Schools teach math, science, and history, but often overlook one of the most critical life skills: personal finance. Managing money wisely can determine success, yet most people learn about it through trial and error. To help you get ahead, here are 15 personal finance rules schools forgot to teach and detailed real-life examples to illustrate each rule.
15 Personal Finance Rules Schools Never Taught You
Rule No. 1: Create an Emergency Fund
You can’t predict what will happen, and financial problems often pop up suddenly. These situations can significantly strain your finances, whether due to a sudden job loss, a major medical expense, unexpected home repairs, or an urgent car breakdown. By having an emergency fund, you create a buffer against unforeseen expenses, preventing the need for high-interest borrowing or seeking help from personal connections.
Example: Rahul, a 30-year-old IT professional, never considered building an emergency fund. He always thought his salary was enough to cover any expenses. One day, he unexpectedly lost his job due to company downsizing. With no savings to fall back on, he struggled to pay rent, bills, and EMIs. Forced to rely on his credit card, his debt quickly accumulated due to high interest rates.
Had Rahul built an emergency fund covering at least six months’ worth of expenses, he could have managed his costs stress-free while searching for a new job. After this experience, Rahul decided to save 20% of his monthly salary until he had a sufficient financial buffer.
Rule No. 2: Track Your Spending
Most people don’t realise how much they spend on small, unnecessary purchases until they look closer. A cup of coffee here, an impulsive online shopping order there—these small expenses add up over time and can create a significant financial drain. When you track your expenses, you see exactly how your money is being used, which helps you spot and stop unnecessary spending and make wiser financial choices.
For example, a 28-year-old marketing professional, Sneha, always felt her salary had disappeared too quickly. Despite earning well, she struggled to save money at the end of the month. Curious about where her money was going, she decided to track every expense for a month.
To her surprise, she discovered:
- She was spending ₹5,000 per month on online food deliveries, even though she had groceries at home.
- Her multiple subscription services (Netflix, Amazon Prime, Spotify, and an unused gym membership) added up to ₹3,500 per month.
- Impulse purchases on shopping apps cost her an additional ₹4,000 monthly.
By cutting down food deliveries, cancelling unused subscriptions, and setting a shopping budget, Sneha saved ₹8,000 every month, which she redirected into her emergency fund and investments.
Rule No. 3: Start Investing Early
The earlier you start investing, the greater your financial advantage. Time is one of the most potent tools in wealth creation, thanks to the magic of compounding, where your earnings generate further earnings over time. Even with a small amount, starting early allows your investments to grow exponentially, giving you financial security and freedom in the long run.
Example: Raj and Ankit, both 25 years old, started their careers simultaneously. However, they had different approaches to investing:
- Raj started investing ₹2,000 per month at age 25 and continued for 30 years. With a hypothetical 12% annual return, his investment reached about ₹70.5 lakhs by age 55.
- Ankit delayed investing until he was 35. He invested the same ₹2,000 per month for 20 years. By age 55, his investment was worth only ₹19.3 lakhs.
Despite investing the same monthly amount, Raj accumulated nearly ₹51.2 lakhs more just because he started 10 years earlier!
Rule No. 4: Know the Power of Compounding
Compounding is the secret to building wealth over time. This principle lets your investments grow at an accelerating rate because you earn returns on both your original investment and its generated returns. The longer you stay invested, the more your money multiplies, making compounding one of the most potent forces in personal finance.
Example: Let’s take two friends, Amit and Rohit, who start investing at different ages but with the same amount.
- Amit started investing ₹5,000 per month at age 25 and continued for 30 years. Assuming a 12% annual return, by age 55, he had accumulated ₹5.88 crore.
- Rohit starts investing ₹5,000 per month at age 35 and continues for 20 years. With the same 12% return, he accumulates only ₹1.49 crore.
Despite investing the same monthly amount, Amit has nearly ₹4.39 crore more than Rohit because he started 10 years earlier!
Rule No. 5: Avoid Credit Card Debt
While credit cards can be helpful, they pose a risk of accumulating substantial debt if not handled carefully. With interest rates often exceeding 30-48% per annum in India, unpaid credit card balances can snowball into an unmanageable financial burden.
Example: Let’s say Rohan buys a new smartphone for ₹50,000 using his credit card and only pays the minimum due of ₹2,500 per month. Assuming an interest rate of 36% per annum (3% per month), here’s what happens:
- Instead of clearing the debt in a few months, Rohan will take nearly 7 years to pay it off!
- By the time he clears the full amount, he will have paid over ₹1.2 lakh, more than double the phone’s original price.
Rule No. 6: Avoid Lifestyle Inflation
When your income increases, it’s natural to want to upgrade your lifestyle—a bigger house, a new car, frequent dining out, or premium gadgets. However, if your expenses increase at the same rate as your earnings, your savings won’t grow, and you may still struggle financially despite earning more. This phenomenon is known as lifestyle inflation.
Example: Let’s take the case of Ankit and Raj, two friends who started their careers at ₹50,000 per month and got annual salary hikes of 10%.
