Personal Finance in 2024: Practical Guide for Beginners

• Influencers on personal finance

Many factors can influence your personal finance. Some of these factors are economic, such as inflation and interest rates. Other factors are political, such as tax laws and government regulations. Still, other social factors include the cost of living and the availability of jobs.

By understanding the factors that can influence your personal finance, you can better prepare for the challenges and opportunities that lie ahead.

• Expenses

One of the most important aspects of personal finance is managing your expenses. It would help if you tracked your spending to identify areas where you can cut back. You also need to invest your money so that it can grow over time.

There are many different ways to track your spending. You can use a budgeting app, a spreadsheet, or a notebook. It is essential to find a method that works for you and stick with it.

Once you know where your money is going, you can identify areas to cut back. There are many different ways to do this. You can cook at home more often, cancel unused subscriptions, and shop for better deals on insurance and groceries.

Investing your money is a great way to grow your wealth over time. There are many different types of investments, so it's essential to research and choose investments that are right for you.

• Disruptions

Unexpected events can have a significant impact on your finances. These events are called disruptions. Some common disruptions include job loss, illness, and natural disasters.

By understanding the potential disruptions, you can better prepare for them and minimize their impact. One way to do this is to create an emergency fund. An emergency fund is a savings account that you can use to cover unexpected expenses.

Another way to prepare for disruptions is to have a financial plan. A financial plan is a document that outlines your financial goals and how you plan to achieve them. A financial plan will help you stay on track and make better financial decisions.

• Takeaways

There are many key takeaways from this course. Some of the most important takeaways include:

• Understanding the factors influencing your personal finance is essential for making better financial decisions.

• Tracking your spending and identifying areas where you can cut back is essential for managing your finances.

• Investing your money is a great way to grow your wealth over time.

• Understanding the potential for disruptions and preparing for them is essential for financial security.

• Having a financial plan is essential for achieving your financial goals.

The course is primarily awareness based.

The most significant factor in personal finance is awareness. Unless you know exactly what context you are dealing with, constantly making decisions wastes time. Hence the course content should be treated as the awareness factor of your knowledge base. Beyond that is outside the curriculum of this course because this course is meant for any person living across the globe. Hence, putting in specific final regulations based on a country will be a hindrance for everyone else.

The next step after finishing this course is for you to go and find a proper financial advisor.

Remember, it is a business, so finding the most trustworthy person will be tough. But that's where you should be spending your time immediately after gaining specific awareness about your context and the tools available to you. Now you have to figure out who can guide you the best, and that's where you are. Next, you have to spend time on getting the right advice. Remember, a Udemy course cannot be treated as formal advice. Instead, you should find someone whom you can hold accountable.

Once you have the awareness and advice, use the calculations I will explain in this course to plan.

This is where the finance gets personal because the goals and ambitions are limited to you. And we will discuss in detail how to understand your goals with a concrete plan. Then you can spend the little time required to execute that plan. Remember, the execution is getting easier by the day with the connectivity. You only need the proper awareness, good advice, and a concrete plan.

And a gentle reminder about the biggest pitfall of personal finance is forgetting to monitor.

You wouldn't know what more you need to learn unless you monitor. And this is a cycle. Awareness, advise, plan, execute, monitor. You have to keep repeating this, and throughout this course, I'll keep reminding you and showing you the importance of having this cycle in place. Otherwise, you are just gambling. Don't even bother to call it personal finance.

In summary, the course is designed to give you the awareness and knowledge you need to make informed decisions about your finances. It is not a substitute for professional financial advice but can help you start on the right track.

A warm-up to get you more into the context for the upcoming sections.

The course is based on Maslow's hierarchy of needs, which is a theory of motivation that states that people are motivated to fulfill five basic needs: physiological needs, safety needs, love and belonging needs, esteem needs, and self-actualization needs.

The course discusses how these needs can be applied to personal finance. For example, physiological conditions include food, water, shelter, and clothing. Safety needs include the need for security, employment, and health insurance. Love and belonging need to have friendship, intimacy, and family. Esteem needs include the need for respect, self-esteem, and status. Finally, self-actualization needs include the need to reach one's full potential.

The course then discusses how to manage your finances to meet your needs. It covers budgeting, saving, investing, and debt management.

The course concludes by discussing the importance of financial planning. It emphasizes the need to set financial goals and develop a plan.

Here are some key takeaways from the course:

• Personal finance is closely linked to psychology.

• Understanding your needs is the first step to managing your finances effectively.

• There are many different ways to manage your finances.

