Everybody wants to get rich, make a lot of money. But why only a handful of people can do that? Ever wondered? The people who are unable are the ones who don’t know how money works. It’s not about earning money, it’s not about saving money, it’s all about wisely managing the money you already have. Everybody has a dream of luxurious life and that’s fair to have. But why most of the people fail in accomplishing that? The reason is the lack of financial education. Yes, financial education.
Every single person in this world is working and of course not for free. Since everybody values their work why not value money? Yes, I am talking about valuing money. Not just earning and spending it like you have a room full of it. People go in debts, then take another loan to repay the previous one then another, the cycle never ends. Then they find themselves under a mountain of debts, which would take more than their lifetime to repay. That’s because they know how to earn money and know nothing about how to manage it. Who to blame? No, they are not primary schools. They are high schools, colleges and at some point, our parents. Knowing that the child has grown into an adult and is grown enough to know and learn about money they don’t bother to teach. I think high schools and colleges are the best places to teach students the basics of personal finance.
But, don’t worry when you are here, you will take something out of this post.
The most basic rule of personal finance is: The 50-30-20 rule
The money you make needs budgeting and 50-30-20 is the best budgeting rule ever known. Let’s see what is it in brief.
50% of the money should be spent on your personal needs like your daily bills, grocery, food, sanitation, recharges, etc. Needs can be anything that satisfies your everyday life. Not less neither more should be spent on needs. Confusing needs with wants can be a major pullback on your bank balance. Many people categorize their needs with wants so 50+30=80% gets included in needs, which is not having a precise limit on your wants.
The rest of the 50 % is divided into 2 parts. 30% and 20%. So, 30% are the wants, luxury, the kind of life you wanted to live. You are free to spend this 30% on your luxurious wants. It can be your Amazon or Netflix subscription, going out for luxury cuisines or it can be an adventure, traveling to different places you like and whatnot. There’s always a long list of wants.
If you want to have a better and wealthy future you better start saving your money right now. The better option would be investing in some good SIP’s. Emergency gives no prior intimation it just falls on you as if it was always waiting for you to make a mistake as to fall over you all of a sudden. Why not get a backup ready? Savings and investments are always better for a financial backup.
Also there is a simple equation to figure out your spendings which is-
Earnings – Savings = Spending
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