We covered why you need a balance between spending and saving and how to plan a budget in our past newsletters. If you are new here, you can read those over here.
In this blog, we will dive deeper into a beginner’s checklist for personal finance. You can look at whether you have completed the basics.
Estimated read time: 2 minutes and 53 seconds
Hint: Unlike your school or college test marks, scoring full marks in this test might settle you for a stable life.
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Buckle up, here we go!
What personal finance covers:
Most people are not aware of this, but personal finance includes expense, income, investment portfolio, tax, retirement, protection, and inheritance management. Don’t worry, Vrid will help you manage all these in simple ways.
Beginner’s Personal Finance Checklist:
The checklist will help you begin your personal finance journey. We will take you through the steps in more detail in the upcoming newsletters. Pinky promise. So subscribe if you haven’t yet.
You are already one level up in your personal finance journey by being here.
1. Avoiding Basic Financial Mistakes:
Have you unsubscribed to the unused subscriptions? Are your EMIs above 40% of your post-tax salary? Have you paid your credit card bill on time? Are you living within your means?
Many small things like these can suck your money with ease. If fixed on time, 40% of your problems are over.
2. Emergency Fund:
Do you have enough liquid funds available to cover any emergency today?
The basic thumb rule is to save at least 6 months of your basic expenses in separate liquid funds. You may lose your job, meet with an accident or have sudden health problems. This fund should be accessible whenever an emergency arrives.
3. Protection:
Do you have life, health and other important insurance? What if, unfortunately, you die tomorrow? Can your family survive without financial help? Or what if you get diagnosed with some disease or damaged your bike/car in an accident? These incidents can drain your savings & investments.
It is crucial to take life & health insurance as early as possible in your life. The premiums are low when you buy them at a young age. Remember, we should never consider insurance as an investment.
4. Tracking Expense:
Have you started tracking your expenses? Even if you don’t take any significant action at the moment, it is necessary to just track your expenses every month. Awareness is important.
5. Debt Management:
Have you or your family taken a loan for a car, home, or anything else? Are you paying the instalments on time? Is it possible to repay the loan earlier?
You need to consider these points and track whether everything is on course. Remember, even the no-cost EMI for your laptop or mobile is a loan.
6. Income Management:
Considering your salary alone as your income is a big mistake. Interest on your FDs, dividends from your investment, etc. are also your income.
Living on a single stream of income is risky. Make sure over time you invest in assets that provide you with an extra source of income. It can be your side business, real estate property, mutual fund investments, or interest income.
7. Goal Planning:
Have you figured out what are the goals you want to achieve in your life? It can be your higher education, trip, car, house or kids. If not, start pondering on it. Write them down and think about the resources required to fulfil them.
Also, we all know that as we grow, our goals might change and that’s okay. It is important to acknowledge them from time to time and revise it.
8. Investment Management:
After completing all the above steps, it’s time to focus on basic investments. If you are a beginner, you need to start investing as soon as possible.
Pro Tip:
You can never time the market. So, create a SIP and invest in index funds every month.
These investments should be separate from your emergency funds. Invest based on your goals and risk appetite.
Since we are talking about beginning your personal finance journey, we don’t want to overwhelm you with complex information about detailed investments, taxes, retirement, and inheritance. Soon, we will share an advanced checklist that focuses on those topics.
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Still Curious?
If you are like us, who likes to analyse a little more or check out content in different formats, well you are in luck. Below you can find some suitable content we found.
Investopedia – Ten Personal Finance Strategies
The Financial Diet – The 20-Point Checklist For Getting Good With Money In Your 20s
Ranveer Allahbadia – Personal Finance Management For Beginners
Note: We don’t have any affiliation with them. We are sharing links only for educational purposes. The opinions expressed by them belong solely to them and do not reflect the views of Vrid.