Mastering Personal Finance

In this ever-changing world, full of uncertainties and record-high inflation, managing personal finance is nevertheless an undisputed skill. You will find many YouTube gurus and vague Google search results that will lead you to a disappointing quest to achieve your dream financial freedom. I hope this article is different, as I will draw a basic framework that can help you get a grip on your finances.

1) Earning money: The first step in managing personal finance is a no-brainer: earning money. This can be done by pursuing a full-time job or a part-time job when you are a student. Suppose you want to avoid working under others; you may opt for side hustles like setting up your startup, flipping items, teaching others, making online content, or freelancing, which can be one of many options. If you already have a job or have your own side hustle, try to find another way to earn more and have multiple streams of income (Relying on a single stream of income is always risky!)

2) Allocation and Budgeting: After you start earning money, the wise thing to do is split your hard-earned money into 3 parts. The first part of that money should be directly invested so that you cannot access it easily for spending. No living being on this planet, Earth, can just be financially free by earning money and keeping it just under their pillows. The second part should be savings that might be used during an unforeseeable circumstance or the cost of a hobby. The third and final part will be for your daily expenses and cost of living. A pro-tip and unpopular tip would be allocating your money for investment, saving first, and then spending the rest!

3) Investing: If you successfully follow all the above points, you might bump into a question- how and where do I invest? Regardless of where you are located worldwide, invest at least 20% of your monthly income to form a portfolio of short-term and long-term investments. Earning 50,000 BDT ($500) monthly should encourage you to invest 10,000 BDT ($100), which can help you achieve financial freedom in the long run. Setting up your Beneficiary Owner (BO) account to invest in good quality stocks in the capital market or just investing in mutual funds is always a wise decision.

4) Savings: Apart from investing, one should set a part of their monthly income in a locker or, even a better way, set up DPS in a bank, which they can access anytime when any unforeseeable circumstances arise. Suppose you save up to BDT 5,000 ($50) through DPS for 2 years when earning 50,000 BDT monthly. In that case, it will accumulate an amount of BDT 120,000 ($1200), which can later be invested in buying a government bond like Sanchaypatra (giving around 9% interest monthly). Purchasing an insurance policy is an alternate way to tackle unforeseen circumstances regarding attending medical emergencies. This instrument is not for saving, but apart from securing your health and life, it will bring a handsome return at maturity if you don't face any mishaps.

5) Tracking your expenses: There is a wise saying: "Live below your means." No matter how much you save or invest, you are not doing your personal finance justice if you don't focus on increasing your income and lowering your expenses. Tracking your expenses and strictly sticking to a budget is the key. If you are good at Microsoft Excel, you can create personal financial tracking from the ground level. Otherwise, many free apps in the Play Store, such as "Wallet" or "Money Manager," exist if creating your personalized dashboard seems a chore.

As I said before, this article may not be your secret sauce of success, but it is always a start if you take well-educated and informed steps regarding your finances. Remember, art is not just about making money but about keeping it!