Personal finance is & will remain an integral part of your life.
How well you manage your money will determine a lot of things for you.
How well you manage your money will determine a lot of things for you.
Yet, Personal Finance is barely taught to us when we are young.
And we end up learning too late & this is exactly what happened with me too.
And we end up learning too late & this is exactly what happened with me too.
Here are some basic finance terms you should learn & understand even before your first-ever earning:
1. INCOME TAX:
You have to pay to the govt a part of the money you earn. But as simple as this sounds, you need to understand this better.
What are the exemptions?
What is Income tax filing?
What are the different tax slabs?
How can you save tax?
And so on…
You have to pay to the govt a part of the money you earn. But as simple as this sounds, you need to understand this better.
What are the exemptions?
What is Income tax filing?
What are the different tax slabs?
How can you save tax?
And so on…
2. SALARY COMPONENTS & DEDUCTIONS:
It will come as a bit of a shock to you when your salary hits the account. The amount will be lesser than what you’d thought.
This is because the Employer is required to deduct amounts under various heads - EPF, Professional tax, etc.
It will come as a bit of a shock to you when your salary hits the account. The amount will be lesser than what you’d thought.
This is because the Employer is required to deduct amounts under various heads - EPF, Professional tax, etc.
Salary is also divided into components such as Basic, HRA, Allowance, etc.
You need to understand all parts of your salary, they relate directly to your tax liability.
You need to understand all parts of your salary, they relate directly to your tax liability.
3. INFLATION:
The value of INR 100 today is lesser than the value of INR 100 one year ago. Your money drops in value every year.
This is a Fact & this is due to Inflation!
The value of INR 100 today is lesser than the value of INR 100 one year ago. Your money drops in value every year.
This is a Fact & this is due to Inflation!
Don’t be alarmed. Once you understand inflation, you can take necessary steps to overcome it… and grow your wealth.
4. COMPOUNDING:
We all learn Compound Interest in school. Now you should understand it’s applicability in Investing.
Compounding is your friend & reaps rewards over the long term. Make the most of it.
We all learn Compound Interest in school. Now you should understand it’s applicability in Investing.
Compounding is your friend & reaps rewards over the long term. Make the most of it.
5. BUDGETING:
While this is most basic, the No of people who do not budget their expenses is astonishing!
It is easy to spend more than you should. Maintaining a budget & saving every month will inculcate financial discipline…
While this is most basic, the No of people who do not budget their expenses is astonishing!
It is easy to spend more than you should. Maintaining a budget & saving every month will inculcate financial discipline…
The more you save & invest early, the better for wealth creation.
6. EMERGENCY FUND:
It is considered good practice to build an Emergency Fund of 6 months or more worth of expenses.
Life is unpredictable, & when something unfortunate / unforeseen happens you will be glad you had an emergency fund to support you.
It is considered good practice to build an Emergency Fund of 6 months or more worth of expenses.
Life is unpredictable, & when something unfortunate / unforeseen happens you will be glad you had an emergency fund to support you.
7. INSURANCE:
You will come across this word a lot & in different ways.
Health Insurance, Life Insurance, Term Insurance, Car Insurance & so on…
Take the first step to understanding what Insurance means & what is needed for you.
You will come across this word a lot & in different ways.
Health Insurance, Life Insurance, Term Insurance, Car Insurance & so on…
Take the first step to understanding what Insurance means & what is needed for you.
8. MUTUAL FUNDS:
This is probably going to be your first investment…. And can yield great returns in the long term.
So you better understand Mutual Funds well…. And invest in them from your very FIRST SALARY.
This is probably going to be your first investment…. And can yield great returns in the long term.
So you better understand Mutual Funds well…. And invest in them from your very FIRST SALARY.
You can start investing in mutual funds with as low as 500 rupees…. Maybe even lesser in some cases. Don’t delay on this.
9. SIP:
Since you will be investing small amounts at the beginning, the route that’s most apt is SIP - Systematic Investment Plan.
You should understand this term well since you are likely going to have an SIP for a long long time.
Since you will be investing small amounts at the beginning, the route that’s most apt is SIP - Systematic Investment Plan.
You should understand this term well since you are likely going to have an SIP for a long long time.
10. NETWORTH:
This stands for the wealth that you are trying to build. The difference between your assets & liabilities is called Networth.
Your networth will one day determine if you are financially free.
This stands for the wealth that you are trying to build. The difference between your assets & liabilities is called Networth.
Your networth will one day determine if you are financially free.
I have just provided a brief introduction to a few terms that will be useful to you. You should read up more about them & apply to your Financial journey.
I learnt all the above a little too late in my life, & mostly through mistakes I could have avoided.
This led to a loss of wealth for me over time.
It hurts more than you know.
I hope you will not repeat the mistakes I made due to lack of proper knowledge.
END.
This led to a loss of wealth for me over time.
It hurts more than you know.
I hope you will not repeat the mistakes I made due to lack of proper knowledge.
END.
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