PERSONAL FINANCE FOR YOUNG & NOT SO YOUNG

PERSONAL FINANCE MANAGEMENT

People work hard to earn money, however the earned money window is much smaller than your life span. After our Civilization entered into the Money-Era, discording the barter system for day-to-day needs, the financial

 system has evolved into a major part of our lives. This is because of the factor that to survive in the complexity of our present day society comfortably we need money and it takes longer time compared to any other species on earth to stand on our own legs. Not only that you need to support your life partner and importantly the children till they get into the cycle of earning and finance

During childhood you need to be under the care of someone and in most of the cases, it is father, mother and sometimes, it is your close relatives. Of course there is segment of people who have been orphaned in their young days & their struggle to become successful in life is a tough trajectory. Whatever it is, the important point is everyone should know how to manage their personal financing needs at one stage or the other.

WHY PERSONAL FINANCE FOR YOUNG

It is unfortunate that our high school education focus more on basic subjects like mathematics, science, history, geography etc., but not on financial concepts like time value of money, cash flow, importance of budgeting, saving to strategies investing for wealth creation, management & protection

It is important that we include Personal Finance in the curriculum at the early age itself along with work and family balance. This is more important to ensure that the growing children understand that the personal finance management is to have Happy Living & the youth should not have a misconception that Money is everything. Not only finance & happy living, it is also imperative to learn about healthy living. Today’s many youngsters start going to gym when they cross adolescent and forget it just after the marriage. Yes, it is great to have triceps & six-pack at that age, but sustainable health throughout the life should have a greater focus.

PERSONAL FINANCE FOR NOT SO YOUNG

 Once the youth enters into separate family, it takes a major focus along with career growth, Children & their progress. This should not have any negative impact on another important factor – “Friends & Society”. All these things have an impact on your personal finance management & happy retirement plan from running around for wealth creation to support you during the retired life. Few things that we need to keep in mind are

Needs keep changing generally based age & these needs require differing amount of cash-flow to experience the gratification expected

• Basic biological needs require a fairly stable cash flow varying basically with inflation rate & addition to your family adding additional responsibility
• Safety needs related toPhysical & health can be addressed through insurance which will make cash-flow requirements more regulated & with good planning can be well managed

• Property/wealth creation requires attention throughout the active earning period apart from the fact that it is a capital investment. Options for Real Estate, like EMI, start paying after 2years or increasing EMI at every 5 years, etc. are interesting options and one need to look at the comfort & returns these options can give. In fact, these days, buying a house is an emotional compulsion and expenses for house-warming is more than a marriage sometimes, not only because of technologies that makes a smart home, which gives lots of comfort and convenience for office-going parents.

 Yes two salaries for a family has become a norm and they would love to provide higher living-standards & give the best to their children. Your status is valued by what kind of house you have and what brand and model of the car that you own 

•  Ensuring Resource availability after retirement requires not only greater planning, but this also depends on how you would like to lead the retired life. There is a definite trend in the majority of the population to explore the avenues for multiple source of income.

The most important and many times unpredictable cash flow requirements are from Love & belongingness need. It may be a diamond necklace for your wife, to be worn during her brother’s wedding or additional money for choosing a high end SUV by your husband to enjoy an extra luxury. 

Or your child want to go in for 2nd masters abroad or two children have to go for international studies at the same time. Or it may be a sudden international tour because of your spouse’s friends & family or you have to take a trip for convocation of your children.

Esteem Needs: The expectations are Recognition for their efforts, Respect for their caliber and Freedom from Financial & Family constraints. As our focus now is on Personal Finance Management, let us deep dive in to Financial Freedom. It has various levels Viz.

Getting out of Paycheck to Paycheck 

Living Expenses can be tinkered only to a limited extent, most of the time.

 Getting out of job temporarily: Savings under emergency fund to have temporary relief from work, change of job or a new initiation for extra income. If the emergency can support the whole family for 2 or 3 years, it is a kind of self-sufficiency, which gives you an opportunity to dilute the present routine

 Enough to Spend-Save-Enjoy: You have money not only for routine expenses, but also to keep a planned amount aside for future requirement and also buying some happy experience for you and the family. Yes buying a new gadget will only make your routine more comfortable, but buying an experiential holiday gives an unforgettable experience with some trekking or rafting etc., which can give a lasting memories. Of all my international travels with my wife, the underwater walking in Thailand is a memorable one.

