8 Personal Finance Tips Most People Wish They'd Known When They're Younger

1. Practice Self-Control: Pay With Cash, Not Cards or Apps

If you are really serious about this, you need to give a little more effort and get out of your comfort zone. 

Self-control is one of the skills you need for this. If you are already good at this, you'll find this easy. If not, you have to learn it. 

One of the most important ways to exercise self-control with your finances is to pay all the possible bills with cash. 

Stop using debit/credit cards or any payment apps as much as possible.  

This will keep your expenses on track, and you will know how much you have spent. 

Paying by debit/credit cards or payment apps won't do this, and it's hard to monitor your expenses.

If you are into the dangerous habit of putting all your purchases on credit cards, you should stop that immediately and start paying with cash. 

2. Avoid Bad Advice: Learn Yourself

If you don’t learn to manage your money, then other people will find ways to mismanage it for you. 

Some of these people could have bad intentions, like dishonest financial planners. 

Others may have good intentions but are not fully informed about your circumstances. 

Instead of relying on random advice from unqualified people, take charge of your own financial future and read a few basic books or blogs on personal finance. 

Once you’re armed with some financial knowledge, don’t let anyone get you off track—whether it’s a significant other who siphons off your bank account or friends who want you to go out and blow tons of money with them every weekend.

3. Track Your Money: Know Where it Goes

After reading a few personal finance books and blogs, you'll find out about the importance of two rules that every personal finance advisor keeps repeating. 

Never let your expenses exceed your income, and always keep your eye on where your money goes. 

The best way to practice this is by budgeting and creating a personal spending plan to track all the money that is coming in and going out.

Once you actually start tracking how you spend your money, it can be a valuable wake-up call to realize how the cost of buying coffee from a cafe every day adds up over the course of a month. 

Unlike a salary hike, which is in the hands of your boss, small changes in your everyday expenses, like making coffee or meals at home, are completely under your control. 

They can have a big impact on your financial situation, just like you're getting a raise.

Keeping your larger monthly expenses—like rent—as low as possible can save you even more money over time. 

Understanding how money works is the first step toward making your money work for you.

4. Pay Yourself First: Start an Emergency Fund

One of the most-repeated mantras in personal finance is “pay yourself first,” which means saving money for emergencies and for your future. 

This simple practice not only keeps you out of trouble financially but it can also help you sleep better at night. 

No matter how much you owe in loans or credit card debt, no matter how low your salary is, and no matter how tight your budget is, there are ways to put at least some of your money into an emergency fund every month. 

If you get into the habit of putting your money into savings automatically, then you will stop treating savings as optional and start treating it as a required monthly expense. 

Before you realize it, you’ll have more than just emergency money saved up—you’ll have retirement money, vacation money, or even money for a down payment on a home.

If you put your cash into a standard savings account, it will be secure and available whenever you need it, but that kind of account will earn almost no interest. 

This means that inflation will eat away the value of your savings over time. 

Instead, you can put your fund in a liquid fund. 

It allows you to withdraw at least 90% of your saving anytime you want.

5. Start Saving for Retirement Right Now

Saving for retirement is crucial, and it is best you start at the earliest. 

If you haven't started yet, it is obviously too late already, and you should start it right now. 

An excellent way to get started on the right path is to educate yourself about the power of compound interest. 

The simplest way to think of compound interest is as “interest on interest,” which means that you will earn interest not only on the principal (the money you put in), but also on the interest (the money the bank pays you for holding your principal). 

By making your money grow at a much faster rate than simple interest, which is calculated only on the principal, compound interest super-charges your savings—especially over time.

Why start saving for your retirement early? 

Because of the way compound interest works, the sooner you start saving, the less principal you have to invest to reach the amount that you need to retire. 

Here’s an example: You start investing in the market at ₹1000 a month, averaging a positive return of 1% a month (which is 12% a year), compounded monthly over 40 years. 

Your friend, who is the same age, doesn’t begin investing until 30 years later and invests ₹10,000 a month for 10 years, also averaging 1% a month (12% a year), compounded monthly. 

After 10 years, your friend will have saved around ₹23.56 lakhs. Your retirement account will be a bit over ₹1.20 cr.

6. Know Your Taxes

Before you even get your first salary, it’s essential to understand how income tax works. 

When a company offers you a starting salary, you need to calculate whether that salary will give you enough money after taxes to meet your financial obligations—and, with smart planning, meet your savings and retirement goals as well.

Thankfully, there are many online calculators that make it easy to calculate and determine what your after-tax salary will be, such as www.cleartax.in.

These calculators will chart your gross pay (total earnings), how much goes to taxes, and your net pay (earnings after taxes and other deductions, also known as take-home pay). 

7. Take Care of Your Health

Health is also one of the most important things you should take care of. 

If your health is not good, you can't work and make money. 

If paying monthly health insurance premiums seems impossible, what will you do if you have to go to the emergency room—where a single visit for a minor injury like a broken bone can cost thousands of dollars? 

Are you still uninsured? Don’t wait another day to apply for health insurance right now. 

It’s easier than you think to wind up in a car accident or trip and fall down a flight of stairs.

If you’re employed, then your employer may offer health insurance, including high-deductible health plans that save on premiums. 

If you need to buy insurance on your own, you can use apps like Navi, Acko, etc. and check the offers. 

It's very easy to get insurance these days, unlike in earlier days. 

8. Protect Your Wealth

To ensure that your hard-earned money doesn’t vanish in an emergency, you should take steps right now to protect it. 

Here are some smart moves to think about, even if you can’t afford them all right away:

If you rent, get renter's insurance to protect the contents of your home from loss due to burglary or fire. Read the policy carefully to see what’s covered and what isn’t.

Disability insurance protects your greatest financial asset—the ability to earn an income—by providing you with a steady income if you ever become unable to work for an extended period of time due to illness or injury.

If you want help managing your money, find a fee-only financial planner to provide unbiased advice. 

Unlike a commission-based financial advisor, who earns money when you sign up with the investments that their company backs, a fee-only planner has no personal incentive to give you financial advice that might not be in your best interest. 

(Even if a commission-based advisor gives you solid advice, they still always have a divided loyalty—to their company’s bottom line and to you.)

You should also protect your money from taxes—which is easy to do with a retirement account—and from inflation—which you can do by making sure that your money is earning interest. 

As you decide how to protect your savings, learn everything you can about relevant investment vehicles because they all bring both different degrees of risk and different potential for growth.

The Bottom Line

Always remember that you don’t need an MBA in finance or specialized training to become great at managing your finances. 

Just follow the eight basic rules listed above, and you will be on the path to financial security. This is the foundation that will allow you to achieve your financial dreams and goals.