Knowing how to handle your money (and grow it as fast as you can) seems to be the latest obsession on the internet. There are more and more people around you who are discussing stock markets (most of them honestly- just speculating). Investing looks like something you must know, while influencers are stressing over how we never got to learn anything about personal finances, consequently, making us an adult who goes broke every month-end.
When it comes to learning financial concepts, many of us are just lost about where to start. This article is for people who do not want to dive deep into financial literacy but just have enough knowledge to keep themselves afloat (with their dream vacation and long-term financial security). If you have never sat down with your money before, this article might just be worth your time
Your first steps to financial literacy
Financial literacy includes concepts like budgeting, saving, and investing. A financially literate person tends to be more stress-free than others. Each one of us has a different income, with different lifestyles, needs and obligations, and goals. Some of us might be swimming under heavy debt, while others might be just figuring out what to do with their first salary. The Points we have covered in this article might seem simple and less significant, but they will help you achieve a strong financial base.
1. 50/30/20 rule in Money basics
The 50/30/20 rule divides your inflow of money into needs, wants, and savings. This ratio can vary depending on the needs of the person. Ideally, before distributing your income into different categories, you must have a fair idea of how much you are spending on each presently. Track all your expenses over the past 2-3 months and divide them into your needs (electricity bills, groceries, rent, medicines, mortgages, etc) and wants (Entertainment, ordering food, leisure travels, fashion, etc.). Once done with that, you can allot a budget to both.
In case If you are a taxpayer, consider subtracting your tax first before setting the threshold. At a minimum, you must have 10% of your income go into monthly savings. However, some are not able to do that due to various reasons. Start saving as little as possible and slowly raise the amount. Similarly, your savings also depend on your goals. For example, let’s say you wish to buy a car this year, then you might add a little more to your savings by cutting down on other costs.
50 – needs
30 – wants
20 – savings
2. Emergency fund – your first line of defence
Emergency funds are anything that can be converted to cash to help you in times of financial distress, like unemployment or a medical emergency. Everyone must have emergency funds covering at least 5-6 months of basic needs. A financial emergency can knock on your door anytime, and you want to be prepared for it.
An emergency fund is non-optional, no matter your financial status. If you do not have an emergency fund, you should start building one now. Start small, aim for 3 months of emergency funds. Most people prefer to keep their emergency fund in a separate bank account.
3. Kill bad debt first
Any debt that is taking a toll on your mental, physical, and financial health is bad. Ideally, debt taken to fulfil your wants is also bad debt. Debt can be taken from one or multiple lenders, formal or informal, like a bank or your relative/friend. Bad Debt can take a toll on your personal finance. You can refer to either of the listed strategies to deal with debt.
- Snowball method
The snowball method involves paying off your smallest debt first.
This is how it works: Make a list of your debts, order them from smallest to largest balance accordingly. The next step is to make the monthly minimum payment for each debt. Make an Extra payment to the smallest debt. Continue until it’s paid off. Afterwards, move on to the next smallest debt.
The cycle keeps going on like that. The snowball method is easier to follow and can be motivating as you check off the list.
One thing to note down here is that the snowball method prioritises balance and not the interest. If your goal is to reduce debt with high interest rates, this strategy may not be ideal for you. Another drawback is that while you focus on paying smaller debts first, your larger debts may grow during that period, making the process longer.
- Avalanche method
Unlike the Snowball method, the Avalanche method focuses on paying off debt with the highest interest rate first. Snowball method prioritizes balance over interest.
This is how it works: Again, make a list, this time ordering the debts from Highest “interest” to lowest interest. Make a minimum monthly payment on each debt and allocate any extra money to the highest debt. Once that debt is cleared out, go for the next one. Avalanche methods work towards reducing the interest that you are paying every month.
This is faster than the snowball method as it avoids accumulating more debt in the form of interest. Thus, it helps in offloading debt at a better rate. But you might still need patience, discipline, and consistency. Though it speeds up your overall debt repayment, it will take a significant time to pay off the first few debts.