• Financial planning is essential for achieving your financial goals.

• What are the five basic needs in Maslow's hierarchy of needs?

• How can Maslow's hierarchy of needs be applied to personal finance?

• What are some tips for managing your finances to meet your needs?

• What is the importance of financial planning?

• How can you set financial goals and develop a plan to achieve them?

This lecture discusses the basic needs that everyone has to survive and thrive and how to meet these needs on a budget. The basic needs discussed include food, shelter, clothing, education, health care, and retirement planning. The lecture also discusses how to create a budget, save money, get help from government programs or charities, and tips for managing your finances. This lecture is designed to give you a foundation in personal finance and to help you meet your basic needs.

Here are some key takeaways from the lecture:

• Everyone has basic needs that must be met to survive and thrive.

• There are various ways to meet your basic needs on a budget.

• It is essential to create a budget, save money, and get help from government programs or charities if you need it.

• There are a variety of tips for managing your finances effectively.

Aspirations and Psychological Needs in Personal Finance

In addition to basic needs, people also have aspirations and psychological needs. These can include wanting to own a lovely home, have a successful career, or travel the world. While these aspirations are not essential for survival, they can significantly affect our overall well-being.

However, being mindful of how our aspirations can impact our finances is essential. If we are not careful, we can easily overspend on things that we don't need. This can lead to debt, financial stress, and even bankruptcy.

To avoid these problems, it is essential to clearly understand our financial goals and create a budget that allows us to meet those goals. However, we should also be realistic about our aspirations and ensure we are not spending more than we can afford.

It is also important to remember that our aspirations can change over time. What we may want today may not be what we want in the future. As our lives change, so too should our financial goals.

By being mindful of our aspirations and psychological needs, we can make better financial decisions to help us achieve our goals and live a happy and fulfilling life.

Here are some tips for managing your finances in a way that meets your aspirations and psychological needs:

• First, create a budget and stick to it.

• Set financial goals and make a plan to achieve them.

• Third, be realistic about your aspirations and ensure you are not spending more than you can afford.

• Fourth, review your financial situation regularly and make adjustments as needed.

• Finally, get help from a financial advisor if you need it.

Self-Fulfillment Needs in Personal Finance

In addition to basic needs and aspirations, people also have self-fulfillment needs. These needs allow us to reach our full potential and live meaningfully. They can include wanting to make a difference, learning new things, or being creative.

While self-fulfillment needs are not essential for survival, they can significantly affect our overall well-being. When we meet our self-fulfillment needs, we are likelier to be happy, healthy, and fulfilled.

There are many ways to meet our self-fulfillment needs. Some people find it through their work, others through their hobbies, and still others through their relationships. There is no right or wrong way to meet these needs as long as they are meaningful to you.

If you are looking for ways to meet your self-fulfillment needs, here are a few ideas:

• First, volunteer your time to a cause you care about.

• Second, take a class or workshop on something you've always wanted to learn.

• Third, start a creative project, such as writing, painting, or playing music.

• Fourth, spend time with loved ones who make you feel good.

• Finally, get involved in your community.

Meeting your self-fulfillment needs can improve your overall well-being and help you live a happier, healthier, and more fulfilling life.

Personal Finance and Life Stages

The speaker in the WEBVTT you provided discusses the importance of personal finance and how it can be affected by different life stages. He begins by talking about the basic needs that everyone has, such as food, shelter, and clothing. He then discusses how these needs can change depending on a person's age, family situation, and career.

The speaker then talks about the importance of setting financial goals. He says it is essential to know what you want to achieve with your money and then create a plan to reach those goals. He also discusses the importance of saving and investing and how these can help you reach your financial goals.

Finally, the speaker talks about the importance of knowing your financial situation. He says it is essential to track your spending and ensure you are not spending more money than you earn. He also talks about the importance of getting help from a financial advisor if needed.

The speaker's discussion of personal finance is comprehensive and informative. He covers a wide range of topics and provides helpful advice for people of all ages. I recommend this WEBVTT to anyone interested in learning more about personal finance.

Here are some additional tips for managing your finances at different life stages:

• When you are young: Start saving early. The sooner you start saving, the more time your money has to grow.

• When you are in your 20s and 30s: Focus on building your career and earning a good income.

• When you are in your 40s and 50s: Start thinking about retirement. Make sure you are saving enough money to support yourself in retirement.

• When you are in your 60s and 70s: Enjoy your retirement! Make sure you are spending your money wisely and enjoying your time off.

No matter your age, it is essential to be aware of your financial situation and to make sure you manage your money wisely. Following these tips can set you up for a financially secure future.

