Financial Literacy is very important in your life
and if you become financially literate and learn how to handle money, then
maybe you won’t have problems in your life and you will know how to use money
properly, your life will become easier, and you will reach one step closer to
becoming rich. Personal finance is a vast field and
can seem a little intimidating at first sight. There are many
big words like risk, returns, and Mutual Funds. What actually are these? If you
start in your 20s, then you can get many advantages. Today we will talk about 4
things that can make you richer in life. In this article, we will discuss 4
such ideas that you can implement in your life to make you more comfortable in
the future, and increase your cash flow.
Savings
So now we’ll talk about savings. Everyone knows about
savings, that we need
to save money. But how do we do this? Most people call this the 50-30-20 rule,
where you invest 50% of your income on your needs, 30% on your wants, luxuries, or other things, and the remaining 20%, you can keep collecting it as an
emergency fund or an investment fund. Depending on the money you save, you will
get your savings or investment fund, through which you can increase your wealth
and income. Think about two people whose salaries are the same. Out of both of
them, one of them saves Rs.5000 per month, which makes Rs.60,000 per year. The
other one saves Rs.1000 per month, which makes Rs.12,000 per year. The person
who’s saving the money also might invest it and they’re ahead of where they
were a year ago. One who saved Rs.12000, spent the money on their life and enjoyed their lifestyle but they are in the same place, where they were a
year ago. Wealth doesn’t grow only by saving money. So how will you increase
your wealth? Wealth increases from passive income.
Passive
Income
What is ‘Passive Income’? A passive income is a money you earn without having
to work or exert effort for it. After working, whether you sit or sleep, money
should keep flowing in your account. Most of the people rely on their efforts
and active income, i.e. their business or salary income, for making their life
better. To increase their salary, these people will keep putting in their
strength and efforts. Alternatively, you can make your money work for you.
Also, there are people who make their money run for them. After working, these
people can sit and see their money grow.
Insurance
In your 20s, another important concept is ‘insurance’. What is ‘Insurance’?
Sometimes, I will pay a company in advance so that, in the future, when I
encounter difficulty or any unexpected costs, they will cover them for
me. There are many types of insurance. You can buy the insurance of
a car, insurance of a house, medical insurance or even the insurance of your
life. Experts believe that, getting medical insurance in your 20s is a
feasible option. If you are healthy in your 20s, and want to buy medical
insurance then you will be able to buy it in a lesser amount. In our life
we must have observed that most of the time these ‘unexpected expenses’ are
medical expenses. A research was conducted in America and they got to
know that 62% of people had shortage of money due to medical expenses. So
that these situations don’t occur in your life, and you get the money on time
during emergencies, insurance is bought. If you are the sole earner in
your family, if you are earning for your family, then you can give life
insurance a thought. If something happens to you in the future, then life
insurance gives your family payment and coverage, so that in the future, they
can handle their life on their own. You will see very different and very
complex products. But if you are starting now, please keep your eyes only
on simple insurance.
Debt
Now we’ll talk about loans or debts. You might have
heard in your
house that loans and debts are not good things, and we shouldn’t take loans or
debts throughout our lives. Loans and debts should be taken for things
that you need or things that will improve your life. If you
need a bike or scooter to travel to work, or you need an education loan to get
a good degree, taking debts for these things is logical. So now we will talk
about credit cards. Credit cards have become common these days. Many
people use credit cards. But people don’t know that credit cards are just
debts taken for a month. If you don’t pay your credit card bills by the
end of the month, then every coming month, you are just adding more and more
interest to that bill from your income. So if you are buying useless
things from your credit card like if you are doing online shopping and not
paying your whole credit card bill for months, then you will keep paying
interest from your income.
So in this article, we learned about some different concepts of finance,
and understood that how these different concepts of finance can help us increase
our life and make it better. But friends, the money is yours, the savings are
yours and the wealth is yours, then the responsibility should also be yours.
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