In every walk of our lives, we need commandments which we try to follow to achieve success. Our financial life is no different. By doing our best to follow these commandments, we are almost certain to have a good financial life and mental peace. Here are the 10 commandments of personal finance which will help us achieve the stress-free financial life

  • Comprehensive Financial Planning. It involves a detailed review and analysis of all the facets of your financial situation. It captures your present financial status and lays a road map to achieve your future financial goals (both short and long term). It includes areas such as cash flow management, risk management, investment management, insurance planning, and tax management. It is through comprehensive analysis that your true financial condition can be determined and a proper plan can be recommended to achieve your desired financial goal.
    Think of a good comprehensive financial plan as being very similar to a health and wellness plan; you need to focus on and take care of all aspects of your health, not just a few to achieve optimal health and wellness. 
  • Pay yourself, First. When you get your salary or any other income, always remember to pay first to your major provider, you. A minimum of 30% of your income should be paid to yourself and try to reach this amount to 50%. This amount should be invested wisely to achieve your financial goals. 
    Though we in the Armed Forces are not much worried about the retirement cash flows due to pension, if someone today at 60 years of age wants to retire, he should have the savings of 30 years of expenses. So it’s essential to plan for retirement. No one else other than younger YOU can help you with sufficient savings for your golden period of life.
  • Diversification. At the strategic level, diversification among the asset classes is important. Though equity has been the best performing asset class, it may not be prudent to invest 100% in equity. Diversification is a must among the equity, debt, gold, and maybe the real estate based on the risk appetite and time available to achieve the financial goals. There is an old saying, “don’t put all your eggs in one basket”.
  • Avoid investing in complex products. Avoid investing in products that you do not understand. This is one of the most common mistakes people make; they tend to invest in the latest investment Fads (like crypto for example), irrespective of the fact that such investments can wipe out their entire principle. Also never mix insurance with investments. Any insurance policy having maturity benefits on survival must be avoided. Insurance is only meant to cover the loss of income due to premature death or disability.
  • Minimize emotional/reckless mistakes. While making investments, we all make mistakes but should try and minimize them. Trying to time the market for selling and buying will only increase the cost of acquisition. Time spent in the market is what matters rather than trying to time the markets. They say, 90% of the market gains have come in 10% of the time, so if you are not invested during this 10% of the time, gains won’t be worth mentioning.
  • Manage your debt wisely. At the outset, one should avoid debt in any form and if you have debt, It’s important to pay it off as quickly as possible. Pay your bills on time in full and do not carry credit card balances. As the bible says, “The borrower is a slave to the lender.” It’s good to be debt-free.
  • Avoid keeping up with Joneses. Many people fall into the trap of competing with others when it comes to buying things, irrespective of their needs. They want to give an outside impression that everything is good, though their pocket may be hurting from inside. Avoid such temptations and spend only based on your needs. 
  • Avoid Lifestyle Inflation. Overspending leads to materialism and lifestyle inflation which is hard to maintain. Mishlei Proverbs 13:7 tells us, “ There is one who feigns riches but has nothing; one who feigns poverty but has great wealth”. Under accumulators of wealth (UAW) have low net wealth despite their high income due to excess spending to maintain their standards; whereas prodigious accumulators of wealth (PAW) manage their net wealth much better, often living in blue-collar neighborhoods and not buying expensive cars.
  • Don’t obsess about money. Though easier said than done, it’s better to maintain balance in your life without the only focus of wealth accumulation. “Keep your lives free from the love of the money and be content with what you have” as mentioned in Hebrews 13:5.
  • Be Charitable. A part of our earnings should go towards a charity for the overall good of society. “Of all that you give me, I will give you a tenth” as mentioned in Genesis 28:22. Those who can afford should donate 10% of their income every year.

Last but not the least, learn about personal financ management and make your family also aware of different aspects of personal finances. Financial awareness gives you more options to manage your money in a better way. It’s important to make your money work for you 24×7 for all 365 days.

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