A Beginner’s Guide to Personal Finance

1. Introduction – Why is personal finance important?
2. How to set financial goals.
3. Make budgets: Set monthly budgets
4. Emergency funds and their importance
5. How to save money?
6. Where and how to invest?
7. Managing your Debts
8. Insurances
9. Credit score: Your financial image
10. Planning your taxes
11. Conclusion

Nowadays, making money is not enough; managing it and saving it are equally necessary. Investing money for your future goals and retirement is now crucial; you can’t ignore it.

Managing your money so you can live well in the present and create a better future without any financial crisis is called personal finance.

Whether you are a student, fresher, or working professional, completely ignoring your finances can make you face uncertain times in the future.

Your goals are the foundations of your financial planning. Without goals, you cannot decide where to invest or save money. Setting a smart goal gives your money a direction.

There are two types of goals:

• Short-term goals: 1-3 Years [ like vacations, purchasing new phones, cars, etc. Setting an emergency fund.]
• Long-term goals:5+ Years [ Buying a house, Retirement, child education, and many more]

What are the SMART goals?

• Specific
• Measurable
• Achievable
• Realistic
• Time-bound

Budgeting means keeping track of your income and expenses. It’s a powerful habit for every beginner. Also, it is the foundation of personal finance

Best budget Formula- 50/20/30 Rule

• 50% – Essentials: rent, food, bills, electricity, transport
• 30% – Lifestyle: shopping, movies, eating out, travel
• 20% – Savings/Investing

From this rule, your spending will be balanced, and savings will be guaranteed.

You can use budgeting tools available in the market to keep you in check. Some of them are mentioned below.

• Walnut
• MoneyFy
• ET Money
• Google Sheets

Why budgeting works?

• By following this rule, you can control your impulsive shopping.
• You will start saving automatically.
• You can keep track of your overspending habit. Or where are you spending more?

Budgeting is simple – Track your expenses for one week, and you will be shocked to see where you are wasting your money.

Emergency funds are money for unexpected situations like:-

• Job loss
• Medical emergency
• Car repair
• Family emergency

How much do you need in emergency funds?

You should have at least 3 to 6 months’ worth of expenses in an emergency fund.

Example:

If your monthly expenses are ₹25,000, your emergency fund should be ₹75,000 to ₹1,50,000.

Where should you keep your Emergency funds?

• Savings account
• FD
• Liquid mutual fund (best option for liquidity + slightly better returns)

By minimising expenses and following a budget, you can save a portion of your income for investments or future costs. Saving is not a one-time activity; it is a daily habit.