Welcome to Hindu Shastra Gyan. In today's article, I want to share with you your The 3 powerful knowledge for your Personal Finance.
If there is one thing we are never taught in school, it is how to manage our expenses. We need to learn the hard way, example. through experience. This can lead to mistakes being made. Some financial mistakes are easy to rectify, whereas others can be very difficult to come back from. With that being said, in this video, we are going to look at the 3 must know knowledge for your personal finance.
1. Not having a budget
There is only one place to begin, and this is with not having a budget. It does not matter how much money you earn every month, everyone needs to have a budget. The good news is that this does not need to be complicated. It simply needs to state all of your incoming and outgoing cash per month. The benefits of this are widespread. Firstly, it will help you to make sure that you are not living above your means. It will also help you to budget for all of your expenses while determining how much money you are going to have available per month to put into your savings. This can then help you to reach different financial goals, for example, saving for a holiday or buying a home. Without a budget, you are pretty much guaranteed to leak money. My TOP recommendation is to automate all your bills, payments, and even investments. That’s a game changer for me.
2. Not paying yourself first
One of the key principals of personal finance is "pay yourself first."
But many people find that phrase to be confusing. If you're not self-employed, you may not conceptualize yourself as someone who "pays" themselves. You get paid by your boss. Right?
What does "pay yourself first" mean, and how does it apply to budget?
What It Means
"Pay yourself first" doesn't refer to how you earn money, contrary to what the phrase implies. It refers to how to save money.
The phrase means that you should pay your own savings and investment accounts first. For example:
• Pay into your retirement accounts, such as your 401k
• Buy reasonable levels of insurance, including life insurance and long-term disability care
• Pay into your health savings account
• Feed your emergency fund
• Pay off your debts and don't incur any new ones, except for a mortgage or reasonable business/real estate loans
Words by Warren Buffet: “Do not save what is left after spending; instead spend what is left after saving.”
3. Not understanding the difference between assets and liabilities
Your net worth is a snapshot of your finances. To determine your current magic number, the first step is to take a look at all of your assets, which are anything of value that you own. Make a list of all these items and next to each, list the amount it's worth. These typically include:
• All Your Cash
• Funds in the bank
• Stocks, bonds and mutual funds
• Retirement accounts
• Real Estate -- the current market value of the property you own, even if you have a mortgage
When you're done listing assets, make a separate list of liabilities and amounts. Liabilities are any debts or payments you owe to someone else. Here are the most common:
• Mortgage
• Home equity loan
• Automobile loan
• Student loans
• Credit card debt
Once you're finished taking stock of all of your assets and liabilities, it's time to calculate the magic number.
So here’s the formula: all of your assets minus of all of your liabilities equal to your total net worth. Walla. that's the magic number.
I hope this video has given you some insights on the power of taking control of your personal finance. the rest is simply staying on track. The hard part of personal finance isn’t knowing what to do, but following through once you do.
The 3 powerful knowledge for your Personal Finance
If there is one thing we are never taught in school, it is how to manage our expenses. We need to learn the hard way, example. through experience. This can lead to mistakes being made. Some financial mistakes are easy to rectify, whereas others can be very difficult to come back from. With that being said, in this video, we are going to look at the 3 must know knowledge for your personal finance.
1. Not having a budget
There is only one place to begin, and this is with not having a budget. It does not matter how much money you earn every month, everyone needs to have a budget. The good news is that this does not need to be complicated. It simply needs to state all of your incoming and outgoing cash per month. The benefits of this are widespread. Firstly, it will help you to make sure that you are not living above your means. It will also help you to budget for all of your expenses while determining how much money you are going to have available per month to put into your savings. This can then help you to reach different financial goals, for example, saving for a holiday or buying a home. Without a budget, you are pretty much guaranteed to leak money. My TOP recommendation is to automate all your bills, payments, and even investments. That’s a game changer for me.
2. Not paying yourself first
One of the key principals of personal finance is "pay yourself first."
But many people find that phrase to be confusing. If you're not self-employed, you may not conceptualize yourself as someone who "pays" themselves. You get paid by your boss. Right?
What does "pay yourself first" mean, and how does it apply to budget?
What It Means
"Pay yourself first" doesn't refer to how you earn money, contrary to what the phrase implies. It refers to how to save money.
The phrase means that you should pay your own savings and investment accounts first. For example:
• Pay into your retirement accounts, such as your 401k
• Buy reasonable levels of insurance, including life insurance and long-term disability care
• Pay into your health savings account
• Feed your emergency fund
• Pay off your debts and don't incur any new ones, except for a mortgage or reasonable business/real estate loans
Words by Warren Buffet: “Do not save what is left after spending; instead spend what is left after saving.”
3. Not understanding the difference between assets and liabilities
Your net worth is a snapshot of your finances. To determine your current magic number, the first step is to take a look at all of your assets, which are anything of value that you own. Make a list of all these items and next to each, list the amount it's worth. These typically include:
• All Your Cash
• Funds in the bank
• Stocks, bonds and mutual funds
• Retirement accounts
• Real Estate -- the current market value of the property you own, even if you have a mortgage
When you're done listing assets, make a separate list of liabilities and amounts. Liabilities are any debts or payments you owe to someone else. Here are the most common:
• Mortgage
• Home equity loan
• Automobile loan
• Student loans
• Credit card debt
Once you're finished taking stock of all of your assets and liabilities, it's time to calculate the magic number.
So here’s the formula: all of your assets minus of all of your liabilities equal to your total net worth. Walla. that's the magic number.
I hope this video has given you some insights on the power of taking control of your personal finance. the rest is simply staying on track. The hard part of personal finance isn’t knowing what to do, but following through once you do.
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