Didn’t get it? Don’t worry I am there to explain you what does this quote and personal finance mean. So, as you must have heard that we measure rich by calculating his net worth.
Now you surely be wondering about what net worth is and what the things I am talking about have a little patience will explain these all terms to you. I will take you to the core of being rich.
Now let us first understand what net worth is so net worth is the total amount of assets you have subtracting the liabilities you have.
Assets refer to the value of ownership that can be converted to cash.
Being rich is not important,
Staying rich is.
Table of Content
Liability is debt or obligation on someone.
Now, net worth=Assets – Liability.
It’s clear that if you want to be rich for that you have to increase your net worth. And for that we have to increase amount of assets you have.
So to handle your assets you have to maintain your cash as cash is the main component of assets.
The field of studying cash is known as finance.
And studying your personal cash flow is known as PERSONAL FINANCE.
Let us understand what the above picture mean, the above list is issued by Forbes of richest person in 2020. Richest person is decided on their net worth.
There are too many billionaires in world who went bankrupt. Do you know why? Because they can’t handle. But you don’t worry because you aren’t going to be bankrupt as you will know how to handle you money.
So don’t worry and start your journey from today itself. If you will go through these billionaires they weren’t born billionaire rather they are self made billionaires.
If you were born poor it’s not your mistake, but if you die poor it’s your mistakeBill Gates
Also it’s not that if you want to rich or be millionaire then you have to read this blog but if you want to not face any financial crashes in life. This blog is all about being basic of finance. Let us 1st study about types of finance:-
1. Personal finance
2. Business finance
WHAT IS PERSONAL FINANCE?
Have you ever made your financial goals? yes, then to achieve that you requires PERSONAL FINANCE. When we talk about personal finance it basically means how an individual handled his money.
Personal Finance basically helps you figure out where and how much you are saving or spending.
One aspect of this is spending money on expenditure, investments, savings it’s basically your cash flow. Other aspect of this is budgeting, retirement plan etc.
Now question arrives that why do you need to plan our personal finance? I would say this that most of the people in this world don’t do personal finance so I would advise you to do it as someone said that Don’t follow the crowd let the crowd follows you. And they will follow you one day just calm and work hard.
Now let me tell you why you should we manage personal finance. When you will look around your society you will found that most the people are in debt it could be home loan, car loan, business loan etc.
And on the basis of that you will found them enjoining their life but actually they aren’t as they always have to think how to pay debt of these items. Debt or credits are the harsh truth. Most billionaire stay away from it. But foolish people carry all things on debt.
Now here are 5 benefits of personal financing you should know:-
1. Establishing short and long term goal
Planning personal finance do let you know how much cash you have and according to that you became aware that how much you have to save for your future goals and near goals how much you have debts and at last you get to know how much you can spend in your income.
The basic rule of calculating how much you can save or sound is wonderfully explained by god of financing i.e. Warren Buffet.
Lets understand with an example let’s assume arun earn Rs.1, 00,000 per month. So according to warren buffet arun shouldn’t spend all his earning on just to show off rather he must live a simple life spending 50,000 on his needs like house, grocery and 30,000 be spend on his desires as they are the things for which we are working so hard and remaining 20,000 must be saved.
2. Managing cash flow
The main benefit of planning personal finance is that you always have an idea or estimate that where the money is going to be which safe you from any sudden need of money. And at that moment you are low in cash and this is what generally happens with people as they didn’t manage their money.
You have heard many a times in stories how a person is much more happy earning 20000 then the person earning 50000. The reason behind this is person earning low manage his cash what easily gets him to next month but another spend all his money within 15 days of getting it.
3. Family security
Family security is the concern for dozen of people as they have to take care of their Children admission fees, wife’s shopping, households expenses, parents medication, unpredictable crises. These are the basis issues through which every men goes to.
You must be going through it or going to be in it as everyone has to face this in life. So these all insecurities can be end with a simple small step that is maintaining cash.
4. Beating economy crisis
Economic crises is like a scariest dream of all, no one want to even think about it as just thinking b about it gives sparks because how you can survive in a environment when nobody is purchasing and selling from where will you get money to get grocery and household items as any crisis don’t get last for only a month in a crises economy gets recover in an year or so,
But it’s also true that it took crises to take time but you never know like 1st crises was The Great Depression in 1929 2nd was Recession in 2008 and 3rd was Corona Breakdown in 2020.
5. Financial literacy
That the best if all what is all needed in life when you are such a personality who can handle all his cash flow himself in his life without dealing with any facing any problem and without under any debt.
Every parent say that they want to see their child as engineer, doctor etc, but what they actually requires is financial independency where they can handle their stuff on their own.
Fear you must be having after this blog:-
1. Think it’s too complicated
Yeah I know that planning personal finance seems to be very difficult in itself and seems to be very hard but trust me if you will thoroughly get to know about it you will crave for this as it been a wonderful thing.
And too it’s not so difficult not too easy it depend on then learner that who is learning it, how he is learning it. And yes of course a little hard work handwork is demanded when anybody stands 1st time in his life and that the second time god giving this opportunity.
2. Show off
That the blunder most of the people doing. I don’t understand why people need to show off when this is costing them very costly and even more costly than its price, for eg.
A person buy an IPhone for show off on EMI now he is paying his EMI with interest rate on it and with his now he is paying interest extra.
3. Struck in comfort zone
That’s the biggest problem young generation face as they are so struck in their comfort zone that they can’t even get out of this as they are ambition less.
The cause of this is lack of aim in their life. And even older generation too as they believe in just go with the flow as it takes effort to go against it.
4. Conscious of small steps
People who thinks that small steps doesn’t matter so let’s take an example of it
So, do manage personal finance through mutual funds, stock market, debt funds, health insurance or any other insurance products instead putting them in savings account of your bank account.
At last want to conclude only that doesn’t be afraid to take small steps
Learn personal finance as it is not at all a big deal it will require a little bit of your time but trust me you will happy to give your some time from your precious time in this Spend every second of your life just to make you more advance version of yourself.
The one who keep changing with time will achieve success.
And yes as our elder say for getting something good you have to lose something.