Taking care of one’s finance is no child’s play and much effort and time have to be allotted in this front.
It is said that Personal finance is 80% behaviour and 20% personal knowledge application. Thus, disciplining one’s behaviour regarding spending and savings is a tough task to be implemented.
One has to observe oneself and record every financial transaction and take reformative steps wherever necessary. For this, applying and setting up principles of personal finance management can be very helpful and relieving.
Personal Finance tenets or principles, when applied, would lead to sound accumulation of savings into wealth and no loss situations.
Additionally, if these tenets are applied life long as habits, then the process of wealth accumulation becomes systematic and stress-free.
PRINCIPLES OF PERSONAL FINANCE
Mentioned below are some must-know principles for taking care of one’s personal finances:
MONEY SAVED IS MONEY EARNED
The very basic premise of making and retaining a bank balance is that nothing above what one earns should be spent. And indulging in the habit of saving will only bring riches.
Money saved is money earned indirectly without any work. This money would help sometime later when one would be facing a cash crunch.
Starting from the first job itself, this habit must be cultivated of savings as this would form the basis for emergency corpus.
One’s Savings can be used in various ways, and this discretion is available because one used time smartly to allocate some money apart from regular expenses.
TAKING GOOD CARE OF CREDIT SCORE
Many people, while taking various kinds of credit, do not realise the importance of gaining and maintaining a good credit score.
A credit score is the benchmark calculation of gauging one’s creditworthiness concerning debt, earnings, and net worth.
This measure is critical as banks, and every other financial institution checks this score to lend any amount of money in the future.
As and when a loan or credit card payment is made on time or well ahead of time, the score automatically gains a higher point. This factor leads to the ease of getting financial assistance from banks.
Additionally, one must have this personal integrity of paying off one’s loan or debt first, then making new purchases or even opting for any insurance.
People many times take their debts not seriously and keep on adding unwanted expenditure on it. Not prioritising debt repayment has long term percussions of accumulation of excessive interest and loss of income for basic living.
Your credit past is your future, except for easy loans for bad credit given by online lenders. The history of a person can cloud the future possibilities of taking any financial assistance.
But, some accredited online finance companies specialise in lending funds to people with a bad credit score as well. These online lenders give many easing options in availing and repayment of the loan.
Included in this as well are doorstep loans From Private Lenders UK which caters to going to the residences of borrowers by agents of the lending company and complete all loan formalities.
Just by sitting at home, people with low creditworthiness, unable to offer collateral can avail of this doorstep loan at competitive interest rates.
TAKING PERSONAL RESPONSIBILITY
Many people miss out on this tenet. Taking responsibility for one’s lifestyle and monetary situation is one of the foremost things in personal finance.
Since the time of one’s first job earnings and after a while, a person must learn to take responsibility for one’s monetary situation.
This would mean not to take unwanted credit cards as well as spending thoughtfully.
Taking responsibility would also mean that to change any monetary situation, only oneself is responsible as well as for any losses or theft of any kind.
This would, in turn, make a person more sophisticated in spending and enable them to become financially literate.
AIM FOR MULTIPLE SOURCE OF INCOME
Earning money from just one source of income is not enough. This leads to not much earnability as well as less usage of one’s abilities for value-added outputs.
Apart from one’s regular job, another source of income should be made, and this can be of any type. One can give away for rent excess residential property or even take tuitions or coaching to children.
Even any kind of freelance business would suffice and ideas to support art time jobs are plenty on the internet. Choosing an easy task and employing oneself in it to earn more than one income is good for one’s pocket.
Moreover, using savings to make various kinds of stock market investments would also lead to another source of income. This income can be in the form of dividends or interest or even equity worth increase, and this often leads to windfall earnings.
Additionally, these added sources of earnings would also mean more savings and better scope for its investing. This investing would, in turn, lead to a compounding of the money spent over several periods.