A common problem in personal finance management is that people do not take it seriously. Yes, we hear people boasting about their wonderful investments, assets, and ambitious plans, yet on the implementation front, they are as messed up as they can be. It is a thumb principle that personal finance management is determinative of a person’s overall financial health. The high-net-worth individuals (HNWIs) know the importance of personal finance management. It is the ways we will be exploring so that you can take cues and start working on effectively consolidating and managing your assets and plans.
Before we begin with those ways, let me tell you what personal finance constitutes so that you know what part of finance management you are dealing with. Personal finance encompasses the management of your wealth as well as matters of investment. It covers many aspects, such as budget-making, insurance, retirement planning, and whatnot. Any personal goal that requires money, such as education plans for your children, comes under the definition of the said term.
On this note, let us explore how you can organize and manage your wealth–and we shall do what the HNWIs suggest.
- Know the Categories of SpendsWhile keeping track of every minute of personal expenditure, it is always workable to broadly classify your areas of expenditure. In finance management, it is called the ‘envelope system.’ As the name suggests, you put your expenditure in specific envelopes or categories. Determine the budget for each envelope for a specific period and analyze them whenever the time’s up.
These envelopes could be categorized into transportation, medical bills, outdoor dining, grocery, and shopping. This way, you can track most of the major spendings and tailor your spending habits based on timely budget-based outcomes.
- Consider InvestmentsFixed Deposits have been a mainstay feature of the savings strategies of the older generations. Even today, in countries with a more savings-centric approach, such as India, fixed deposits remain a common preference even among younger generations. Things are changing, of course, as more people dive into the world of investments. India has recorded unprecedented stock market investment growth in the past few years.
Now the increasing popularity of investment-friendly culture does not mitigate the market risks. These risks remain. Not everyone has the resources or the guts in bulk to invest ambitiously in the market. So, there is an alternative. Go for a Systematic Investment Plan (SIP) in mutual funds. Determine your goals, research mutual funds that help you achieve those goals within the required time, and invest periodically. You don’t have to fund a handsome sum every month; keep them long-term to receive significant results.
- Start thinking about retirement earlyYou must be reading quite a lot about the increasing burn-out cultures. The old school, break your neck if need be, workforce culture is no longer appealing, especially to the younger generation. Many want to work in congenial, relatively relaxed atmospheres and retire early. But do you retire early without a plan? Of course not.
Even if you plan to never retire, you may at some point have to put a pause on your work. You age like every other human, and your circumstances are as unpredictable. So, plan well. It doesn’t matter whether you are in your early 20s or late 30s; start as early as possible. In case of a late start, you may have to plan more aggressively than normal. But don’t go lax.
- Make the Best Use of TechnologyNo matter how prolific technology is in our daily lives, not everyone can be an equally capable user of it. And, in the case of personal finance, you don’t have to be a techno-crat. Just the right amount of knowledge and skill is enough to get by and exploit the giveaways of technology in personal finance management.
Various finance management apps track expenses and assist in budget configuration. Bank statements are electronically communicated to the users. Online payments have become remarkably popular following the pandemic. Even countries such as Japan and India, with traditionally cash-based economies, have substantially switched to online-based payment systems. Being in touch with technology is supplemental to finance management, as all your income, investments, and expenditures are digitally recorded. Such accessibility is convenient and smart.
- Let the experts do the workThis suggestion may not be very suitable for persons with limited budgets, but it is worth considering. If your budget allows, you should consider hiring a financial planner. There are professionals out there who spent sizeable chunks of money on their education to learn the best ways of finance management.
The HNWIs do not have the time and the capability to keep an eye on their vast expanse of assets, income, and expenditures around the clock. So, they have these professionals do the job for them. These people can help you scrutinize your existing wealth and liabilities, devise a plan to deal with assets, and help you go on with life without too much tension.
Have you read?
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Temptation Bundling: The Secret to more joy for hybrid workers by Sasha D’Arcy.
How to Make a Change in Your Boardroom’s Culture by Shireen Muhiudeen.
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