The speaker discusses the different sources of income throughout a person's life. They begin by talking about parental support, the primary income source for children. Then, as people get older, they may earn money from part-time or full-time jobs. Finally, people may rely on pensions, investments, or retirement funds in retirement.

The speaker then talks about how the sources of income can change over time, depending on a person's age, family situation, and career. For example, people with children may need to rely on parental support for extended periods. People with a career change may need to start earning money from a new source. And people who retire may need to adjust their spending habits to live on a smaller income.

Finally, the speaker talks about the importance of planning for retirement. They say that it is essential to start saving money early and to make sure you have a diversified portfolio of investments. They also say it is necessary to talk to a financial advisor to get help planning retirement.

The speaker's discussion of personal finance is comprehensive and informative. They cover a wide range of topics and provide helpful advice for people of all ages. I recommend this WEBVTT to anyone interested in learning more about personal finance.

Here are some additional tips for managing your finances at different life stages:

• When you are young: Start saving early. The sooner you start saving, the more time your money has to grow.

• When you are in your 20s and 30s: Focus on building your career and earning a good income.

• When you are in your 40s and 50s: Start thinking about retirement. Make sure you are saving enough money to support yourself in retirement.

• When you are in your 60s and 70s: Enjoy your retirement! Make sure you are spending your money wisely and enjoying your time off.

No matter your age, it is essential to be aware of your financial situation and ensure that you manage your money wisely. Following these tips can set you up for a financially secure future.

The speaker discusses the importance of managing your finances and how the ratio of necessities to disposable income can affect your wealth. They begin by talking about the concept of disposable income, which is the amount of money you have left over after paying for your basic necessities. They then talk about how the amount of disposable income that you have can affect your ability to build wealth.

The speaker then talks about how the ratio of necessities to disposable income can change over time. They say that you may have a lower percentage of conditions to disposable income when you are young because you may not have as many financial responsibilities. However, as you get older, you may have a higher ratio of necessities to disposable income because you may have more financial obligations, such as a mortgage, car payments, and child care.

Finally, the speaker talks about how you can manage your finances to improve your necessities to disposable income ratio. They say you can do this by cutting back on unnecessary expenses, increasing your income, and investing your money wisely.

The speaker's discussion of personal finance is comprehensive and informative. They cover a wide range of topics and provide helpful advice for people of all ages. I recommend this WEBVTT to anyone interested in learning more about personal finance.

Here are some additional tips for managing your finances:

• Create a budget. A budget is a plan for how you will spend your money. It can help you to track your spending and to make sure that you are not overspending.

• Set financial goals. Once you have created a budget, you can set your financial goals. These goals can help you stay motivated and ensure you are on track with your finances.

• Cut back on unnecessary expenses. Look closely at your spending and see where you can cut back. There are probably some expenses that you can eliminate without even noticing.

• Increase your income. There are several ways to increase your revenue. For example, you can get a part-time job, start a side hustle, or ask for a raise at work.

• Invest your money wisely. When you invest your money, you are putting it to work for you. Over time, your investments can grow and help you to reach your financial goals.

By following these tips, you can manage your finances wisely and improve your necessities to disposable income ratio. This can help you to build wealth and secure your financial future.

The speaker discusses the different entities that can affect a person's finance. They begin by discussing the individual, the center of the unique finance universe. They then talk about the economy, the markets, the government, banks, and employers, the main cast around which a person's finance revolves. Finally, they talk about the bad actors, such as advertisements, influencers, spammers, phishing messages, friends who claim to be experts without any underlying knowledge, and ignorance, which can all hurt a person's finance.

The speaker discusses the different entities that can affect a person's finance. They begin by discussing the individual, the center of the unique finance universe. They then talk about the economy, the markets, the government, banks, and employers, the main cast around which a person's finance revolves. Finally, they talk about the bad actors, such as advertisements, influencers, spammers, phishing messages, friends who claim to be experts without any underlying knowledge, and ignorance, which can all hurt a person's finance.

Testing the concepts covered in the section.

In this lecture, we'll explore the highly simplified mechanisms of currency circulation within an economic system. We begin by discussing the role of central banks in printing and controlling the currency in a country. We then delve into how commercial and business banks function as distribution channels for this currency to reach individuals and businesses.

In illustrating this process, we touch on key concepts such as the base rate, the profit motives of banks, and the differences between these banks and the government. We highlight that the government also needs to borrow money, operating much like a business in this regard.

