A Complete Guide to Managing Personal Finances for Beginners

Managing your personal finances is the foundation for achieving your financial goals, including saving and investing. The key is discipline and consistency .

Stage 1: Current Financial Evaluation

1. Record Income and Expenditure (Cash Flow)

   • Income: List all your sources of income (net salary, side income, etc. ).

   • Expenses: Record all expenses for the entire month. Use a bookkeeping app , spreadsheet , or small notebook. Categorize expenses (e.g., necessities, transportation, entertainment, bills).

   • The goal: Know exactly where your money is going.

2. Separate Needs and Wants

   • Needs: Essential things for living (food, shelter/rent, mandatory bills).

   • Wants: Things that enhance your lifestyle but are not mandatory (movie nights, expensive coffee every day, the latest gadget ).

   • Its purpose: To help you prioritize spending and control unnecessary desires.

Stage 2: Budgeting

3. Set Clear Financial Goals

   • Determine what you want to achieve (for example: Emergency Fund of 3 months salary, house down payment, vacation, retirement fund).

   • A clear goal will be your main motivation to save.

4. Create a Realistic Monthly Budget

   • Compare total income with total expenses that have been recorded.

   • Use an allocation method, one of the popular ones is the 50/30/20 Method :

     • 50% for necessities (rent, food, transportation).

     • 30% for Desires (entertainment, hanging out , non-essential shopping).

     • 20% for Savings & Investments .

   • If 20% feels difficult at first, start with what you can handle (e.g. 10%), then increase it gradually.

Stage 3: Start Saving and Investing

5. Apply the "Pay Yourself First" Principle

   • This is the key to saving quickly . As soon as you get your paycheck, immediately transfer a portion of your savings/investments (for example, 20%) to a separate account. Don't wait until the end of the month to find the remaining money.

   • Use the auto-debit feature if available to automate this process.

6. Build an Emergency Fund (Urgent Savings)

   • Before investing in risky instruments, prioritize emergency funds.

   • Target: At least funds equivalent to 3 to 6 months of your monthly living expenses.

   • Place: In highly liquid and safe instruments (for example: regular savings or Cash Fund Account/RDPU).

7. Start Investing (After Emergency Funds Are Secure)

   • Once your emergency fund is met, allocate your regular monthly funds to investment instruments according to your goals and risk profile.

   • Education: Learn the basics of available investment instruments (e.g.: Mutual Funds, Bonds, Stocks, Gold).

   • Principle: Start with low risk if you are a complete beginner, and always invest consistently (Dollar Cost Averaging/DCA) without being affected by daily market fluctuations.

Stage 4: Control and Evaluation

8. Routine Monitoring and Evaluation

   • Review your budget every month. Are there any expenses that are too large? Have you reached your savings target?

   • Conduct a thorough financial evaluation every 3 or 6 months.

9. Manage Consumer Debt

   • If you have debt (especially high-interest debt like credit cards or online consumer loans), create an aggressive repayment plan. Pay off the high-interest debt first before focusing on major investments.

10. Improve Financial Literacy

    • Continue learning about personal finance, risk management, and investment instruments from trusted sources. The more you understand, the wiser your financial decisions will be.

By following these steps in a disciplined manner, you will create a healthy financial flow and will automatically save more quickly and be ready to invest.