A Note on Good Personal Finance Management

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Many times I have written about why you should not take a loan to trade. But it’s been very long since I have written a post on personal finance. This post was written on JULY 18, 2017.

https://www.theoptioncourse.com/do-not-take-a-loan-to-trade/

Do read especially if you have taken a loan to trade or wish to take one.

One of the most important rules of personal finance management is never to take a loan to trade or invest in stock markets.

Even if you are a good trader, most of the profits will be taken away by the loan interest and you will be left with almost 8-10% a year or less which is equivalent to investing in good stocks or mutual funds.

And if you lose that money then you will be in deep trouble.

Another important personal finance management try to avoid personal loans. They come at a very high rate – at almost 12% a year.  If you cannot survive without a personal loan then take at most up to 1 lakh not more and try to repay it as soon as possible.

Today access to credit is easy. Do not fall for the trap. Some loan apps are fraud. Try to avail loan from a well-known bank. If possible walk to your nearest bank and talk about loans. Many look-alike apps can fool you, take your personal data and sell to third parties.

I have not installed any banking app on my mobile to avoid online fraud. If required I access them online from my laptop. The chances of my mobile getting lost are bigger than my laptop getting lost. You don’t know who will get your mobile when lost and what they will do. So to avoid the stress I do not install banking apps at all.

This rule I leave to you, but it is better to uninstall any banking apps from your mobile to be safe.

Of course, we need to buy items/services online and offline so keeping payment apps is ok as long as you have kept them secured with a phone screen lock pattern, PIN, password or fingerprint.

Even if a hacker gets access to your mobile phone they may not be able to open the app. The same goes for banking apps but still, it is better not to have them on your mobile phone at all as checking your bank account periodically can be done easily on your laptop.

As far as home loans is concerned do not hurry to buy a home. Take your time, research well and buy a good home so that you do not need to buy another home after a few years. By taking more time you will have saved enough to buy a good home and take a home loan as little as possible. There is no penalty to prepay your home loan so try to prepay as soon as possible.

The same is the case with a car loan. You should not take a car loan if possible. To avoid taking a car loan downgrade your choice to what you can afford. But if your love for a particular car is very high then take a car loan and pre-pay it as soon as possible.

Car in any case is a liability plus if you take a car loan, the liability will increase.

Have one term insurance equivalent to ten years of your take-home salary and one family health insurance of at least 10 lakh.

Your savings should be invested well in stocks, bonds and mutual funds and do not break them to let the compounding do their job. Of course, you will need money from time to time in that case just redeem whatever is required at that moment but do not stop your investments.

If you follow the above personal finance management tips then you will live a stress-free life as far as your finances are concerned.

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