Personal Finance is the only way through which you can multiply your money and become rich fast. Personal finance is so important and it is a much-abused topic for most
of us. Personal finance is the life skill through which you can increase the value of the money which is in your bank account.
In this blog, we will start off by explaining to you guys the basics of personal finance. Although personal finance in a topic itself is very vast so we will start with the basics. No matter what your age is you should learn about personal finance because this skill will not be taught to you in your school, colleagues, and in universities. You can only learn this valuable skill through reading blog articles likes this or reading a book or watching a video.
Basic no 01 – Savings Account is Bad for You
What do these mean by saving account is bad? In school we learn about the topic interest wherein we learned about simple interest and compound interest. It is the mentality of almost the majority of the Indians that if you are earning then you should keep your money in a savings account because you will receive interest and eventually your money will increase. Yes, this is true but also know that savings account for life is just the basic. If you maintain all your money in your savings account then it will be the biggest mistake of your life.
Why You May think?
It’s because of inflation. Inflations mean an increase in the prices of the things around you and a fall in the general value of money. What these things mean is that whatever money you saved in your bank account be it 1lakh of 10k after 5 years or maybe after 10 years the value of 1lakh will be reduced. It won’t be as valuable as it is today. There are many money-building options especially in the year 2021 which will help you to increase your wealth much more time if you compare it with just keeping your money in your savings account.
Basic No 02 – Start Building Passive Income Sources
Let us understand what does passives income mean. There are two types of sources through which you will earn your income first is Active Income Source wherein the job you are doing eg if you are an engineer or doctor you every day go and work in your office or in your clinic where you are spending your own time and in return getting paid for it. You are giving your time to the world and in return, the world is paying you for your time and efforts.
Now we will understand about passive income sources. Through passive income, you will make money by just sitting and relaxing in your home. The only mission in your life should be is to increase the sources of passive income. If you learn and study some of the richest people you will know that how did they become rich by managing their money well and they have created a passive income source for them.
Basic No 03 – Gain Your Financial Freedom
In the above section, we have spoken about passive income, and through passive income, you can achieve financial freedom. You should have this goal in mind that when you are in your 35 you should have achieved your financial freedom in your life. You should have created so many sources of passive income that you don’t need to worry about money anymore. But one of the bitter truths to become financially free in your 30s is that when
you are between 20 to 30 years you should focus on active sources of income become successful in your job, earn your own money.
Once you have money in your hand then your money should be divided in the following manner-
If you are at the age of 20 to 30 then your expenses should be minimum. Don’t go for expensive vacations, clothes, etc focus on investing your money in a smart way.
Basic No 04 – Know Your Assets and Liabilities
Let us understand whatever we purchase is divided into two categories
Liabilities – It means a product or service whose value decreases over a period of time. Most of the product that we purchase is liabilities.
Assets – They are exactly the opposite of the liabilities. For eg if you have purchased an asset worth 10 rupees its value will increase to 12 over the period of time. This means you have earned 2 rupees by spending 10 rupees.
Always remember most of the things that you own should be assets and you should decrease liabilities. More Assets + Fewer Liabilities = More Profit.
If you take the opinion from the generations of our parents then they will say that you should invest only in real estate. Purchase a land, flat, or villa then you will be successful. But if you observe now people are not investing heavily in real estate. Always remember you have many options now to invest in your money which was not available in our parent’s generation such as on paper assets which are known as
- Fixed Deposits
- Government Bonds
- Bank Bonds
These lists will go on and on if you invest in these things you can multiply your earnings as well.
That was it guys and just to tell you that after investing making money do gift your loved ones a personalized gift from Classy Things. These will make them happy and for you, it will motivate you to earn more.