5 main rules of finance management

Friends, many people have a question that how to manage finances, what is the right way to do it? If you too were looking for the answer to this question, then today your search is complete. In today’s blog, we will learn five big rules related to finance management with the help of which you can manage finances easily. The rules given in this blog are given by investor Charlie Manger. Charlie Manger was an investment strategic partner of Warren Buffett and vice chairman of Workhorse Hathaway. Charlie Manger has played a big role in bringing the Workhorse Hathaway you see today to this point. Before we talk about the rules, let us tell you that most of these rules are in the context of share market and along with this, these rules will also be useful in your life, so the first rule is –

1.Identifying the circle of competence

By circle of competence I mean Circle of Competence. Many people often think that to achieve success they will have to do something new and different, but it is not necessary. You make a list of those people who did something new and different, you will find that they did not think of doing anything new, rather they only focused on their interest, they worked hard in the areas in which they were interested and The result is in front of you and us. For example, take Charlie Mangar. If he had left the intricacies of investment and started learning the intricacies of cricket, would he have been so successful? The answer is probably no. He understood his interest from the very beginning, learned the mantra of investment with hard work, some experience and some mistakes and by repeating this sequence, he came in front of the world as a successful investor. What I mean to say is very simple, just think in solitude with a calm mind, what do you enjoy doing? What area are you interested in? And in which field or by doing what, you never feel tired. Believe me, if you get the answers to these questions, then only one thing remains, hard work which will take you to the pinnacle of success.Let us try to understand this rule in the context of finance. Suppose you only have knowledge of share market. In which you know how to invest well, on the other hand, you want to invest in mutual funds about which you have no knowledge, then it is not a simple matter whether it would be wise to invest there or not. If you understand the share market well, then If you understand the mathematics of ups and downs, then why do you want to invest in mutual funds? Whereas you can make good returns from here as compared to mutual funds. Suppose you are trying to diversify but without knowledge it makes no sense. If you understand the market, you can make many times the money from here, which you might not be able to do by creating a mutual fund. It means to say that whatever you know well, first do it with hard work and whatever you don’t know, learn it first and after learning, work hard on it with some risk.

2.Expand your knowledge

The second rule of financial management says that to use money properly, you should have proper knowledge, only then you will be able to do it properly. Many people believe that a person should stop learning after a certain age, but why, as long as there is life in your body, you should learn. If you have knowledge of many areas in finance management then it proves to be very useful for you. Due to this you are able to take mostly right decisions. Mangar had knowledge of many subjects, he had concentrated all his knowledge at one place and the proof is in front of all of us.For example, we can understand it in this way. For example, if you have knowledge of share market and along with it you also have some knowledge of insurance, then you can do better financial planning as compared to someone who only has knowledge of share market. Similarly, if you have knowledge of stock market as well as insurance and various other asset classes, then you will definitely be able to do better financial planning.

3.Learning from the mistakes of others

Today I am giving you a very simple mantra by following which you will make less mistakes in your life and the same applies in financial management also. The mantra is to learn from the mistakes of others. It sounds like a very simple thing to learn from the mistakes of others but its real meaning becomes real when you are determined to achieve success. People make mistakes and why not? After all, we are all human beings, but can we learn some lessons from these mistakes? Yes, of course, then why should we make the same mistakes that the other person made? If we once learn the lesson and implement it in our working style and lifestyle, then the chances of winning and being successful increases to a great extent. Charlie Manger left no stone unturned in learning from the mistakes of other investors during his tenure. He found out why this investor failed? Why did it suffer loss? What options did it have and which option did it choose? He paid attention to many such aspects that you too can learn from the mistakes of others while managing finances. For example, one of your neighbors meets with a car accident due to which he has to go to the hospital because he did not take insurance, due to which he had to pay all the expenses there from his own pocket. From this you can learn that it is important to have insurance and you can avoid such unexpected situations. Insurance will not put any burden on your pocket nor will there be any hindrance in financial management. You can learn from many such mistakes of others.

4.Recognize the power of compounding

I can say with great confidence that many of us do not understand the real power of compounding and the one who understands its power becomes the owner of limitless wealth. Compounding simply means interest on interest. Does compounding work at all in the share market? The more time you give to your investment, the bigger it will become over time. Think about a small plant, the more time you give it fertilizer, water and sunlight, the bigger it will become and after some time it will also provide you with sweet fruits. Many great investors like Warren Buffet, Rakesh Jhunjhunwala, Ramesh Damani, Radhakishan Damani understood the power of compounding which is why they were able to become so successful. Many of us don’t have time. We all want to become rich quickly due to which we end up incurring huge losses. Everything takes time and with patience we get everything on time.

5.Keep things simple

It is often seen that the solutions to complex problems are mostly simple. Don’t know why people make situations complicated. Perhaps it is because of making the situations complicated that they are often unable to find solutions. All you have to do is see things as they appear. We have to keep a little control on what our brain thinks. This thing is commonly seen in the stock market. When we talk to someone about investment, the person complicates things so much that we do not feel like investing again. If you think with a cool mind, why do we invest and how is investment done, then you can easily get the answers. Look at things first and then learn and understand.There are many strategies for investing. Invest by adopting the strategy that seems simple to you and try to keep that strategy as simple as possible. That you can easily explain that strategy to another person when needed. The simpler things are, the more effective they will be, the better your financial management will be.

I hope you liked our blog. If there is any mistake in this blog, we apologize for that. You keep giving us your suggestions in the comments box. Your suggestions will act as guidelines for our team and will also inspire us to do better work. So with this we bid farewell to you and meet you in a new blog.

#Personal Finance

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