Build Wealth: Secure Your Future With These 5 Personal Finance Habits

Stocks offer direct ownership in companies with the potential for high returns, while mutual funds and ETFs provide beginner-friendly, professionally managed pooled investments

By Ramneek Ghotra

Managing personal finances effectively is key to building a secure financial future. It’s not just about earning money but how you allocate, save, and grow it. Here are five essential habits for financial stability and long-term success.

Follow the 50/20/20/10 Rule

One of the most practical ways to manage your finances is by following the 50/20/20/10 rule.
50 per cent of your income goes to basic needs like rent, groceries, utilities, and transportation.
20 per cent to self-care and discretionary expenses like dining out, hobbies, entertainment or even personal development.
20 per cent for savings aimed at long-term goals like retirement, buying a house, or starting a business.
10 per cent for emergencies to ensure you’re prepared for unexpected expenses such as medical bills, car repairs, or sudden job loss.

Why is this rule so effective? It ensures that your savings remain untouched during emergencies, avoiding the common mistake of dipping into long-term investments for short-term crises. By setting aside a separate emergency fund, you’re safeguarding your financial goals while maintaining flexibility in your monthly budget.

Invest in the Stock Market

Investing in the stock market is a powerful way to grow wealth over time. The average stock market return for the last 5 years was 11.33 per cent (7.28 per cent when adjusted for inflation), for the last 10 years it was 12.39 per cent (9.48 per cent when adjusted for inflation), for the last 20 years it was 9.75 per cent (7.03 per cent when adjusted for inflation), and for the last 30 years it was 9.90 per cent (7.22 per cent when adjusted for inflation). Based on your risk appetite and long-term goals, choose what works for you.

Stocks offer direct ownership in companies with the potential for high returns, while mutual funds and ETFs provide beginner-friendly, professionally managed pooled investments. Index funds are a low-cost way to invest passively by tracking market indices, and bonds are low-risk options offering steady income. For those interested in real estate, REITs allow investment without directly owning property.

Invest in Skills and Self-Development

Spending on your personal growth is not an expense but a vital investment. Learning new skills, earning certifications, or pursuing higher education can significantly enhance your earning potential. For instance, acquiring digital skills, learning a new language, or mastering negotiation techniques can open up new career opportunities and income streams.

Moreover, self-development isn’t limited to professional growth. Investing in your mental and physical health ensures you’re in the best position to seize opportunities and maintain a balanced life.

Turn to AI for Personalised Insights

Technology has made managing finances easier than ever. AI-powered tools can track your spending, optimise savings, and provide tailored investment advice based on your goals and risk tolerance. These platforms simplify complex decisions, ensuring you make smarter, data-driven financial choices with minimal effort.

Regularly Review and Adjust Your Financial Plan

Your financial goals and circumstances will evolve over time. It’s crucial to review your budget, savings, and investments periodically to ensure they align with your current needs and aspirations.

For example, a promotion might allow you to save more aggressively, while a life event like buying a house or starting a family may require reallocating funds. Regular reviews help you stay on track and adapt to life’s changes effectively.

Securing your financial future is about consistent habits and smart tools. By managing your budget, investing wisely, and leveraging AI for personalised insights, you can confidently build a stable and prosperous future.

(The author is the Chief Growth Officer at Finvasia and has over 15 years of experience in advocating financial empowerment and inclusion.)

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