- Ankit spends every extra rupee he earns on better gadgets, vacations, and luxury purchases.
- On the other hand, Raj increases his savings by 50% of his salary hike and invests regularly.
After 10 years, Ankit has no substantial savings, while Raj has built a wealth corpus of ₹30+ lakhs through disciplined investments.
Rule No. 7: Build a Good Credit Score
Your credit score is a crucial financial metric determining your ability to borrow at favourable interest rates. In India, credit scores are maintained by agencies like CIBIL, Experian, Equifax, and CRIF High Mark. A high credit score (typically 750 or above) signals financial responsibility and helps secure loans at lower interest rates.
Example: Ravi and Mohit, both 28 years old, applied for home loans of ₹50 lakhs.
- Ravi has a credit score 780, thanks to timely EMI payments and low credit utilisation.
- Mohit scored 650 due to multiple missed payments and high credit card balances.
Result?
- Ravi gets a loan at 7.5% interest, with a monthly EMI of ₹39,000.
- Mohit is offered the loan at 9.5% interest, with an EMI of ₹42,000, which will cost him ₹3,000 extra per month and ₹10+ lakhs more over 20 years!
Rule No. 8: Plan for Retirement Early
Many people delay retirement planning, assuming they have plenty of time. However, the earlier you start, the more financially secure your retirement will be. Relying solely on government pensions, Employee Provident Fund (EPF), or National Pension System (NPS) may not be sufficient to maintain your lifestyle post-retirement. A well-planned retirement fund ensures financial independence and a stress-free life in your golden years.
Example: Rahul (25 years old) and Anil (40 years old) want to retire at 60 with ₹ five crore. Let’s see how their savings differ:
- Rahul starts investing ₹5,000 per month in an equity mutual fund at 12% annual returns.
- Anil delays investing until age 40 and contributes ₹15,000 per month to catch up.
By the time they turn 60:
- Rahul’s investment grows to ₹5.5 crores.
- Anil’s investment grows to only ₹2.3 crores despite contributing three times more per month!
This is the power of compounding—starting early allows your money to work for you.
Rule No. 9: Get Adequate Insurance
Life is uncertain, and unexpected financial burdens can derail your long-term plans. Insurance acts as a financial shield that protects you and your family from unforeseen expenses, such as medical emergencies, accidents, property damage, or untimely death. You may be forced to dip into your savings or take on debt to cover unexpected costs without proper coverage.
Example: Ravi, a 35-year-old IT professional, is the sole earner in his family. He has no life or health insurance, assuming he’s young and healthy. One day, he is diagnosed with a serious heart condition, requiring immediate surgery costing ₹ eight lakhs. Since he has no health insurance, he withdraws his emergency savings and takes a personal loan to cover the remaining amount.
If Ravi had a ₹10 lakh health insurance policy, his medical expenses would have been covered without financial strain. Similarly, if he had a ₹ one crore term insurance plan, his family’s future would have been secure in case of an unfortunate event.
Rule No. 10: Learn Negotiation Skills
Many people shy away from negotiating, assuming prices, salaries, and interest rates are fixed. However, negotiation is a powerful financial tool that can help you save money, increase your income, and get better financial deals. A skilled negotiator can positively impact your financial situation, helping you get better car deals, salaries, and loan interest rates.
Example: Rahul was planning to buy a new car with a budget of ₹10 lakhs. Instead of accepting the sticker price at the dealership, he negotiated with the salesperson. He pointed out competitor prices and inquired about seasonal discounts, corporate offers, and complimentary add-ons like extended warranties and accessories.
After 30 minutes of negotiation, Rahul got a ₹50,000 discount, free insurance for a year, and additional accessories worth ₹20,000. Without negotiating, he would have paid full price and missed out on savings.
Similarly, when switching jobs, Rahul negotiated his salary package. Instead of accepting the initial offer of ₹12 LPA, he emphasised his skills, market research, and industry benchmarks. The employer agreed to ₹14 LPA with additional benefits, ensuring a higher long-term income.
Rule No. 11: Automate Savings and Investments
Saving money can be challenging, especially when spending opportunities arise daily. The best way to ensure consistent savings is to automate the process. Automatic transfers help you avoid the common pitfall of spending first and saving whatever is left. This habit enforces financial discipline and helps build wealth over time.
Example: Megha, a 28-year-old marketing professional, always wanted to save money, but after expenses, she had little left at the end of each month. Whenever she tried to save manually, she would forget or spend it elsewhere.
To solve this, she set up the following automation:
✅ ₹10,000 auto-transferred to her SIPs on the 5th of every month.
✅ ₹5,000 auto-debited to her emergency fund in a high-interest savings account.
✅ ₹3,000 auto-paid towards her life and health insurance premiums.
Results? After two years, Megha had built an ₹2.4 lakh investment portfolio, ₹1.2 lakh in emergency savings, and continuous insurance coverage—all without manual effort.
Rule No. 12: Learn Tax Planning
Understanding tax planning allows you to minimise your tax payments and increase your overall savings legally. Many people pay more taxes than necessary simply because they don’t take advantage of available deductions, exemptions, and investment benefits. By understanding tax laws and making informed decisions, you can retain more of your hard-earned money.
