Zero1 by Zerodha · Transcript · · Updated
4 Money Rules Everyone Should Follow! 🚨💰 – Transcript
Video by Zero1 by Zerodha · Watch the original on YouTube
Summary
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- The speaker advises keeping the EMI to income ratio as low as possible and ideally below 30% to avoid bad personal finance practice.
- Credit card spends and no cost EMIs can be categorized into assets if used for work or liabilities if they are unaffordable purchases.
- Before starting to invest, individuals should build an emergency fund by stashing away an amount equal to their monthly expense multiplied by six months.
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Transcript
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Four signs you're actually good with your money. Calculate your EMI to income ratio. So, if you're earning 50,000 rupees and your EMI is 25,000, that's 50%. In most cases, this will go up and it's really bad personal finance practice.
So, try to keep this as low as possible, ideally below 30%. Second, here's a fun exercise to look at all of your credit card spends and your no cost EMIs and categorize them into two buckets. It could be assets and liabilities. So, if you bought say a laptop or a camera and use it for your work, then that's an asset, good. But, if you have those shiny, nice, beautiful shoes which you can't afford, that's in liabilities.
If 50% of your credit spends are on liabilities, that's obviously not good. Third, don't spend more than 30% of your total credit limit. Now, there is no credit bureau which has said that you should do this, but it's a good personal finance habit to keep it under 30% because generally once you really like spending, that 30% becomes 40, 50, 60, 70. So, just for yourself, keep that credit spend low. And finally, the most
important of them all, all of you start investing before doing this, an emergency fund. Take your monthly expense multiplied by 6 months and this amount of money, stash it away so you can't access it. So, when there's an emergency, you have somewhere to go. And follow for more.