Basic Fundamentals of Personal Finance

Personal finance broad term which includes budgeting,investing,insurance and the list goes onn.But here we will understand the basic fundamentals of personal finance.

Personal Finance is a more of life skill which everyone should learn.

Wondering why I said so??

Lets understand that by taking some real life examples:-


The world famous football player Ronaldinho  who was known for his lavish lifestyle and sports car went bankrupt in year 2018. During 2008 he had a net worth valued over £85-100 million.





Remember sushil kumar from Kaun Banega Crorepati (KBC)??


Basic Fundamentals of Personal Finance

Sushil Kumar won  Rs. 5 crore in the Famous game show  Kaun Banega Crorepati in the year 2011, he actually created a history by becoming the first person to win such a big amount from the game.But in the year 2020 he declared bankruptcy.

These two stories taught us that its not only important to learn to earn money but you should also learn to manage your money.

Lets begin the fundamentals of basics of personal finance:-

Before beginning lets understand these concept in a easy way lets take a live character named Ajay and his wife Neha. These characters has define resemblance of each and everyone of us.


Ajay’s parents are depended on him and they live in rented place and both ajay and neha have plans for their future for example:-

  1. Planning for a child
  2. Buying a house

Lets says they both make  total of a lakh rupees per month.Lets discuss how they can achieve their dreams and have secure life ahead withoutworrying about money.

Step1-  They have to save atleast 15% of their monthly salary, and i know you guys are like we barely save 4-5 %. Guys you guys can make it possible, like think it as a tax and put that money in any other account which you wont touch or go for a recurring deposit which deduct the amount as soon as your salary is credited or mutual funds.

Step 2- Creating  a Emergency Fund

What the heck is this emergency fund??

Emergency fund is the money which you can use in case of emergencies for ex:- Accident or medical emergencies, job loss etc.

How much should the emergency fund should be???

Let say ajay and Neha have a monthly expenditure of Rs.80000 per month so the the emergency fund for them should be the monthly expenditure multiplied by 6 i.e the 6 month of their monthly expenditure is the amount they should have as a emergency Fund.

Why 6 months of emergency fund??

6 month is average time period to recover from the most of situation

Pro tip: The money should be kept in such that it will be available to you as soon as possible.


These days we have ‘n’ number of source through which you can get credit for almost anything.Credit is something you should always stay away, because once we get the habit of taking credit we get into almost a chakravyuh which will make it almost impossible for us to get out of the debt.

Credit also has good sides aswell, so basically there are two types ofcredit one is good credit another is the bad credit.

Good credit:-

Its something which will help us get something that has an appreciating value,for e.g your dream house, education loan etc. these are the things that will help you to improve your earning capacity or help you get an appreciating asset at a lower cost.

Bad credit:-

Its something as mentioned get you into a trap or the chakravyuh.For e.g, Credit card can sometime get it into this trap.

Why i say so,because a credit card can charge you upto 60%  interest on the amount which is horrible and almost  make it impossible to repay.

Pro Tip:- Always pay the credit card bill in full amount, don’t fall into the trap of paying the minimum amount as i said it will you pay upto 60% of interest.

Credits are super powerful if you know to use them wisely as we all know with greater power come greater responsibility, so if you cannot control your spending habit please don’t take credit for avoid as far as possible.


Insurance is one of the most misunderstood industry,people take insurance for tax benefits.But this is not the real use of insurance.Insurance is a very beautiful product, if you use it or take the appropriate plan it could help you in the most adverse affected conditions.I know there are so much polices that you don’t know what to do. So let’s discuss the two must have insurances.

  1. Health Insurance

Health insurance help you cover your bills in case our medical emergencies.It is so important to take a life insurance because we cannot guarantee anything in life,what will happen so you should have a health insurance.

  1. Life Insurance

As we had discussed that nothing is guaranteed in life so you have to safeguard your loved ones even after your death , that is where a life insurance play a vital role and take care of our loved ones.

I know that there are hundreds of life insurances out there and they are pretty expensive,there you can take something called the term insurance which charges you a very nominal charge.As the name suggest a term insurance is between a period of certain years.A term insurance can charge you as less as  Rs 500 per month which is less than getting a pizza.

I hope you got a bit overview of World of personal finance, to learn about financial planning click here

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