Example: Amit, a 30-year-old IT professional, was paying ₹1.2 lakh in annual taxes. He never explored tax-saving options and assumed there was no way to reduce his tax liability.
After consulting a tax advisor, Amit implemented the following strategies:
✅ Invested ₹1.5 lakh in ELSS mutual funds & PPF under Section 80C, reducing his taxable income.
✅ Bought health insurance for himself and his parents, claiming a deduction of ₹50,000 under Section 80D.
✅ Started investing in NPS, getting an additional ₹50,000 tax deduction under Section 80CCD(1B).
✅ Claimed HRA benefits by properly structuring his rent payments.
The result? Amit’s taxable income was significantly reduced, and his tax outgo dropped by ₹50,000 while his investments and savings grew simultaneously.
Rule No. 13: Diversify Investments
The saying “Don’t put all your eggs in one basket” applies to investing. Diversification reduces risk by spreading investments across multiple asset classes, such as equities, debt, real estate, and gold. This ensures that a decline in one investment does not significantly impact your entire portfolio.
Example: Rahul, a 35-year-old investor, invested his entire ₹10 lakh savings in stocks, hoping for high returns. Initially, his portfolio grew rapidly, but during a market downturn, his investments lost 40% of their value, reducing his savings to ₹6 lakh.
On the other hand, his friend Neha followed a diversification strategy:
✅ 40% in equity mutual funds for long-term growth
✅ 30% in fixed-income instruments (PPF, bonds, fixed deposits) for stability
✅ 20% in real estate investments for wealth appreciation
✅ 10% in gold ETFs & commodities as a hedge against inflation
When the stock market crashed, Neha’s portfolio saw only a 10% decline instead of 40% since her debt and gold investments balanced the losses. Over time, her diversified portfolio outperformed Rahul’s and provided consistent growth.
Rule No. 14: Avoid Get-Rich-Quick Schemes
In personal finance, if something sounds too good to be true, it probably is. Many fall for high-return, low-risk investment schemes, hoping to make quick money. Unfortunately, most of these are scams, pyramid schemes, or highly speculative investments that promise big profits but result in financial ruin.
Example: Amit, a 30-year-old software engineer, came across an investment scheme promising 30% monthly returns through cryptocurrency trading. The promoter claimed it was a “once-in-a-lifetime opportunity” and showed fake testimonials of people doubling their money.
Tempted by quick profits, Amit invested ₹5 lakh in the scheme. Initially, he received some returns, making him confident. Encouraged, he invested another ₹10 lakh. A few months later, the company vanished overnight, its website shut down, and Amit lost his entire investment.
Meanwhile, his friend Ramesh followed a disciplined approach, investing in mutual funds, index funds, and gold ETFs. His returns were slower but consistent and safe, helping him build long-term wealth.
Rule No. 15: Live Below Your Means
A key to financial success is living below your means. Regardless of their income level, many people struggle with financial stress because they spend everything they make, or even worse, more than they earn. Living below your means allows you to save, invest, and build wealth over time rather than getting trapped in a paycheck-to-paycheck lifestyle.
Example: Rohit and Sameer are childhood friends who started earning ₹1 lakh per month simultaneously. However, their financial decisions were completely different:
- Rohit’s Lifestyle:
- Rented a luxury apartment in an expensive area.
- Bought the latest iPhone on EMI and a car with a loan.
- Went to expensive restaurants every weekend.
- Spent ₹95,000 per month, saving only ₹5,000.
- After 5 years, he had no savings and ₹7 lakh in credit card debt.
- Rented a luxury apartment in an expensive area.
- Sameer’s Lifestyle:
- Lived in a modest apartment, sharing rent with a roommate.
- Used a mid-range phone and relied on public transport.
- Cooked at home and went to restaurants occasionally.
- Spent only ₹60,000 per month, saving ₹40,000.
- After 5 years, he had ₹25 lakh in investments and no debt.
- Lived in a modest apartment, sharing rent with a roommate.
Because Rohit lived paycheck to paycheck, he had to take personal loans for emergencies. Meanwhile, Sameer’s financial discipline helped him invest consistently and build wealth.
Final Words
Mastering these 15 personal finance rules can lay the foundation for long-term financial security and success. While schools may overlook these critical lessons, incorporating them into daily life can be life-changing. The key is to start today—whether it’s building an emergency fund, tracking expenses, investing early, or avoiding lifestyle inflation.
Small, consistent financial decisions today can lead to massive wealth in the future. So, take control of your finances, apply these rules, and watch your financial health thrive! 🚀
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Disclaimer: The information provided in this blog is for educational and informational purposes only and should not be considered as financial, investment, or tax advice. While every effort has been made to ensure accuracy, readers must consult a qualified financial advisor before making investment decisions. VSJ FinMart is an AMFI-registered mutual fund distributor (MFD) that does not provide investment advisory services. Mutual fund investments are subject to market risks; please read all scheme-related documents carefully before investing.