 Flexibility: In Financial rat race, without comprise on income like paid holidays, time out to go to a doctor and flexible weekend off gives time for work-home balance. This gives the family members a reason to have stronger bonds & being with them during times of need gives better recognition & respect

 Happy Retirement: When you want to retire from chasing behind money depends on how much retirement wealth you have created that can be turned in to cash at your convenience to meet your expectation about retirement life. Yes! It may be

 Simple Retirement: Just meeting basic needs which makes you happy and takes care of any geriatric health issues apart from supporting your spouse, or

 Visionary Retirement: You have enough wealth for early retirement apart from fulfilling a few special desires like sponsoring an orphan or international travel, once in two years with your spouse or visiting spiritual places or

 Retirement with Abundant Wealth: This is where your passive income is at such high level, that your, reasonably- lavish spending can’t wipe your capital and you have written a will to support next generation and also to create a trust for some social cause you like most.

Pursuing early Financial freedom

Factor that  you need to considered  for advancing financial freedom may be:

1. A Second Emergency fund for Geriatric Health Care which may be a wise decision
2. Funds & cash flows required for Home Improvements & Gadget replacements including the car or two wheeler
3.  Cash flows for Settling in Senior citizen Homes, especially when your children are abroad. This may also necessitate your international travel on regular intervals, may be once in a year or once in 2 to 3 years
4.   During the retirement, your children would have grown up & you may have grandchildren too, you may love to give some gifts whenever you visit them or when they visit you. May be it is a better idea to set aside a fund for this purpose separately. .

Once they all are settled and you have ample financial freedom you start wondering, what you have been identifying yourself with have all moved out from that marked spots and start to think what you are & who is your real partner? Yes! They are your part of your life, but not your life-partner. Ponder on this view, you entered in to the life journey of your parents and you were the focal point till you had a younger sibling & you were in that train journey of your parent till you moved out due to job or marriage or any other reason, you were still moving in the same direction of completing your responsibilities on the way, like your family, children, your career to support it. After your responsibilities change shoulders, you restart your full focus on your spouse for the second time apart from your personal hobbies/goals. However, it your body, which is identified with you is the one which is your life partner. Once your life soul leaves your body, the body ends all its activity & rest in peace, exhibiting a real life-partnership. The kind of awakening you got from this life experience, you may like to share your thoughts through a book or through a social media to create a more meaningful, peaceful & the right kind life-path for the gen-next.

Health & happiness: They are no doubt, most important apart from your family responsibility, fulfilling these needs require money, cash-flows at the right time and creation of wealth to support you for the non-earning periods of your life. Finance management is the one that you cannot neglect throughout your life expect during your childhood which is taken care by your parents. Hence understanding the various aspects of finance and the techniques to create wealth. It is how fast you can create wealth that gives you passive income to support you & your family for the rest of the life supporting your living standards. Once you achieve this Financial Freedom you have more time to focus on happiness & health. Time is another most important factor as we cannot get back to our past through any time-machines and correct our mistakes. During your childhood you should enjoy playing which is supported by your parents & focus about acquiring skill-sets to ensure that once you reach your adulthood, you know the art of living viz. balancing Time-Happiness-Money-Family-Friends & Society.

Money or Finance is the one which has a great impact on other factors and lets sharpen our skills of personal finance management.

• It starts with Income & Expenses. The main formula is to maximize the income & control the expenses, so that you save more (INCOME>EXPENSES => MORE SAVINGS FOR WEALTH CREATION)
• What is the basic expenses & what amount of comfort and luxury you prefer, makes your goals for income. 
• Figuring out ways for multiple source of income is the key. Understanding the exact nuances in the following factors are important
• Earned income is a function of Time & your skills
• Hustle income that you can generate
• On-line part time jobs that you can take up
• Starting a small business with your family members or friends
• Creating passive funds that generate & support your expenses may be a good idea
• Improving the basic skills that you require to master the above will include

