7 steps on how to manage your personal finance by author Anupam Gupta – Times of India

Author Anupam Gupta’s new book ‘The Wisest Owl– Be Your Own Financial Planner’ was published by Penguin Random House on July 25, 2020. In this book, the author interviews and shares the wisdom and experiences of some of India’s top personal finance professionals. This will inspire and guide readers on how to in turn create their own wealth. In this exclusive article written by author Anupam Gupta, he shares his seven steps on how to manage your personal finance. Read on to know more.

Seven steps on managing your personal finance
A good financial plan begins with awareness and understanding of basics such as risk, return, liquidity, taxation, etc. So, it is always a good idea to learn what are these concepts and how do they apply to your life. A financial plan is also specific to each person because the needs and goals of Person X cannot be the same as the needs and goals of Person Y. So, ask how yourself three questions before you start making your financial plan.

First, what is the period for which you are making this financial plan? (For example, is this to plan your retirement, which will be longer term, or to start your business after leaving your job, which might be comparatively shorter).

Second, is your family included in this financial plan? (As we progress through our life, some of us choose to get married and have children. Therefore, how extensive is your financial plan and does it include provisions for your family?)

Finally, most importantly, what is your risk-return profile? (Risk-return is usually understood as the amount of risk you are willing to take for a target rate of return; some of us prefer to take lower risk and hence value capital safety, others are willing to take higher risk with their capital in the hunt for potentially higher returns).

Once you have comprehensively answered the questions, these are seven steps in financial planning:

1. Income: Make a list of all sources of your income, from salary to income from investments (including basic things like interest on savings bank accounts, on fixed deposits, etc)

2. Expenses: Make a list of all expenses and classify these on the lines of recurring and non-recurring, or essential and lifestyle – choose a classification that makes sense to you. So recurring (or essential) would be expenses on, say, rent, groceries, etc. and non-recurring (lifestyle) could be, say, vacations, indulgences, gadgets, etc.

3. Savings: Warren Buffett had famously said ‘do not save what is left after spending, instead spend what is left after saving’. Thus, after making a list and estimates of income and expenses, you will get a fair idea of how much you …….

Source: https://timesofindia.indiatimes.com/life-style/books/features/7-steps-on-how-to-manage-your-personal-finance-by-author-anupam-gupta/articleshow/93329553.cms

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