Easy ways to avoid the debt trap and secure your earnings

The art of financial literacy dictates that you utilise and apply this knowledge to gain proficiency when it comes to money-related matters

Rohit GargUpdated: Friday, April 15, 2022, 10:36 PM IST
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Many people spend their lives surviving on paycheck to paycheck, it is an unhealthy way of living that only breeds stress and anxiety. Though your monthly salary may be able to cover your daily expenses, financial emergencies of any kind can take a considerable toll on your financial health if you don’t plan ahead. Therefore, honing your personal financial management skills is imperative if you want to steer clear of bad weather.

The art of financial literacy dictates that you utilise and apply this knowledge to gain proficiency when it comes to money-related matters. You must be aware of numerous terms and concepts that are significant to ensure that you stay on a positive financial course. Like everything else, practice does make a person perfect. The more you develop your financial management ability, the more responsible and clear-minded you become when utilising money and allocating funds for different ends.

Personal finance essentially denotes the close-circuit supervision of a person’s or a family’s financial resources. It consists of various methods that are used to manage money through investments, expenditure and savings, while taking into account the entire exigency spectrum which includes threats and risks that may arise any time without warning. The additional aspects of personal finance consist of budgeting, banking, planning for retirement, insurance, etc. The term also refers to the several financial institutions that specialise in providing financial services to an individual throughout their life or for a certain period.

Personal finance primarily delves on gratifying both the long-and-short-term financial objectives of an individual. Being a vast phenomenon, personal finance is inclusive of everything that can lend a financial impact on your life from having access to sufficient funds to pay off essential bills to preparing for your eventual retirement. People who imbibe the habit of saving money from the initial stages of life enjoy a greater likelihood of having enough money to salvage a safe course even through storm and choppy waters. Even if you make small yet consistent savings, the amount will go a long way in ensuring heightened returns in the future. These savings alone prove valuable when it comes to fending of any crisis or untoward events that can occur in life.

Money and security needs

Money issues transcend the ordinary predictabilities. It is important to nurture a wider and more holistic perspective. Personal finances go way beyond being employed in a professional capacity and earning some bucks. It is considered reckless to spend your entire salary right after you receive it. What is needed is a genuine plan of action that can adeptly oversee all vital factors like zeroing in on the income, the expenses incurred on a monthly basis, and the overarching long-term financial objectives. This will aid in cementing the financial stability and security needed to meet everyday requirements in life.

Budgeting, saving and spending

Although you may be earning a handsome amount every month, you can still be vulnerable to a world of financial trouble and debt if you fail to accord a veritable financial plan in action. It is ultra-essential to utilise your earnings judiciously or you might unwittingly end up stretching your legs beyond the actual financial cover. However, the contrast to the above statement is true, as well. Someone who may not be earning much but is sincere in making savings and managing finances has more chances of living a financially attuned life. All because the individual has been committed to saving money diligently and spending only on essential expenses. Personal finance plays a foremost role in etching a clear picture of one’s earnings, monthly expenditure, and carving a workable budget with the given income.

Increased cash flow

Personal finance can also prove to be a blessing as it can assist in enhancing your overall cash flow. It is prudent to keep a tab on your expenses and spending patterns and increase the cash flow. To make sure that you don’t mislay your salary fund and steer clear of unwarranted expenses, it is recommended that you devote necessary time towards tax planning, sensible spending, and cautious budgeting.

Unmanageable debts

Being in a state of extreme debt is always bad news. It can not only jeopardise your financial future but also restrict your upward movement in society. The art of personal finance consists of a variety of time-tested techniques that can help in managing debts efficiently. To ward off unnecessary debts, it is critical to avoid splurging on needless things. For example, many people are lured by the promises of an opulent lifestyle the minute they are able to draw a higher salary. This can lead to getting embroiled in a vicious death trap. Abusing your credit card and exceeding its limit is another way of inviting debt on your head. To resolve predicaments of such nature, it is important to practice a sound personal financial plan in everyday life.

Asset Growth

A number of people are more inclined towards owning assets. However, a number of assets are privy to their own share of liabilities. This means that gaining an actionable knowledge of basic financial concepts is pertinent to say the least. We can easily figure out the true value of a specific asset and resolve liabilities by comprehending our finances. This is a sure shot method of allowing our assets to expand organically.

When it comes to forging a sturdy and robust financial future for yourself and your family, having deep knowledge of your finances play an integral role. It’s essential that you transform your spending traits and plan your budget each month to avoid any financial backlash.

(Rohit Garg is CEO and Co-Founder, SmartCoin)

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