Here are the basics of personal finance:

Set smart financial goals.

In order to live a healthy and successful life, everyone should set clear goals. In 1963, his 29-year-old accounting professor at an American university asked how many of his students had written down their life goals. Surprisingly, out of 300 students, only 9 of them had written down their life goals on paper. 30 years later. So in 1993 all the students went to the same college and met the same professor who is now 59 years old.

He calculated each person’s net worth. He was the only 9 people found to have a net worth greater than the combined net worth of 291 people. Interestingly, the nine were the same person who wrote down his goals 30 years earlier. Therefore, it is important to set clear financial goals. There are three key factors to consider when defining your financial goals.

SMART IT: Smart is an acronym for Specific Measurable, Achievable and Relevant Time. You need to see what you want, how much you need it, if it’s realistic and reasonable, and when you want it.

Time it: Goals can be short-, medium-, or long-term. Immediate goals are tasks that must be completed within the next 30 days. For example, consider purchasing an Android smartphone. A job that lasts a year is a short-term goal. Medium-term goals are goals that take three years or more to achieve. Long-term goals take three years or more to reach. High school students may have the opportunity to study abroad.

Write it down: It’s usually a good idea to record your goals on a journal sheet. This will keep your goals fresh in your mind and make them achievable.

The power of compound interest:

compound interest is sometimes called “his eighth wonder of the universe.” Simple interest earns interest only on the principal, while compound interest earns interest on both the principal and interest. For example, capital of 1,000 rupees invested for 10 years at 10% interest yields 1,000 rupees in simple interest and 1,593 rupees in compound interest. Compound interest is always good when it comes to investing as it helps the fund grow faster.

• Money increases in value over time.
• The less money you save over time, the greater the return.
• The sooner you invest, the better.

Recordkeeping (Actual and Budget)

Everyone needs to keep accurate financial records to determine spending and saving against income.

There are many ways to earn money. A paycheck from a job, a profit from a business, and an interest in saving are all adult possibilities. Sources of income for student tutors include pocket money from parents, gifts from relatives, and scholarships from internships.

In contrast, their expenses include college tuition, meals, gas, and cell phone top-ups. Therefore, it is always a good idea to keep track of your financial transactions in order to get the most out of your money. Create a budget at the beginning of each month and set aside at least 20% of your money. Wise use of money is underpinned by proper preparation and execution. Keep financial records during these steps.

Originally published at https://businessdor.com on January 26, 2023.