Personal finance tips of all time

Personal finance is something which is sometimes misrepresented as financial planning. But the reality is that financial planning is one of the aspects of personal finance. Apart from financial planning personal finance also involves life planning and financial life literacy. So, here are some of the most rewarding personal finance tips of all time.

Needs Vs Wants
When it comes to financial goals planning it is often advisable to segregate them into needs and wants. Needs are something which is going to happen at any cost. This means that you cannot defer your needs for any future date. Child’s education is an example of needs. Wants are something which are your desires and there is no harm in deferring them to any future date if as of now, you are not able to save for them. Buying a holiday home is an example of wants. Why is it important to segregate? This segregation is important to prioritise those financial goals which are your needs that you cannot defer to any future date. This will help you to first fund your needs and then you move on to fund your wants. So in case some of your wants are not funded, you may defer them to any future date.

Auto-deduct the savings
As a thumb rule, it is often said that you should at least save 20 per cent of your income. However, it is human tendency to defer this saving and splurge the excess cashflow. This type of spending behaviour can be majorly witnessed among the millennials. This is why they usually live paycheck to paycheck. Although it is important to control such behavior and do some savings to circumvent the cashflow crunch. You can do so by opting auto-deduction of some amount from your savings bank account at a particular date (usually should be your salary date).

Build emergency fund
Emergency fund is something which should be planned at first. Even before you plan for your any other financial goals. The simple reason for the same is that in case of an emergency, having an emergency fund would help you to protect your allocation for financial goals. In the absence of an emergency fund, there is a possibility that you may need to withdraw funds that you saved for your financial needs. So, building the emergency fund is necessary to avoid the last-minute rush for money.