Kavan Choksi / カヴァン・チョクシ Discusses the Fundamentals of Personal Finance

Anyone wanting to secure their financial future must firstly acquire a good understanding of the fundamentals of personal finance. As per Kavan Choksi / カヴァン・チョクシ, this knowledge not only helps people make informed decisions, but may also provide a foundation for effectively managing money. Basics of personal finance encompasses many fundamental principles and concepts that guide the process of personal financial management. Knowing these basics allows individuals to make informed decisions about their money, while ensuring financial stability and growth.

Kavan Choksi / カヴァン・チョクシ provides an insight into the fundamentals of personal finance

Personal finance implies to the management of individual or household finances. It comprises of a wide range of financial activities that can affect the daily life of people, such as banking, insurance, portfolio management, and tax planning. Here are a few fundamentals aspects of personal finance that everyone must be well acquainted with:

• Financial goals: An individual is far more likely to achieve financial success when goals are clearly identified and well defined. Financial planning begins with understanding exactly what one is working toward, rather than saving or investing without direction. These goals can be broadly categorized into short-term, medium-term, and long-term objectives. Short-term goals may include purchasing a new smartphone or funding a vacation, while medium term goals often involve more significant commitment, like buying a car, paying for higher education, or purchasing a home. Long-term goals usually revolve around wealth creation and financial security, such as retirement planning being the most common example.

• Investment strategy: Once financial goals are established, the next step is to develop an investment strategy that aligns with those objectives. An investment strategy considers factors such as time horizon, risk tolerance, and the amount of capital required to reach specific milestones.

• Emergency fund: Life is unpredictable, and unexpected situations like job loss, medical emergencies, or sudden financial obligations can create immense stress if one is unprepared. An emergency fund serves as a financial safety net during such times. An emergency fund should ideally cover at least six months of living expenses, including loan repayments, groceries, utilities, and other necessary bills. Building this fund should be treated as a top priority and completed prior to investing in expensive assets or high-risk opportunities.

• Budgeting: Budgeting is a powerful tool for gaining awareness and control over personal finances. It helps individuals to understand how their income is being spent and ensures that their spending aligns with personal values and long-term goals. Diverse budgeting methods can be adopted by a person, depending on their personal preferences and habits. One popular approach is the 50/30/20 rule, which allocates 50% of income to essential needs, 30% to discretionary wants, and 20% to savings and investment.

• Credit score: This numerical score is calculated based on the past and present credit behavior of a person, including their loan repayments, credit card usage, and overall debt management. Lenders use credit scores to evaluate applications for loans, credit cards, insurance policies, and rental agreements. The score also influences the interest rates, credit limits, and terms that are offered to a person.

Kavan Choksi / カヴァン・チョクシ mentions that understanding the basics of personal finance would allow a person to invest smartly, spend judiciously, and save more money.