In the present uncertain times, failing to plan is equivalent to planning to fail. Whether you are a businessperson or a salaried individual or a professional, you must be planning your finances, and if you haven’t started it yet, then you must start now.
You never know when any personal or financial crisis might hit you and believe it or not, it will hit you when you are least prepared for it. In such situations, you cannot rely on borrowing from somebody, but you must have your savings to bail you out. Creating a corpus to meet any financial exigency is not only desirable but also necessary.
Here are some handy tips that will help you with your financial planning and would ensure that you can realise your long-term business objectives.
- Prepare your monthly budget: Preparing a budget is one of the most basic requirements for a perfect financial plan. You must know how much you have earned in a month and how much are you going to spend from it. This step will help you keep a check on your expenses.
For preparing a good budget, you must write down all your monthly expenditures and allocate a specific amount to it. If you keep your expenses within the specified limit, it will serve you in good stead, but any overspending must invite a corrective action. Do this exercise on the first day of every month and try your best to live according to it.
- Keep an account of your expenditure
It might sound a bit odd, but you should carry a pocket notebook with you every time you go out and write the amount you have spent on specific expenses. When you come back home, you can write the expenses in an organized way for ease of reference. You must continue this practice for the whole month and for all expenses that you make.
Writing something down has a stronger impact on you as you otherwise may not realise if you are exceeding your budget. If you have a smartphone, you can use an expenditure management app to keep track of your expenses.
- Follow your budget
This might be difficult in the initial few months, but if you make a habit of noting down all your expenses and comparing them with the monthly allocation, you will be able to assess as to where you need to take corrective actions. If you are exceeding your budget every month, it is a recipe for disaster. You should try hard to keep your expenses within control even if it means making some personal sacrifices.
You need to save money from your monthly expenses and start creating a savings fund to realise your other financial objectives.
- Reduce your debt liability
It is necessary for you to get rid of your debt liability as it is putting a huge strain on your income. You might not realise, but a huge part of your monthly incomes goes towards the payment of the interest on your debt, whether it be a Personal Loan or a Credit Card debt.
You must save from all other avenues and try to clear off your debt as soon as possible. Do not fall into the minimum payment trap and make as much payment as you can. Due to limited income, it won’t be possible for you to pay off all the debt in one go, but you can surely work towards paying it every month.
- Create an emergency fund
Crisis never announces their arrival, but when they do arrive, you must be fully prepared to handle them. This is where an emergency fund can come to your rescue. Every month you should set aside a fixed portion of your income towards an emergency fund and only use the remaining amount for your budgetary allocation.
You need to assess your monthly expenditure and make sure that you have at least 12-months worth of amount in your account to take care of any emergency situation that may come up. If you do not have the amount as of now, start saving from this month onwards itself.
- Don’t avail any more loans
In order to reduce your existing debt liability, you must make it a point that you will not Apply for a Personal Loan this year. You should prepare yourself mentally and postpone any big purchase that you wanted to make. Rather pool all your funds towards paying your existing loans and Credit Card debts. Resist the temptation and make it a point to avoid taking any new loans this year if you have an existing running loan.
- Create a retirement fund
You will not stay young forever, like everybody else you will also grow old, and you will also retire. In order to maintain your lifestyle post retirement, you must create a retirement fund and start paying every month towards it. Select any suitable retirement plan and start making a monthly contribution towards it. You should not depend on anybody after you retire, so this step is a must for a safe and secure future.
- Tax planning
As a responsible citizen, it is your duty to pay taxes on time and in full. Rather than opting for unscrupulous means to save taxes and jeopardizing your life, it is advisable that you start investing in tax saving schemes approved by the government. The money you put in a tax saving fund is exempted from tax up to a specified limit and is renewed every year. So, you could save a considerable amount of money every year and build a sizeable corpus for your retirement.
- Get an insurance coverage
If you have not yet got insurance coverage, you must get one now. Insurance is very helpful in saving you against the risk of various types. You must get a family Mediclaim policy as well as an insurance term plan to safeguard you and your family against any unforeseen emergency which might otherwise wipe out your savings. If anything was to happen to you, the insurance policy would cover you against the damages. Also, the government offers tax exemption on insurance coverage also, up to a specified limit, so it is an added incentive for you.
- Manage your personal accounts
It might feel a little tiresome, but you must keep your personal accounts. You can do it manually in a ledger, use accounting software if you can or keep track of your accounts on your smartphone. Choose whichever mode you are most comfortable with and make it a point to maintain up to date books of account, so that you can have a clear picture of your personal finances and keep them under control.
Planning your finances is not only necessary to secure your present, but it is also imperative for your prosperous future. If you haven’t started yet, do not worry, it’s never too late, you should start now and ensure a safe future for yourself.
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