- The power of compounding will work in your favor in the long term, and you could witness an exponential growth in your savings.
- Always track your expenses. Living paycheck to paycheck and finding yourself struggling for money even before the month ends is a sign that you are not spending wisely.
- You should always have insurance coverage so that you don’t have to rely on your savings in case of medical emergencies and other contingencies.
New Delhi: Managing your finance doesn’t need a degree in financial management, but it certainly requires discipline and dedication to achieve financial goals at various stages of life. More than anything else financial planning over a period of time becomes a habit. It comes with objectives, such as determining capital requirements, framing financial policies, and ensuring that the scarce financial resources are utilized in the best possible manner.
Quite often, inculcating the habit of financial planning seems like a difficult task. When you start planning about finances, you find yourself in a fix and don’t know where and how to begin. Here are some golden rules to follow while planning your finances.
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A mistake most of us commit in our life is when we start career, we don’t give too much attention to financial planning and developing a habit of savings. We must start as early as possible in life. Even saving a smaller amount can give you a headstart. The power of compounding will work in your favor in the long term and you could witness an exponential growth in your savings. Do not procrastinate and start saving early.
Regulate expenses wisely:
You should always track your expenses carefully. Living paycheck to paycheck and finding yourself struggling for money even before the month ends is a sign that you are not spending wisely. Unplanned expenses are the biggest roadblock when it comes to savings.
Try preparing a monthly budget. Unless you have a budget, you won’t be able to control your unnecessary expenses. A budget always keeps you on a path of financial discipline and shows how much money you have coming in and how those funds are spent.
Dealing with surplus cash prudently:
How you deal with surplus cash determines whether you will be able to meet your career and life’s financial objectives or not. When you don’t have a plan, you are likely to overspend. This money can be used to make you financially self-sufficient.
In view of rising inflation, everything is going to be costlier with each passing year. If you don’t invest, your money won’t grow to bridge the inflation gap. Otherwise, you might not be able to retire as you would want to.
You should always have insurance coverage for self and family members so that you don’t have to rely on your savings in case of medical emergencies and other contingencies. If you have financial dependents, buy adequate life insurance preferably through a term insurance plan. Also, get health coverage for all family members. By paying a small cost as a premium towards these risk covers, you ensure that your savings are not hit when emergency strikes and life goals are not derailed for the family.
Create Investment Portfolio:
Creating an investment portfolio is the first step towards financial freedom. Building a portfolio involves distributing your investment amongst various asset classes such as equity, debt, real estate and so on. It is known as asset allocation.
Although equity is the best tax-efficient and inflation countering vehicle, putting all money in equity isn’t advisable. You need to diversify the sums that are to be allocated in each asset class as per investment goals.