Financial Philosophies

Personal finance is about meeting personal financial goals and desires and coming up
with a plan to fulfill those needs within your financial constraints.
Money management is the process of budgeting, saving, investing, spending or

otherwise overseeing the capital usage of an individual or group.
The sooner you start financial planning the better, but it's never too late to create
financial goals to give yourself and your family financial security and freedom. Here are
the best practices and tips for personal finance:
TOP Personal Finance Philosophies
BUDGET
1. Budgeting makes smart people smart with money
Having a Budget has proved to be one of the ways to become smart in financial
planning. You should know your spending patterns and where you can cut your
unnecessary expenses.
2. Devise a Budget
A budget is essential to living within your means and saving enough to meet your long-
term goals. The 50/30/20 budgeting method offers a great framework. It breaks down
like this:
 50% of your take-home pay or net income (after taxes, that is) goes toward living
essentials, such as rent, utilities, groceries, and transport
 30% is allocated to lifestyle expenses, such as dining out and shopping for
clothes.
 20% goes towards the future: paying down debt and saving both for retirement
and for emergencies
It’s never been easier to manage money, thanks to a growing number of personal
budgeting apps for smartphones that put day-to-day finances in the palm of your hand.
Here are just two examples: YNAB, aka You Need a Budget, helps you track and adjust
your spending so that you are in control of every dollar you spend.
Meanwhile, Mint streamlines cash flow, budgets, credit cards, bills, and investment
tracking—all from one place. It automatically updates and categorizes your financial
data as info comes in, so you always know where you stand financially. The app will
even dish out custom tips and advice.
3. Create an Emergency Fund
Between three and six months' worth of living expenses is the ideal safety net. Financial
experts generally recommend putting away 20% of each paycheck every month (which
of course, you’ve already budgeted for!). Once you’ve filled up your “rainy day” fund (for
emergencies or sudden unemployment), don’t stop. Continue funneling the monthly
20% towards other financial goals such as a retirement fund.
DEBT:
1. AVOID CREDIT CARD DEBT. There is perhaps no greater way to damage your
financial well-being than credit card debt.
2. Limit Debt
It sounds simple enough: To keep debt from getting out of hand, don’t spend more than
you earn. Of course, most people do have to borrow from time to time—and sometimes
going into debt can be advantageous, if it leads to acquiring an asset. Taking out a
mortgage to buy a house is one good example. But leasing can sometimes be more
economical than buying outright, whether you’re renting a property, leasing a car, or
even getting a subscription to computer software.
3. Getting out of debt is an emergency
Good Debt is something that will help you increase your income. Bad Debt is used to buy
Liabilities.
“If you are in any kind of Debt, just remember one thing. Coming out of your Debt
should be your top priority.”
4. Use Credit Cards Wisely
Credit cards can be major debt traps. But it's unrealistic not to own any in the
contemporary world, and they have applications other than as a tool to buy things. Not
only are they crucial to establishing your credit rating, but they’re also a great way to
track spending, which can be a big budgeting aid.
Credit just needs to be managed correctly, which means the balance should ideally be
paid off every month, or at least be kept at a credit utilization rate minimum (that is,
keep your account balances below 30% of your total available credit). Given the
extraordinary rewards incentives on offer these days (such as cash back), it makes
sense to charge as many purchases as possible. Still, avoid maxing out credit cards at
all costs, and always pay bills on time. One of the fastest ways to ruin your credit
score is to constantly pay bills late—or even worse, miss payments. (See Tip No. 5.)
Using a debit card is another way to ensure you will not be paying for accumulated
small purchases over an extended period—with interest.
5. Credit cards make spending cheaper when correctly used
Credit cards usually have cash backs in the form of points. Take maximum advantage of
your credit card’s features. But at the same time, use it wisely.
“Most of the items we purchase are not required, with money that we don’t have, by
using our Credit Cards.”
Pay credit card bills in full and on time. Use it wisely and purchase only required things.
Don’t buy unnecessary stuff just because you are getting free cash temporarily.
HANDLING CASH
1. You are responsible for your own wealth
Your Financial status at any given point of time is due to the series of actions you have
taken in the past. It’s the small steps that count to give desired results.
“Good Debt makes your Financial Life better. Bad Debt makes it worse. Know the
difference.”
2. LIVE BELOW YOUR MEANS. This is the only way to ensure you save and grow your
net worth.
3. Super frugality is a waste of time and money
There are several blogs and podcasts that teaches you how to be super frugal and
create everything by yourself. It doesn’t work always. Sometimes it’s your waste of time
and resources.
“Don’t try to create soap at home by yourself. It is inexpensive and saves time if
you buy it from local shops. Don’t be that frugal.”
Live and enjoy your life. It’s OK to spend some Dollars on entertainment and other stuff
that makes you happy. Don’t be in saving mode throughout your life.
4. Materialism inhibits wealth building and leads to debt
Don’t be a materialistic person. Don’t buy things that you don’t need. Follow the principle
of ‘less is more’. Avoid buying unnecessary stuff and have less material things. It will
save your time and money.
5. MORE THINGS WILL NOT MAKE YOU HAPPY. Someone will always have more
toys than you. The sooner this lesson is swallowed the easier.
6. Plan (and Save) for Retirement
Retirement may seem like a lifetime away, but it arrives much sooner than you’d expect.
Experts suggest that most people will need about 80% of their current salary in
retirement. The younger you start, the more you benefit from what advisors like to call
the magic of compounding interest—how small amounts grow over time. Setting aside
money now for your retirement not only allows it to grow over the long term
7. INSURE YOUR NEEDS (NOT YOUR WANTS). Insurance is exactly that…
Insurance. It provides another margin of safety. Most importantly, insurance is not a
primary vehicle for creating wealth, merely protecting it.
References:
https://www.investopedia.com/terms/m/moneymanagement.asp
https://www.investopedia.com/terms/p/personalfinance.asp
https://www.raymondjames.com/hesmerwealth/financial-planning-blog/2017/01/04/top-10-
personal-finance-philosophies
https://medium.com/datadriveninvestor/10-best-financial-philosophies-to-improve-your-
personal-finances-18426eb080f9

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What are the best practices for budgeting?

What are some tips for handling debt?

Personal finance is about meeting personal financial goals and desires and coming up

with a plan to fulfill those needs within your financial constraints.

Money management is the process of budgeting, saving, investing, spending or

TOP Personal Finance Philosophies

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