Personal finance have been one thing that a lot of people have been struggling with. How do you master your money, what are the basic understandings you need to have with finance? People always say they only know the amount they earn, but when they are taxed and are left with their net income, they just realize that they spend all the money they worked for all day, week, or month. Before I continue, I will like to explain a few words which are needs, wants, savings, debt and Investment. This words are the very simple things that determine the financial life of a person.
Needs
Needs are essential things you cannot live/do without, it is called in so many cases basic requirements and they include housing, utility, groceries, health insurance and so on.
Wants
A want is a desire not a necessity. A want is not going to cause a serious inconvenience if you do not need them to survive rather you need them to feel better, or satisfy your taste. Examples of wants includes New cloth shopping spree, dining out, going to the cinema and subscribing for video channels/applications.
Savings
Money set aside for future security. It is often the leftover of a person’s spending or the first set aside before spending. This money is for future expenses or unforeseen expenses.
Debt
Money owed to a person or an organization which is to be paid in a specific time at a specific percentage.
Investment
Investment means setting aside money to do trade for the purpose of making profit in the future. Investment could be in form of stocks, bonds, or businesses.
This is not a post to lecture you but to get your opinion how people should handle their personal finance but it was necessary to explain the basics at the top. I have heard of people talking about sharing their income into certain percentage and living so they can become a millionaire before they retire.
I have heard a lot of people say save 50% of your income, invest 10%, 10% for needs and 10% for wants and the remaining 20 for debt until you are out of debt. A few others say invest 20% of income, save 20%, pay debt with 20%, spend 20% on needs and 20% on wants. I have heard a lot of formulae to have gain financial stability but most of them seem to contradict one another.
This is where you come in
Let’s make the post as interactive as possible, I will reply as fast as possible to as many comments on this post. What financial advice will you give to a 25 year old young man with an income of $2,500 monthly who is in debt of up to $200,000 and has to attend to other necessities in life but want to be worth $10,000,000 within 10 years without quitting his job?
P.S: You do not have to be a financial advisor, you can share your thoughts, experience and knowledge on how you think he can handle his financial life. Also, you could share your own personal finance formulae.
