When it comes to personal financial planning, some trends will continue to exist. However, in the disruptive market and uncertain environment, there are certain new rules of personal financial planning. The most traditional rules of personal finance are: save money, stick to budget, spend less. In this article, I am going to discuss the new trend:
Owning a home is everyone’s dream. When it comes to citylike Mumbai, it is really a big deal to have own flat. People don’t wish to payto landlord and ready to pay EMIs for owning a flat. For the owners it is likea freedom to own a flat. Buying a home is not only a financial decision but itis also attached to the emotions and desire.
The new trend:Staying on rent can be a smarter financial decision
If a million people running in arace in a particular direction and if you took a different direction, it is notnecessary that you will lose the race. You may find some charismatic resultsfor the different step you have taken.
If you think beyond your desire to own flat and do some mathematics,you will find that buying a house might not be a right decision. If you takeall the money you could have spent buying a home — down payment, maintenance,renovations, property tax, interest, and insurance — and invest it instead,that might yield a better long-term result.
I am not saying that going torented house instead of buying a flat is always a good decision. But thisdecision depends on person to person- where you live, mortgage interest rates,housing prices, how long you plan on keeping the house, how is your job — thelist goes on. So here is the new rule: don’t take decision out of emotions,do proper mathematics as what is coming in and what is going out.
The old trend: Saving money will create more money
We all wish to save more and more money out of our incomes.We believe that we will create more money out of saved money. This is true,however, it depends upon how much money we have and how much patience we have.
The new trend: More earnings will create more money
As per the new trend, in the disruptive world, we need tohave additional source of income. For many people, it is difficult to createnetworth by having income from one source. People are trying to have multiplesource of income for better future and security.
The Old Trend: save 10% of your salaryfor retirement
Put 10 percent ofyour income into a retirement account. While it’s a good idea in theory, thereare a certain reasons this rule no longer workable.
For starters, 10 percent was an easier chunk to put away.But the more daunting truth is, for most people, saving 10 percent isn’t evenenough.
The new Trend: save how much you want
The new trend is,decide your figure i.e. how much money you need for your retirement andaccordingly plan.
The Old Trend: Student loan is always good
Most of peoplebelieved that its goods to have education loan and go for higher education asthe degree will always give higher returns. In reality and looking at the disruptive job market,the debt that comes with higher education isn’t always necessarily a good thingto take on.
The new Trend: Compute ROI for yourdegree
In the disruptive world, where there are lot of uncertainty for jobs it is not always smart decision to take education loan. Generally people assume and they go ahead with education loan. However, it is important to compute the ROI for the investment made in the education. The ROI should be computed considering the recovery amount (through salary) of the loan and interest.
The Old Trend:pay off all your debt before investing
As a human, we wish to achieve complete freedom first then leisure.Normally we see people paying off their EMIs for home loan, car loan, person loan etc. rather than investing the amount for better yield.
The New Trend: Pay off the debt having higher interest
Life is all about balancing out. One should not wait for the complete freedom, it may result into losing some good earning opportunities. The new trend is not to pay off the whole debt to pay off the debt having higher interest rate. This way one can balance out and earn extra money by taking wise investment decisions.
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