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5 Mandatory Financial Basics You Need To Know For A Stable Life

By Author: Ummesalma
Total Articles: 3

Financial literacy plays a very important role in our lives as it shapes our financial future and also that our children. It has an unseen impact on the quality of our lives as it helps us to
take a variety of financial decisions throughout our life. When you understand these financial basics and apply them to the money you earn, it is likely to have a positive impact on wealth creation.
If terms like balance transfer or compound interest leave you in a tizzy, then read ahead to clear the basic concepts about money:
1. Risk: Finances and risks go hand in hand since you will always strive to make your money grow through investment. Risk is always a part of investing but by taking calculated risks, it is possible to increase wealth after considering the stages of your life. Stay away from quick, overnight schemes that promise fantastic returns and at
the same time, do not be completely risk-averse too.
2. Credit Cards: It is vital to understand the basics of credit cards, especially in today’s world of credit. Depending on the way you use them, credit can prove to be a boon or a curse in your life. Understanding credit cards will help you to use them to your advantage and stay away from the pitfalls of using them indiscriminately. This can be a very important financial lesson to make sure your finances remain in order.
3. Budget: To stay on the right financial track, it is very important to know where your money is going. Keeping track of your hard-earned money is the key to saving for a secured life post-retirement. After creating a suitable budget, make sure you note down all your expenses and investments on a daily basis, to know that money is being used for right purposes.
4. Emergency Fund: Just as a batsman is unable to anticipate a bouncer every single time, you cannot predict an emergency situation that could be created without warning. Though you wont always know what is going to happen next, being prepared for it financially can help you to manage a tricky situation. For this, an emergency fund is necessary as it can take care of sudden financial losses, a job loss or a health-related emergency.
5. Depreciating Assets: Every purchase you make may not fall in the category of an investment and it is therefore necessary to understand what an appreciating and depreciating asset is. A car is a depreciating asset, especially when bought new as its value will reduce over a period of time. If your home is in a place with bad amenities or connectivity, its value could depreciate over a period of time.

Other than this, taking a high-interest personal loan to finance a holiday aboard or taking a mortgage loan without having the capacity to afford it are wrong decisions that could affect your finances deeply. Through the above mentioned financial concepts you can bring in a lot
of stability into your personal and professional life.

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