Basics of Personal Finance in India: What They Don’t Teach You in School

Most of us graduated knowing the Pythagoras theorem but not how to read a payslip.
We could solve for x in a triangle but not for “why my salary disappears by the 10th.”

That’s the problem with our education system — it prepares us to earn, not to manage. And so, we step into adult life financially blind, armed with degrees but no sense of what to actually do with money once it arrives.

This isn’t your fault. Nobody sat you down and explained compounding, taxes, or the quiet trap of lifestyle inflation. But it’s never too late to learn what school forgot to mention.

Step 1: Know where your money actually goes

If you can’t tell where your salary vanishes, you’re already behind. Most people in their 20s think they’re “bad at saving” when in reality, they’re just unaware.

Start by tracking your spending for one month. Every single expense — rent, Zomato, Uber, that random midnight Amazon order. Once you see it in numbers, you’ll realize money doesn’t leak in big chunks; it evaporates in small ones.

Awareness is the first rule of wealth. You can’t fix what you don’t see.

Step 2: Build a budget that fits real life

Forget those “save 50% of your income” gurus. For most young Indians, that’s unrealistic. Rent, EMIs, family help — life eats into your pay faster than you expect.

A good rule of thumb is the 50-30-20 rule:

• 50% for needs (rent, bills, groceries)

• 30% for wants (fun, comfort, your sanity)

• 20% for savings or investments

If 20% feels impossible right now, start smaller. The number matters less than the habit.

Step 3: Build an emergency fund before investing

Everyone’s obsessed with “where to invest,” but the truth is, you shouldn’t invest a single rupee until you’ve built a safety cushion.
Three to six months of expenses in a liquid account can save you from panic borrowing later.

Life doesn’t warn you before throwing surprises — medical bills, layoffs, family emergencies. Your emergency fund is not about returns; it’s about peace of mind.

Step 4: Learn the difference between saving and investing

Saving keeps money safe. Investing makes it grow. Both matter.
A savings account guards your short-term needs. But if you park everything there, inflation will quietly eat your returns.

Start simple:

• Learn how SIPs work in mutual funds.

• Understand what a diversified portfolio means.

• Avoid “tips” from relatives who swear by some mystery stock.

The goal isn’t to gamble; it’s to grow steadily.

Step 5: Don’t ignore insurance and taxes

Insurance feels boring until life proves why it exists. Health insurance isn’t an expense — it’s protection from financial ruin. The same goes for term insurance once you have dependents.

And taxes? They’re not something to dread. They’re something to plan for. Learn about sections like 80C and 80D, which help you save legitimately. The earlier you start, the less painful April feels.

Step 6: Start early, even if it’s small

The magic of compounding doesn’t reward the rich; it rewards the early.
Even investing ₹1,000 a month at 12% annual return for 25 years can grow beyond ₹17 lakh. Delay it by 10 years, and you’ll barely reach half.

Consistency beats intensity. Don’t wait to “earn more” to begin. Start now, and let time do the heavy lifting.

The emotional truth about money

In India, money is emotional before it’s practical. We’re raised to save out of fear, not invest out of confidence.
We see talking about income as arrogance and discussing debt as shame.

But the truth is, financial literacy isn’t about status — it’s about survival. The earlier you learn to talk about money openly, the faster you stop being controlled by it.

A final thought

You don’t need a finance degree to be financially free. You just need to start paying attention.

So, before chasing higher salaries or new side hustles, ask yourself:

Do I actually know how to manage what I already earn?