Guide to personal finance: Lesson 101

A Few weeks ago I had done a post on how to look at your personal finances like a corporate would. The suggestions were to learn what is burn rate, savings rate, take charge of financial goals etc. However many people have written in to say all this is too complicated.

So I decided to tell you the very basic which you MUST do to make money.

1.    Keep track of what you earn, spend, invest and save: This sounds very simple and many of my readers scream saying ‘this is too basic’ – we know it! The question is not whether you know it. The question is whether you do it. It is never a problem knowing – it is doing that is the problem!
2.    The advantages of using a proper software (like is much better than trying to calculate your net-worth, cash-flow, income and expenditure account, current market value of mutual funds, equities, loans, etc. in a un-coordinated excel sheet. Try it, its free!
3.    Build a nice ‘safety net fund’ – in case of an emergency it will be useful. A person is considered rich by knowing how many days he/ she can live without a job. This is the question is for you to answer. If you can live without a salary for 2 years it means you are richer than a person who can live without salary for 1 year!
4.    Look at all the risks – and cover the more important ones. What immediately comes to mind is life, medical, household items, etc.
5.    Keep a healthy attitude towards money.

This may sound very basic – but how many people can put up their hand and claim that they are already doing it? I guess very few!

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