From there, we shift our focus to how employers (including the government) pay salaries or benefits to individuals, further distributing the currency. Throughout this exploration, we constantly remind you of the ultimate goal: ensuring your financial Security. This understanding of the broader economic environment should help you navigate your personal financial decisions more effectively.

This lecture provides an excellent starting point for those interested in understanding the basics of economics and finance. Still, it also emphasizes that mastery of these subjects is not necessary for everyone. The main goal is to understand enough to make wise decisions about your finances.

This lecture provides a comprehensive overview of bonds, their features, and their role as a financial asset. It starts by delineating the differences between equities and bonds, explaining that while equity signifies a share of the business, a bond is a certificate of trust between the buyer and seller that guarantees a fixed rate of return over a defined period.

The lecture explains how bonds function to raise capital for both governments and corporations. The speaker delves into the workings of government bonds and the fixed interest rates they offer, ensuring their appeal to investors. The lecture also examines how businesses and corporations utilize bonds to raise funds, emphasizing that the stability and age of the company issuing the bonds can significantly affect the associated risk level.

Participants will also learn about the role of corporate bonds, which the speaker points out are typically riskier than government bonds. The speaker highlights the importance of investor awareness in understanding and navigating the bond market effectively. They emphasize that the lecture introduces various asset classes and that it is up to the individual investor to identify which ones suit them based on their financial needs and risk tolerance.

Finally, the lecture introduces the roles of different entities in the bond market, including commercial banks, business banks, retail investors, institutional investors, and investment banks. It concludes by emphasizing the importance of assessing risk and reward when investing in bonds.

This lecture delves into inflation and its implications on consumers and the economy. The session starts with the basic definition of inflation as the reduced purchasing power of a given sum of money over time. This reduction in buying power makes consumers feel the impact of inflation the most.

The lecture discusses the role of central banks in controlling inflation by adjusting the money supply. It explains how inflation is introduced into the market as a controlling mechanism. However, too much inflation can negatively affect us.

We examine how central banks increase the base interest rate to control inflation. Commercial and business banks, profit-making entities, compensate for this increase by forwarding it to their customers through increased interest rates.

The lecture goes on to explore the repercussions of these higher interest rates. For instance, all repayments to lenders – such as the government or businesses to banks, and subsequently, banks to the central bank – increase, leading to higher installments for the same borrowed amount.

Furthermore, we discuss potential government responses to compensate for these increased payments. For example, the government could raise taxes or issue new bonds to generate additional revenue. However, frequent increases in taxes can lead to political issues.

The discussion then shifts to the impact of inflation on product pricing and indirect taxes like sales tax. To maintain their profit margins amidst inflation, businesses may increase their product prices, which in turn indirectly raises the taxes consumers pay.

The lecture wraps up by explaining how this process brings inflation to consumers, leading to higher product prices and indirectly higher taxes, even if the government holds back from increasing direct taxes. In this way, inflation has far-reaching implications for consumers and the broader economy.

Testing your understanding of the concepts.

The video discusses different income components from both a salaried employee perspective and a self-employed individual perspective.

1. As an employee, there are various ways you receive your income:

   • Base Salary: This is the fixed cash component you receive monthly. It forms about 40-60% of your Cost To Company (CTC), and other details are usually calculated as a percentage of this.

   • Benefits: These are non-cash components paid on your behalf by the company. Examples could include insurance premiums, food coupons, or transportation costs. These benefits typically end when you leave the company.

   • Variable Pay/Bonus: These depend on the company's performance and fluctuate. While they can add to your income, they should not be relied upon for personal finance planning as their occurrence is not guaranteed.

   • ESOPs (Employee Stock Options): Some companies offer these and can be a significant part of your compensation. However, they cannot be immediately liquidated to pay your monthly bills.

   • Taxes: Your company includes the taxes you must pay as part of your CTC. They might deduct this from your salary and spend it on your behalf (Tax Deduction at Source), or you might have to pay it yourself.

The speaker emphasizes that while the CTC may seem significant, the actual take-home pay, or 'in-hand salary,' is usually around 1.2-1.25 times the base salary after considering the various components.

2. For self-employed individuals, the income structure is much simpler: They earn an income and pay taxes on it. However, any other benefits or bonuses must be managed personally.

The speaker describes four categories of personal expenditure: bills, investments, savings, and leisure. They point out that investing is a long-term strategy for generating income, which is crucial for later stages in life—on the other hand, saving aims to preserve capital for future investment. It's a strategy to generate more disposable income and increase investment capacity.

