Personal financial management is a complex arena. It involves the fields of deposits, retail investments, insurance and treasury. While most of us are only concerned with a couple of these categories, we have often heard that diversification of the financial portfolio is the smart thing to do. To diversify a portfolio, we have to be aware of basic finance management at first.
In this post, we will provide a few tips on basic budget and expense management. To give a bit of context, FinTech is based entirely on simplicity and prudency. If you are not good at the basics, FinTech is not of much help to you. Note that you don’t need a finance or accounting degree to follow any of these tips.
Many of us, especially busy working professionals, have a centralized calendar where we put all the items in our daily agenda, be it personal, professional or otherwise. Finance too requires a calendar for prudent management. A Financial calendar is where you keep track and note recurring expenses, such as credit card balance due dates, income tax deadlines, subscription withdrawal dates (Spotify, Dropbox, NY Times etc.).
We realize that it is difficult and perhaps even a tad unnecessary to budget every single expense you will incur in a month or week. However, it is extremely useful to budget key expenses. For example, it is wise not to allocate more than 20-25% of your salary towards rent, or to budget a 20% savings at the end of each month.
If your only source of income is your paycheck, you would already know the annual income tax bracket that you fall under. However, if you have multiple sources of income such as dividends, interest on debt (eg. bonds) or more complex financial instrument profits, it is wise to know all the tax categories that you must oblige to, and plan your expenses accordingly.
Follow the Stock Market
Chances are that you don’t guard all your money in a savings account. You probably have your money invested in a couple of Mutual Funds, Bonds and Stocks. When it comes to equity, everything depends ultimately on the stock market. Understand the dynamics of the stock market and its indices, and the main movers and shakers of each index that you are interested in.
These are some simple tips that you can learn from the internet. You don’t really need a consultant or adviser to follow these. Ultimately, they will help you in the path towards better and more prudent financial management.