8 main principles of personal finance that everyone must follow
With a steady income comes financial freedom. You start becoming independent as you stand on your own feet and singlehandedly manage your immediate expenses. However, you should also start thinking about the future. In order to be self-sufficient and financially stable, you need to be careful about your personal finance. This includes managing investments, mortgages, banking, taxes, budgeting, insurance policies, and finally, your retirement plan.
All this might seem too much to handle, and sure, it is quite a challenge. But by taking a few steps in the right direction, you can effectively manage your personal finance successfully.
To help you out, we have compiled a list of 8 main principles of personal finance that you should always keep in mind:
1. Choose the repayment tenure carefully
A lot of borrowers do not focus on the repayment plans while looking at the features of a loan plan. This is a mistake as they find difficulties in the future when it is time to start paying their monthly installments. This leads to problems in their personal finance since they may have to start using their savings to cover their EMIs. This is why you should always focus on the repayment tenure of the loan so as to not face any problems in the future.
2. Open an emergency fund
Once you have cleared your loans, you might feel unburdened without any major debt. However, you can never be sure of when you will be in sudden need of funds. You might face an unexpected situation such as a medical emergency. In such a case, you should have the finances to deal with the situation at hand. You can always make use of personal loans for financial support, but it is also advisable that you start saving a certain amount every month as part of your emergency fund. Make a monthly transfer from your salary account to your new savings account that is meant for emergencies. This will be very helpful when you are suddenly faced with a situation and are in need of funds.
3. Make sure you choose lenders that offer quick sanctions
We all are aware of how long banks take to process our loans. They first review our loan application, then verify all our documents. This process obviously takes a very long time. However, there are many cases where borrowers do not have the liberty to wait so long as they require the funds urgently. But do not worry, thanks to today’s digital world, there is no need for you to wait for many days before you get the loan. In fact, you can get instant cash loans online the very same day you apply for them. A good loan app would have a record of sanctioning the loan within 2 minutes and disbursing it in 30 minutes!
4. Inquire about the documentation process
Completing the documentation process is one of the most tedious processes that any borrower would dread. Most financial institutions have complicated processes where borrowers have to waste a lot of time in submitting their documents. Even after investing so much of your time, the banks could still reject your loan application. But do not worry, you can choose a simpler way! Many borrowers have started going for an instant loan app that offers them a simple documentation process. A good loan app would only require basic documentation such as your PAN card, Aadhaar card, and your photograph.
5. Always use a loan EMI calculator
Many borrowers who struggle with their loans have one problem in common: Inaccurate EMI planning. It is quite natural to make a mistake while you are calculating your monthly installments manually. This is a problem when you have to start repaying the loan because you then start finding difficulties in managing your budget. One effective solution to manage this is to use a loan EMI calculator. With this digital device, you just have to fit in details of the loan tenure, interest rate, and loan amount. You will instantly receive an accurate estimation of the EMIs you would have to pay. This would leave out any complications or room for errors.
6. Build your credit score
Any borrower would know the significance of credit scores. There are many lenders out there and they are known to review an applicant’s credit score before approving their loan application. You will need to take a loan in the future and this is where your credit score will be very important. What you need to be particular about is to pay off all outstanding bills on your credit card. Also, do not empty your available credit. These things play a big role in improving your credit score. You should avoid defaulting on any of your loans as this will have a negative impact on your credit score. If you have a bad credit score, you can consider taking a loan from an instant loan app in India as many of these apps go easy on credit history.
7. Do not spend more than you earn
One of the most basic principles is to not spend more than what your income is. You might feel that once you have savings, you can go overboard with the expenses for just one month. But this is very likely to become a habit, which is something that will start affecting your financial health. Always be very particular about managing your expenses within the set budget. However, if for one month you have fallen short, you can always use an instant loan app to cover the financial gap.
8. Always strive for a better income
Lastly, you should always try and climb in your career. Increasing your income will make managing your expenses much easier, and allow you to save bigger amounts. There are many ways of increasing your income, such as taking on freelance projects, getting a deserved raise, looking for better job opportunities, or even starting a side business. You should always strive to do better.
We hope that this article helps you manage your personal finance effectively. All the best!