In some cases, you might have conflicting situations like having the smallest debt with the highest interest rate or the highest debt with the smallest interest rate – in that case, you can practice both strategies.
4. The Simple path to investing
One of the main reasons to start investing today is inflation. Your funds that are secure in different financial institutions like banks and post offices might give you some interest, but they are not enough to keep you afloat in the long term. You do not want the value of your money to go down with time. But you don’t need to start with stocks right away, either. There are plenty of investing options out there to start without the hassle.
Unless or until you are speculating in investing, you shouldn’t say it’s a sort of gambling. The other myth is that you need a lot of money to get good results in investing, which might hardly be true in 2025.
Step 1: Build Your Foundation First
Before you start to invest, make sure you pay at least 70% of your bad debt first. Also, do not forget your emergency fund.
Step 2: Start with Index Funds & ETFs
You don’t need a complicated portfolio to start. A single low-cost index fund or exchange-traded fund (ETF), such as one that tracks the S&P 500, can give you instant diversification and steady long-term growth. If your country offers tax-advantaged accounts like a 401(k), IRA, ISA, or PPF, prioritize those first. Avoid chasing “hot” stocks or trends — keeping it simple protects you from costly mistakes.
Here are some YouTube videos to guide you through index funds and ETFs ▶️
- What are Index Mutual Funds? | Ankur Warikoo
- What are Index Funds? | Mutual Funds Masterclass
- This Is How To Become A Millionaire: Index Fund Investing for Beginners
ETFs ▶️
- ETFs For Beginners
- What is ETF? Is it same as Nifty BeES? | CA Rachana Ranade
- What is ETF ? Should you invest in Exchange Traded Funds (ETF)? ETF explained in hindi
Step 3: Automate and Leave It Alone
Once your account is set up, link it to your bank and schedule automatic transfers each month. Over decades, regular investing will smooth out short-term market ups and downs. Check your progress quarterly or annually, but resist the urge to constantly tinker.
Step 4: Increase Contributions Over Time
As your income grows, increase your contribution rate by 1–2% so your investments grow alongside your earnings.
5. Protect your money – insurance and safety nets.
Having insurance is a necessity these days. You don’t want one mishap to take away something important from your life. Some common and important insurances are –
- Health Insurance
- Life insurance
- Home insurance
- Vehicle insurance
We have already discussed emergency funds before. If you have emergency funds, try not to put all of the savings in one account – the same advice goes for investing. Go for at least 2-3 accounts or schemes in case if you are holding a significant amount.
You have already heard enough about cyber crimes from BIG B. Be aware of financial scams going on both online and offline. One irresponsible move from you can wipe out your hard-earned money. You should know how to identify fraud and always verify apps and websites before entering bank details.
6. One-hour monthly money check-in
Check in on your spending once a month and see if you need to tweak anything to maximise savings or adjust a new expense to it. It’s an important part of handling your personal finance. This can be helpful to plan ahead of any financial obligation coming your way, like weddings, paying college fees, a vacation, or some other annual payment. Also, it will let you not be oblivious to where your (hard-earned) money is going.
7. Ignore the noise – and check your dopamine.
As you start to become more financially literate gradually, good enough to make major financial decisions independently, you might hear some digital noise. This is nothing but just the algorithm trying its best to serve you content based on your online activities. One word – Focus. Learn from ethical sources, do not fall for Hard advice by virtual faces. And know your goals. Social media will try to attract you with hot tips to grow your money – be mindful of both your actions and the content you consume, or it will cost you an irreversible error.
Conclusion
Last but not least, always leave below your means. Money at times can seem complicated, out of reach, and stubborn – but with mindfulness and the right mindset, you can always keep it under your reins. The first step comes with not just knowing the concepts but also starting to apply them right away. You do not need a 60-hour workshop to manage your household expenses. At The Rupee Guide, we believe learning about finances and navigating personal finance should never be overwhelming, but it should be a journey filled with hope, progress, and empowerment.
