for 30 years can generate wealth for your retirement. Check it by yourself

Return assumed – 12%

2. Take as less loans as possible, avoid taking personal finance loans.

No Cost EMIs are myth; always check hidden charges and interest rates.

“Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets” – Quote from the famous Book; Rich Dad Poor Dad

3. Life Insurance is not an Investment option.

Rather than buying Unit Linked Insurance Plans (ULIPs), always buy Term Life Insurance of sufficient amount that your family would survive without you.

Invest the money left by not taking ULIPs into the Stock Market (Index Funds are safest in the long run), as the same money would have gone into stocks only, by Insurance Companies.

Suppose, ULIPs Plans for 1 crore sum assured is available at Rs.1 Lakh Rupees, and Term plan for the same sum assured is available is at Rs. 15,000. The amount of 85,000 left, you can invest in Index Funds.

The difference is that ULIPs offer Investment Return on Insurance Amount paid, and term plan does not. The general return on ULIP is 7-8% and in Index Funds it is 12% over a long period of time. Here is the cash flow after 30 years.

4. Regularize doing SIP investment, without taking any break.

Increase if you can in a downfall markets that will increase your Unit Allotment.

Withdraw only when you are in need and not just because it is showing too much profit.

5. Buy Term Health Plan for entire family, so that you don’t have to expend afterwards when they suffer physically.

6. Minimize usage of credit card, don’t spend just because you have credit left or you want to increase your credit score. Buy only those things with credit cards, which you are supposed to buy even if you didn’t have a credit card.

7. Lifestyle change: stop wasting money buying things on discount or billion day sales, things which you do not really require.

If your financial planning is pending, don’t go to late night parties for the sake of showing off and stop taking vacations for Instagram Photos.

8. Build Emergency Funds for futures requirements, the events such as CoViD-19. These events are called as ‘Black Swan Events’.

9. Track your Cash Flows along with tracking Bank Accounts. See where hard cash goes and avoid unnecessary expenses as much as possible.

10. Set Medium Term and Long Term Financial Goals. Medium Term Goals can be getting married, buying a house, leaving job to start business, child planning etc. Long term goals can be Early Retirement.

11. Do not use all hard earned money and retirement funds on child marriage, especially applicable to Indian Parents.

12. Asset allocation: bring diversity on asset allocation.

Fixed Assets, Debt Market, Stocks, Gold and Real Estate are traditional Asset Classes. There are so many financial products available within them now.

For Fixed Deposits, there is an alternative called Liquid Funds. We have already posted an article on that.

Apart from buying stocks directly, we now have Mutual Funds, ETFs, Smallcase, InvITs.

Gold ETFs and Gold Bonds are far better options than Gold held physically. Physical Gold is sold at a higher price, gets depreciated over time and re seling value is lower than market value. Gold ETFs offer overnight selling option, Gold Bond, backed by government of India, offers 2.5% Interest.

Real Estate Investment are one of the way to have long term passive Income, if you cannot afford directly buying Real Estates, you may invest in Real Estate Investment Trusts (REITs), which are listed on Stock Exchanges.

13. Understand Basic Financial Terms, the terms which are generally used in Banks, Insurance Policy, and Financial Reports etc.

Understand the difference between Real Return and Nominal Return.

14. Discuss your Ideas, Plans and Investments with Family also. Give access of your passwords and other details to them.

15. Do productive things which fulfill your Long Term and Medium Term Financial Goals like getting done an online course related to your work for upgrading. Have a side hustle in your free time.

16. While directly investing in Stocks –

Do not believe in market rumours;

Do not trade on the basis of TV recommendation and penny stock tip messages;

See overall market and basic economy once in a while;

Study industry you understand and find leader of the same;

Always see fundament and technical before putting money.

17. Act today and stop postponing your decisions every time.

18. At last, have discipline and patience.

It takes years to improve financially, but it does!

Read more of our blogs at blog.bewealthwise.in