• Time management : Only 20% of the time we spend is used for fulfilling our regular financial needs, we need to work on optimizing time to focus on high yield activities & for achieving this we need perfect our skills on time management
• Grip on high paying and trending technological skill sets & updating them to stay ahead like Presentation & communication skills to get a recognition for your potential
• Creativity-Problem solving 
•  Interpersonal skill
• In today’s world of buy today & pay tomorrow through EMIs, it is important to have a solid Debt-Management plan. You will be tempted with various offers, but balancing it with total debt-management is a fundamental factor that should never go out of your focus
• In terms of Expenses the important tool is the budget, which combines income, expenses to help you generate savings that can be leveraged to create wealth. They include
• Clear understanding of various types of expenses, categorization into fixed- variable, essential-non essential, which will give a good control on the budget.
• Planning for cash flows required for large Capital Expenses like buying a car/home/children education is vital.
• Involving your spouse & family members in the process of Budget which will make your savings and investment plans a great success
• There are around 10 countries where in the average saving is above 40% of the income. The top one is around 65%.. One needs to be among the high saving group in their country if not to try for 65% or more. So what should be the rules for saving & how will you increase your saving, what should be your plan?. Let us discuss it out

Should we record and review various expenses by categorizing them. You have an option to categorizing them in two ways:

• One is into VDE:: Vital – Desirable – Essential. This identifies the vital few areas to be focused as a top priority & Other based on Fixed and variable portion in every expense head and also understands those which have high volatility in price & look for alternative to meet the need. As a matter of taking care of our family members health, we have the rule of consuming 3 type fruits in our food-routine. My spouse always use to warn me about the high volatility and advise me to go for cheaper but healthy alternative if available, like choice between sweet lime and orange, based on the cost.
• Another thing, my spouse use to insist is to break our work- routine once in a month or once in two months for an outing, just for two days and on our way back, she would stop on the weekly market where vegetables are fresh and cheap & she will store it in fridge to use them for 7 to 10 days minimum, which I found that there is a saving of our vegetable and fruits expenses around 18-20%.. Similarly she identifies the bulk purchases of items like green-peas which are available at less than 1/4th of cost during winter time and storing them in aluminum foil pouches in the fridge use them for 2 to three months. So identifying all opportunities & exploiting them to save more is a really a good idea.
• However, you must understand that penny wise & pound foolish is not going to help you.
• One main factor that we need to have a control is usage of credit-card judiciously. There are lots of shopping cards & now days those using only one credit card.
• There are people who regularly repay the full credit card amount as per due date
• Second is a category who pay at least 60 percent of the total amount
• Third is the category who struggle to pay the minimum amount

If one doesn’t understand and comply with what level of purchases that they have to make & how to use the credit limit carefully, they are sure to end up in debt trap. It is better to explore the alternative loan options like credit transfer etc., to reduce the negative impact on personal finance

There is a trend of using technology for personal finance. Big Data, There are lots of digital apps which allows direct immediate payment or deferred EMI amount, expense focused budget-apps, which gives you alerts based of limits you set for each category. There are also AI based apps which focuses on real time aggregation of the various elements of personal finance

• Tracking your spending Monitoring daily activities: there are lots of Apps available, in these days & your  sharing your experiences in comments box, on some of the Apps, you tried will be of use to other
• Budgeting using envelops: It is splitting your money based on how much you should spend in each category—and then only let yourself spend until the cash in each envelope is gone. Envelope budgeting works best for variable expenses, like groceries and dining out, which change slightly every month depending on your spending habits. It is also relevant for Couples where both of them do the spending & earning
• Saving for Goals and achieving them – I would like to see your feeling through the comment box as stories of success. We also need to understand the concepts like Passive saving & Active Investing
• The real time aggregation focuses on:
• Live financial situation and creating a regular status report for monitoring & corrective action
• Setting priorities & financial goals based on Individuals Requirement & preferences
• Inculcate a Financial Discipline on expenses, saving, debt management and investing
• Creating & monitoring your buffer and emergency funds to support during the periods of distress
• Retirement planning and 
• Creating regular status reports

Selection of these should be based on your comfort level & if you are not effectively using, you may be paying unnecessary subscription charges. 

While choosing it makes sense to consider Security-Features-Fees-Support (Customer support). You may use the ratings of the apps with respect to Overall Score, Encryption Score (for Security), Multi-platforms Capability including web version, Multiple Account Integration Capabilities and Multiple-users to share the app.