Personal finance basics 2025
We do not know whether many of the subjects taught to us in school will be useful to everyone in real life, but there is one subject that is not taught there that is definitely useful in the life of each of us, that is financial education. We need general financial education more than the advanced calculations taught to us in school. Because we do not know whether they will be useful to us in real life, but this financial education will definitely be useful in everyone’s daily life.
Many people who do not know about financial education face many financial difficulties due to small mistakes they make knowingly or unknowingly after completing their education when stepping into real life. No one tells us about this in school or from people we know, we should know ourselves
Whether you are born in the middle class or an ordinary employee, you must follow these rules. If you follow these rules, you can avoid financial difficulties in the future.
Now let’s learn financial education step by step.
1. Budgeting
First, we need to know about budgeting. Budgeting is a plan that involves planning how much of our income we receive and how much we spend on each of our daily expenses. Let’s see how it works now.
Track expenses: Write down in detail in a book what expenses we have from the time we wake up in the morning to the time we go to bed at night. In this, keep food expenses, personal expenses, children’s school fees, petrol, diesel and every expense for entertainment and luxuries.
Create a budget plan: After budgeting, prepare a plan accordingly and enter how much you want to spend on each of them in this plan.
Prioritize needs over wants: Food, house, clothes are definitely a must in everyone’s life. So, we should give priority to our necessities and daily necessities rather than our desires.
Adjust and review: Identify any wasteful expenses in our daily expenses and gradually eliminate them from your expenses. Some people take some paid subscriptions even though they are not necessary and use them only once or twice a month. Identifying and eliminating such things will reduce some of the burden on you. If you write a precise budget plan, you can eliminate these very easily.
2. Savings
Emergency fund: Your life is going very well but what if something unexpected happens and you lose your job? It is very scary to imagine. That is why we should always have an emergency fund. This will be very useful for your monthly expenses and any EMIs if any unexpected events happen. This should be the case even if you do not work for 6 months or a year, you should not have any problem with your daily expenses
Short-term goals: Gradually save some money for your upcoming needs in the short term. Be it a vacation or any function or even your hobbies and pursuits. By doing this, you will have money at the right time and can complete them efficiently.
Long-term goals: It is okay if you get retirement money after you retire, but if you do not get any money or pension, you will have to face many problems in your old age. That is why you should save some part for your future from the moment you start earning money. Some people have the desire to build their own house in retirement age, some have the desire to buy a car or buy land and properties. Such people should save some amount for long-term goals from now on.
Automate savings: Sometimes we forget to save money for our future goals. In such cases, we should automate the process so that the money is automatically deducted from our bank account and transferred to a savings or investment account.
3. Debt management
Create a List of all debts: Write down all your debts and observe them once. This will give you clarity.
Prioritize debts: Write down the details of which of your debts you need to pay off early and which ones you can pay off late. The interest rate on loans taken from some banks is a bit higher, some banks are lower, and some loans taken from outsiders have very high interest rates. Therefore, try to pay off the debt with the highest interest rate first.
Create a payment plan: Focus on the things like how much of your income you need to pay off, which debt you need to pay off early, who you need to pay urgently, and whether it is okay to pay late. Prepare a plan keeping all of these in mind.
Consider debt consolidation: In some cases, we may have taken small loans from different places. In such cases, it is best to take out a loan from a bank that offers loans at low interest rates and clear all the small loans. This will reduce our mental stress and allow us to focus on the work we do.
4. Investing
Understand risk tolerance: Whatever you decide to invest in, keep in mind the ups and downs of the market. In some cases, the time you enter the market may not be favorable for you. Make careful decisions and move forward.
Diversify portfolio: When you want to start investing, you will see many paths, some of which will attract you a lot in terms of profits or low risk. If you put your entire investment in one place, it will be good if you get profits, but if you get losses, there are many chances that you will lose your entire capital. That is why you should keep your portfolio diversified. It is best to diversify some of your capital in different ways, such as stocks, bonds, real estate, etc.
Start early: “The most powerful force in the universe is compound interest “. Many people have heard this. The earlier we start investing, the faster and more wealth we can create. So, pay off your debts as soon as possible and start investing.
Monitor and adjust: Keep monitoring your investments regularly because if there is a possibility of your investments going into losses, you will be able to react quickly and get out of huge losses. You can withdraw your investments from that and put them in other opportunities. So, you won’t be regret.
5. Credit score management:
Check credit report: These days, many websites (Paisabazaar, Phonepe, Google pay etc..) offer us the opportunity to check our credit scores for free. go to any of those websites and check your credit score.
Understand credit report: We can estimate our credit score using some parameters.
– 800 to 850: Excellent Credit Score. Individuals in this range are considered to be low-risk borrowers.
– 740 to 799: Very Good Credit Score
– 670 to 739: Good Credit Score
– 580 to 669: Fair Credit Score
– 300 to 579: Poor Credit Score
Pay bills on time: Pay your bank loans or EMI bills on time, this can increase your credit (or cibil) score and maintain a good credit score. If you need another loan in the future, a good credit score will help you get the loan approved faster. If you do not pay your bills or loans on time, you will be charged a large amount of penalties, and your credit score will also suffer. This may make it difficult to get loans in times of emergency in the future.
Keep credit utilization low: Keep your credit utilization below 30%. That means if your credit limit is Rs 100,000, try to use only Rs 30,000 of it. This can help your credit score increase quickly.
Note: Financial education is a gradual learning process. Don’t rush into it. If you want to start investing without any knowledge about investing, invest only as per the advice of a financial advisor. Don’t make hasty mistakes and lose your hard-earned money. There are many fraudsters online day by day who try to lure you with high returns and steal your money. Be careful! first learn and then earn. Remember there is no get rich quick, everything takes time.