The speaker notes the importance of understanding the difference between saving and investing, as these two have different risk profiles and goals. Unfortunately, many wrongly treat them as identical and tend to commit a significant portion of their income to pay bills and mortgage down payments, which hampers long-term financial stability.

The speaker highlights the risk of taking on a mortgage that consumes around 50%-60% of one's income, a common practice as mortgage providers often base their calculations on these figures. However, if one's bills exceed 50% of their income, it could severely destabilize their personal life.

Therefore, the speaker urges listeners to ensure their bills constitute less than 50% of their income and to separate their savings and investment strategies to ensure long-term financial stability and growth.

The lecture focuses on personal finance, particularly the role of bills and expenses in managing and growing one's capital.

The speaker emphasizes that the first step towards growing capital is generating it primarily from saving. As the speaker notes, bills are the most significant outflows of cash, and hence, managing them effectively can result in substantial savings. The speaker also warns listeners about the inevitable nature of bills, as they are periodic and inevitable, emphasizing the importance of understanding one's outgoing cash flows.

Five major categories of expenses are presented, inspired by Maslow's hierarchy of needs. These are mortgages (covering housing needs), food, utilities (including electricity and transportation), fuel (explicitly separated from utilities due to its significant role), and insurance (covering safety needs).

The speaker urges listeners to adapt this framework to their specific region and city circumstances, as costs and requirements vary widely. This course is described as an "awareness course" aimed at providing direction rather than specific financial advice. The listeners are encouraged to take action, learn more, and not consider the information given as a silver bullet to their financial concerns.

This lecture is dedicated to helping you make informed decisions about loans, explicitly focusing on home loans, education loans, auto loans, personal loans, and the use of credit cards.

In the first part, the instructor discusses the dynamics of home loans, emphasizing how the borrower needs to contribute a certain percentage as a down payment while the bank covers the rest. In addition, he highlights that until the loan is fully repaid, the house is technically owned by the bank, serving as a reminder that it is a liability rather than an asset during this period.

Next, he delves into education loans, discussing how they typically require collateral for more significant amounts and how these loans can significantly impact personal finances and future planning.

The third part covers auto loans, reminding attendees that vehicles are depreciating assets and explaining how these loans affect repayment capacity.

The instructor then covers personal loans, discussing the higher interest rates due to the risky nature of these loans. He stresses that banks are profit-making entities and will charge for each transaction, reminding attendees to factor this into their financial planning.

Finally, the lecture addresses credit cards, cautioning participants that these are loans with potentially high-interest rates. The instructor encourages attendees to use credit cards responsibly, treating them as plastic cash within their spending capacity.

Throughout the lecture, the instructor emphasizes the need for careful planning, consideration of pros and cons, and responsible borrowing to maintain creditworthiness and financial health.

This lecture will be incredibly beneficial for individuals looking to understand the implications of various loans, those seeking to improve their financial literacy, and anyone interested in making informed financial decisions.

- Health insurance: This is presented as a crucial investment, even if it isn't used every month. The speaker mentions that this can sometimes be provided as a benefit of full-time employment, which is something to consider when comparing full-time work to freelancing.

- Term or life insurance: This type of insurance is described as providing for dependents in the event of the insured's death. The speaker recommends considering all potential future expenses when determining the necessary amount of coverage.

- Property insurance: The importance of having insurance coverage for property damage, such as a home, is stressed.

- Travel insurance: This is recommended for anyone traveling abroad, as their regular insurance may not cover them outside their home country.

- Emergency fund: This is seen as a fundamental aspect of personal finance and a form of self-insurance. It is suggested that one save at least six months of expenses and adjust this amount for inflation over time.

The instructor emphasizes the importance of insurance to mitigate risk and ensure financial stability. Obtaining insurance is described as pooling money against low-probability events and as a legitimate business for insurance companies, who can invest the pooled funds to earn profits. The emergency fund, while not a form of insurance per se, is seen as a crucial aspect of financial stability and preparedness.

The speaker suggests considering savings in terms of targets for different time frames, such as one year, three years, five years, and ten years. The speaker emphasizes the importance of contributing to a retirement fund early in one's career. This is because jobs are becoming shorter, and competition is increasing due to the widespread accessibility of education and the Internet.

The speaker warns about the risks of retirement savings falling short and the need to invest in fixed-income assets early in one's career. This allows these assets to generate sufficient capital over time. However, there are risks associated with bonds as fixed-income assets, such as their returns potentially falling below inflation.

The speaker concludes by reiterating the importance of active savings management and not simply seeing them as a static number. The money saved needs to be further acted upon and cannot remain in cash.