5 golden rules for personal finance planning

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

Learning to count money - five golden rules for personal financial planning.

Are you making plans? Surely yes. Some are planning no further than the next evening (to go to the cinema), while others are planning three, five or more years ahead (to buy a house, go on vacation, etc.). At the same time, for the implementation of any plans, resources are needed, in particular monetary. Therefore, before making life plans, you need to learn how to plan your finances. Private financial planning is a whole science. We will share with you five of its basic rules.

Saving is a habit. Work it out. Wealth does not come immediately, but gradually. Saving is the foundation of wealth.

The first thing to learn when planning your personal finances is the rationality of spending.

Life is full of surprises (not always pleasant ones). At any time, something can happen that will require immediate expenses (from diseases and fires to weddings and moving).

There are two ways out of such situations: to go into debt or break a money box. Set aside 2, 5, 10 thousand rubles (as much as you can) a month - this will be your untouchable stock, your financial safety cushion.

You probably know what Maslow's pyramid is. This is a hierarchy of human needs: as the underlying needs are satisfied, the needs of higher levels become more and more urgent.

Maslow's system can be used not only in terms of motivation, but also for planning a personal budget.

So, the base of the pyramid is physiological needs. From a financial point of view, these are rent and loans, food and clothing (the most necessary). The next step is the need for security, which means that it is payment for electricity, gas, communications, medicines, etc. After all, all this provides us with a sense of security. Next - social needs (gifts, entertainment, etc.). Then there are prestigious needs, that is, the money we spend on maintaining our status in society (expensive suits, dinners in restaurants, etc.). Finally, spiritual needs crown the pyramid. These are our hobbies, travel and so on.

Accordingly, the priority of spending should be distributed based on the satisfaction of needs - from the lowest to the highest.

Economic calculations prove that if you have accounts payable and free money, then they should be invested in paying off it, and not investing.

Income from a deposit (for example) and investments in loans can be estimated using the ROI indicator. As a rule, ROI from loan repayment is 2-4 times higher than from investment.

Moreover, if you have several loans, you should be the first to pay off the one with the highest interest rate.

Money loves the bill. But if at the same time you do not like to reduce debit and credit with pharmaceutical precision, then do not. Your nerves and stress are worth more than a couple of "extra" thousand in your pocket.

Plan your personal finances to the extent that you can maintain a positive trend in profitability and feel safe.

Everyone wants well-being, but only a few know how to use it.

Axel Gustavsson Oxensherna