Personal Finance 101 | The Financial Planning Guide for a Newbie | Journey of a Fresher
IF you are a newbie, a fresher, a college pass-out, an entrepreneur, or anyone who has just started earning and want to know how to make smart decisions with their hard earn money, this blog is just for you.
This blog includes :
My Journey of Personal Financial Literacy
Being a commerce student, who likes numbers and who once was preparing for CA, thinking and talking about money was not a big deal for me. Moreover, reading books like ‘Rich Dad, Poor Dad’, ‘Think and Grow Rich’, etc. had made me realise the importance of personal financial planning quite early. And when you love to Travel and Explore, then Personal Finance is one of the many skills you need to hone.
And when you love to Travel and Explore, then Personal Finance is one of the many skills you need to hone.
But when you are a fresh college graduate, who starts making income for the first time, the desire to buy all the items which were lying in your shopping cart since long is also very strong. Be it some travel gear, camera, speaker, phone etc., anything that you want to buy for yourself or your dear ones.
So this is my journey of personal financial planning, hopefully, it will be useful and you will get some tips and tricks as well.
Being in a rural area for the fellowship, we feel that our expenses won’t be much but in reality, it is not true. It is on par or at times even more than you will have in the city. The reasons being an increase in transportation cost which increases the price, there are little choices available in a rural place (kind of monopoly or oligopoly exists), also when you are living with your parents you tend to ignore all the petty expenses which add up to a major amount, etc.
For me, my accommodation was provided by the organization so it was a major saver because in rural areas you don’t easily get a rented space and even if you will find any, it’s rent is usually high. When you are getting a just a nominal stipend then it’s a killer and thus sharing the space with someone is a good idea. And yes even in 2019 if you belong to a certain caste/ religion or you are a bachelor you are going to have a hard time finding one!
And yes even in 2019 if you belong to a certain caste/ religion or you are a bachelor you are going to have a hard time finding one!
More than half of my stipend was being spent on food items. Being so away from home, I could not afford to fall sick and thus eating healthy was a priority for me. Moreover, the transportation cost of the food items is quite high in remote places resulting in a rise in the products price. On this topic, I found this article very interesting ‘Food Cost Disparities in Rural Communities’.
Then there was travel cost which on average was 10% of stipend. Having a two-wheeler helps a lot in rural areas as autorickshaws are not that dependable. But you can always hitchhike as I use to do, it saves cost plus you get to interact with different people who were always surprised to hear that I have come from Mumbai, quoting them ‘Yaha se log Mumbai jate h aur tum idhar aye ho!’ ( People migrate from here to Mumbai and you have come here!) I have hitchhiked on bike, scooter, truck, tempo, jeep, bullock cart, car, bus and even on a cycle till date.
When my stipend came for the first month, I had already borrowed some money which I paid back. And after deducting the above expenses as well, a small amount was remaining with me which was used by me to tick items from my shopping cart, as the urge was major. But this left me with almost negligible savings. I realised my approach was wrong and I need to work on it…
In the second month, I used this formula ‘Income — Savings = Expenses’. I started keeping 20% aside as savings, quoting ‘Rich Dad Poor Dad’, I paid myself first, and the remaining amount was used for my expenses. In the following months, I followed the same. When there was some special event like any dear one’s birthday, etc. or I will be going to travel anywhere I used to plan and manage my expenses accordingly, without hampering the savings.
This also meant making better choices, I didn’t compromise on health & nutritious food, I limited the mouthwatering street food to once a week, dining out & cinema expenses to max twice a month, etc.
While buying things I used to focus on its quality and long term use and then compare it with its price. When buying things online I used to use my friends Prime Account, which helped me save on the shipping charges.
For recharge, paying online & more I use various apps like Paytm, PhonePe, Amazon Pay, Google Pay and Mobikwik. First three being my favourite. As there is often some offer going on, on these apps through which you can earn Cashbacks & it adds up to your savings, and above all, it’s very convenient and time-saving as well.
To keep a track on all expenses and income I had prepared a simple google sheet template. And which I used to update every night. If you want to you can download it here and edit it according to your needs. This habit of keeping a track helps you to understand & manage your expenses better, it is a continuous learning process.
So now the question arises after saving what to do with the money? Keeping it in the bank was not an option for me because firstly of the minimal return rate and secondly seeing the amount in the account increases the urge to spend it, don’t you agree?
Keeping it in the bank was not an option for me because firstly of the minimal return rate and secondly seeing the amount in the account increases the urge to spend it, don’t you agree?
Reading and studying about the compound interest earlier, I naturally got attracted to the stock market. On researching, I came across a discount brokering firm ‘Zerodha’ which charges a nominal amount for intraday trade and no charges for delivery (ie. holding more than a day). After completing all the formalities I opened an account with them. I turned to YouTube for educating my self about the stock market. Inter alia I really liked Dr Sagar RV channel. Just to understand the process I invested a handsome amount in few companies. Soon I realised the following things;
- Investing a small amount makes little or no difference in a short period.
- You must select companies carefully studying and understanding their business model, financials, about the management, the economy and then hold for a sufficient period.
- Being well-read is important and it takes time.
- No one can predict the market.
So I decided to take some time to understand and learn and meanwhile invest indirectly ie. through Mutual Funds. I loved the idea of it we can start small and yet diversify. It helps to track and study the market. You can also choose between Equity and Debt depending on the risk profile. So I chose ET Money App and Paytm Money App for investing in Mutual Funds. Both these apps are absolutely free and you are able to invest in direct funds which give 1% higher returns than regular funds as well. I use both these apps because of the charts and data available on them. I use this data to analyse the funds before investing in them. There is also Groww App but I haven’t used it myself.
ET Money app also helps you with Personal Loan and Insurance but I am yet to used these features.
Before investing I also check the Moneycontrol App & Screener.in which are simply the best stock market information platforms I found until now. It helps to track, read news and other information related to various companies and helps to analyse them. Moneycontrol is also good for Mutual funds.
After all this, you also need to file Income Tax Returns. For this I used Clear Tax App, reading blogs on the topic helped me and it was quite convenient as well.
So learning Personal Financial Planning is an ongoing process, which requires practical knowledge which comes over time. This being my first blog on the topic, hope you found it useful. Thank you for devoting your time in reading this blog. Let me know your thoughts in the comments section below.
List of Apps mentioned here :
- For UPI, Send & Receive Money Online, Recharge & Payment, etc. — Amazon Pay, Paytm, PhonePe, Google Pay, MobiKwik
- For Tracking Expenses — Google Sheets
- For Investing in Mutual Funds — Etmoney, Paytm Money, Groww
- For Investing in Stocks — Zerodha
- For Analysis & Tracking Stock Market — Money Control, Screener.in
- For Insurance — Etmoney
- For Loan — Etmoney
- For Filling Tax Returns — Clear Tax
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