03 May 2024 | Edukatips

Tips to Become A Financially Healthy Generation

To become a financially healthy generation, it is crucial to build a strong financial foundation. This includes understanding and practicing wise financial management techniques.

Here are some tips to manage your finances and achieve financial stability.

Initial Tips for Managing Finances Towards a Financially Healthy Generation

Achieving financial stability starts with managing personal finances in a way that aligns with your financial goals.Here are some strategies to optimize personal financial management:

1. Develop a Budget

Develop a realistic budget that reflects your actual income and expenses. This will help you see the big picture of your finances and identify areas where you can save money. By creating a budget, you can increase your financial awareness.

2. Adopt Wise Shopping Habit

Adopt wise spending habits by looking for deals and discounts when making purchases of daily necessities. Distinguish between needs and wants and prioritize spending on basic needs such as food, housing, and transportation.

3. Create an Emergency Fund

Having an emergency fund that covers at least three to six months of living expenses is crucial in dealing with unexpected situations such as job loss or health problems. This fund can serve as a financial safety net.

The 50/30/20 Principle in Managing Finances

The 50/30/20 principle is a valuable guideline for managing finances. This principle suggests dividing after-tax income into three main categories: needs, wants, and savings.

1. Allocation for Needs (50%)

Half of your income should be allocated to fulfill basic needs. This includes expenses such as daily living expenses, utility bills, transportation, and food.Distinguishing between absolute needs and expenses that can be reduced, such as opting for a more economical car model, can help you keep costs within your financial means.

2. Allocation for Wants (30%)

Around 30% of your income can be allocated for things that are not essential but can improve the quality of your life, such as dining out, sports, travel, hobbies, or digital subscriptions.Just make sure that your spending on wants does not impede your ability to meet your needs or aside savings. It’s also important to consider the long-term value of your spending and adjust if necessary.

3. Allocation for Savings and Investment (20%)

The remaining 20% of your income should be allocated towards savings and investments. This includes retirement funds, emergency funds, insurance, and other investments that promote long-term financial stability.

You can maximize your savings by utilizing deposit accounts, Tahapan Berjangka, and other investments in various instruments such as Mutual Funds, Bonds, and so on. It’s also a good idea to consider investing some of your funds into insurance or other financial products that can provide further protection and financial security.

Becoming financially healthy requires a long-term commitment and improvement in your financial literacy. So, keep learning to become a financially healthy generation.