Category Archives: Finance

The Initial step to Freedom

Everybody wants to be financially free, but a few knows the way and a very few actually puts in the effort.

Welcome to riteFinance – the pathway to Financial Freedom! Today we will discuss how to create wealth.

The very first step to wealth creation is to know your spending aka track your expenses. To track your expenses you can use a simple excel sheet or a more suitable tool like mint. Whatever you choose the process is very simple, you need to list down all your expenses from day 1 of every month to the last day. And you need to do this for at least 3 months to get an average. If this Average is more than 100% of your Income, then you need to either A. Cut down your expenses, or B. Increase your Income, though an Increase is always advisable but cutting down the expenses is the first thing you should do. Remember ‘Live below your means’, buy only what you can afford not what your credit card can afford.

Once we know how much we spend, the next step is to create an Emergency Fund, i.e. set aside 3 to 6 months (6 recommended) of cash reserved, only to be used for Emergency. If you need to know more about the same, we already have blogged regarding the same here.

Now, if you have the above two steps taken. The next question is ‘How to create Wealth?‘. Yes, we haven’t yet discussed that. The above steps won’t help you create wealth, but it will give enough peace to progress towards Financial Freedom.

To begin your journey, you must know how much of the Income is your expenditure (again if your expenditure is more than or equal 100% we urge you to increase income or cut the expenses). Calculate %Expense of Income, for example if your Income is 100 INR
(or for that matter any currency), and your expense is 75 INR than it becomes 75%.

One thumb rule to manage your Finances especially if you are beginner is to follow 75-15-10 rule i.e. Spend 75% of your Income, Invest 15% and Save 10%. Later on as you get better grasp of your finances and is able to cut more on expenses / increase your income then one should progress to 50-30-20 Rule, 50-30-20 rule can also be called as the Ultimate lifetime Money Plan. It simply means one should Spend 50% of the Income, Invest 30% and save the remaining 20%. And in case your expenses are less than 50%, great you can invest the remaining. You can read more on Investing here.

Remember the you need to Invest like crazy to be Wealthy, while if you Spend like crazy you just end up looking Rich. Choice is Yours.

Tip – Donate a small amount from your earnings to a Charity, and you will start feeling Abundance & Positivity surrounds you, fueling in more wealth and adding a sense of purpose to your life. The more you give the more you will be in a position to receive. Give it a try!

Thank you for reading. For more such Financial Tips, do follow us @ritefinance. Together let’s build Wealth. Happy Learning…

Covid happened, what does it mean for Personal Finance?

Spend less, Save more and hope for the best. Well, yes but not exactly. Covid has left many Businesses and firms bankrupt, leaving millions of employees jobless.  News of Recession and Economic downturn is all around. And no one knows, how long the Economy is going to take to recover or will it even further go down! While we agree its a tough time, nevertheless every tough situation has some thing important to teach us.

One thing Covid teaches us is the Importance of Emergency Fund. It echoes clearly that Emergency Fund is a must. So What is Emergency Fund?, Why everyone should have it?, and How?.

What is Emergency Fund?

As the name suggest it’s a fund set aside only to be used in an Emergency. So can you use it to buy the next new iPhone?, or that fancy Car down the road? The answer is obviously not! It’s the amount only to be used when you have no other source of Income coming in. When you can’t manage your expenses, and is being laid off or became victim of a crisis like Covid.

Why everyone should have it?

Yes, you heard it correct. Not just Individuals, even a Business needs to have some sort of Emergency fund to safeguard its employees and help the Business survive the Crisis by being able to pay off all the basic minimum expenditure. That is not to say, Business shouldn’t look for alternative or cut costs. A healthy Business is the one who is capable of doing it all. Surviving a Crisis is not easy especially if you are operating in a sector that is being hit hard (for example – ‘Theatres’, ‘Cinema Halls’, ‘Gyms’ and ‘Restaurants’ in current Covid19), but having the reserve cash set aside to meet the basic minimum of your operational cost and other expenditures for a period of 3 to 6 months gives you enough time to think with clarity and plan for better handling of Crisis or even turn it into an Opportunity.

For Individuals ‘especially’ keeping aside the Cash can keep their Stress at check, and help them be better prepared to cope with Crisis. Emergency fund won’t  give you a lavish lifestyle or won’t guarantee you funding for the period till the Crisis resolve, you will still have to think of alternative, but it will give you enough Mental Peace to be able to focus on the next steps.

How to have it?

Now that we have established the importance of Emergency fund/Reserved cash for Crisis, you may be wondering how can one have it? Well the answer is pretty obvious Save 3 to 6 months of personal expenditure in a separate account that you can’t touch unless until its an Emergency! Yes, there is no secret sauce to it. You need to, you must Save, Save before you Spend, Save before you Invest, In fact don’t start Investing unless you have the Emergency Fund setup. After all Money is a tool and if it can’t get you peace, it is useless.

All the fancy items can be bought back later, first you need to live below your means and get the Fund setup. It is an essential first step towards your Financial Freedom. And if you already spend more than you earn than by all means either Earn more or Spend less!

Thanks you for Reading. For more such Financial Tips, follow riteFinance. Happy Saving

Invest your Money

Money affects every aspect of our Life. But oftentimes we forget that it is just a tool. A tool to help us live better, not the sole purpose of life. It is not the only thing that should matter, but yes its a major thing in Life.

If you are broke, no one will shelter you. If you are broke, sure your life becomes a hell. That is why we need to understand how to not let Money destroy our Happiness, how to not let Money stress us, how to not let us be consumed and work tirelessly for Money without caring about health or stuff that matters,“how to be financially free”!

One Important aspect to Financial Freedom is INVESTING. ‘To Let Money grow Money’. But before you Invest, you need to know

5 To Dos of INVESTING

1. Only INVEST in things you understand. Not just listen to any random advice, Do your own due diligence before Investing. Because Investing comes with risk and you are never guaranteed to make Money, you may lose all.

2. INVEST for the Long term. By Investing for long term you can stay away from seasonal risk and short term market fluctuations, hence reducing the risk and letting your capital grow over the time. This is the way to reap all the benefits of Compounding.

3. Diversify your Investments. Like the saying goes don’t put all your eggs in one basket. The same is true for Investment, one should not put all their Money on a single asset.

4. Only INVEST the Money you don’t need for the next 1 to 3 years at-least. Well apart from Investing you need to make sure you have a saving cushion, and some cash to be used in case of emergency.

5. INVEST on Self. Now this is the thing many of us forget, well its equally important if not more to Invest back on self i.e. education, learning, personal grooming, health etc in order to reap all the benefits and even further grow your Investments.

That’s all for now ‘Happy Investing‘. For more such Personal Finance related tips and knowledge do follow riteFinance, ‘because Money Matters’.