Emergency Money: In today’s time, many people have to face financial problems. The reason for this is not that their income is low, but the real reason is that they are not able to make the right financial planning according to their earnings. Financial planning is something that should be done from the beginning of the career. If this is not possible, then at least one should start handling it in the middle of the career. If you make the right plan on time, then in the future you will never have to face a shortage of money. Come, let’s know those 7 best rules, which can make your financial journey successful.
Salary – Savings = Expenses
This rule says that whenever you get a salary, first save a certain part of it and then spend the remaining money. The way to do this is to first decide some of your important goals – like retirement, children’s education or marriage, buying a house, etc. Then start saving every month according to those goals.
But just saving money is not enough, investing that money in the right place is equally important. For example, you can invest in PPF or NPS for retirement, and you can invest in Sukanya Samriddhi Yojana for your daughter’s future. While investing, keep in mind what will be the value of your investment in the future and whether it will be able to meet your needs.
50-30-20 Rule
This rule tells how your salary should be divided into three parts:
50% for essential expenses (Needs):- 50 percent of your salary should be spent on your essential needs (Essential Expenses) like house rent (House Rent), ration, electricity-water, EMI, etc.
30% for savings and investments (Savings & Investments):- After this, you should invest 30 percent of your part in savings and investments, so that you can fulfill your small and big financial goals on time. This part will secure your future.
20% for wants (Wants/Discretionary Spending):- You can use the remaining 20 percent money as per your wish, like traveling, eating in restaurants, shopping, or fulfilling other hobbies. If your needs are slightly different, you can adjust this rule a little according to your needs. This gives you flexibility.
20-4-10 rule
If you are thinking of buying a car, then this rule can prove to be very useful for you:
20%:- Down Payment: Give at least 20 percent of the total cost of the car as a down payment, so that both the loan amount and the monthly installment (EMI) remain low.
4%:- Loan tenure: Your car loan should not be more than 4 years. Taking a loan for a long time increases the interest burden a lot.
10%:- EMI share: Only 10 percent of your salary should go towards the EMI of the car loan. This will not put any pressure on your other expenses and savings. This rule helps you buy wisely.
Insurance protection
Everyone should take life insurance of at least 10 times their annual income. This is important so that if something happens to you for any reason, your family does not get into a financial crisis. It is a strong protection shield for your loved ones. Also, medical insurance has also become very important in today’s time. Nowadays getting admitted to a hospital or getting treatment is very expensive. In such a situation, health insurance can save your pocket and also give you mental peace.
Careful management of home loan EMI
Everyone dreams of having their own house. But when you take a home loan, its EMI should be planned very carefully. Your EMI. It should not be more than 30 percent of your in-hand salary. If both husband and wife earn, then you can take this limit to 50-60 percent. The shorter the home loan tenure, the less interest you will have to pay. But this increases the monthly EMI, which can put pressure on the budget.
Diversify Risky Investments
If you are investing money in risky options like Mutual Funds or the Stock Market, then you have to keep some things in mind. First of all, invest only 20-30 percent of your total savings in these places. In that too, instead of investing all the money in a single scheme or company, invest in different places (diversify). By doing this, even if there is a loss in one place, the rest of the investments will be safe and the total loss will be less. This is called the principle of ‘do not keep all eggs in one basket’.
Create an emergency fund
Emergencies can occur at any time in life, such as illness, job loss, or a family member needing help. At such times, an emergency fund is very useful. For this, it is important that you invest 3-5 percent of your salary every month in this fund and save it somewhere safe (such as a liquid fund or savings account). Try to use this money only when there is a real need. This fund gives you the strength to deal with any sudden problem.