Financial crisis can fall upon anyone anytime and one has no control on them, but one can be well prepared or well equipped to deal with them. Preparing for financial stability can be done at any point of time but it’s good to do it at the beginning of the financial year. Mentioned below are few basics to be financially ahead.
1. Set your financial priorities:
It is better if one plans financial priorities from an early age and reviews it after regular intervals of time. The first step in managing the finances is to prioritizing the goals and needs and working towards them. Prioritizing helps to be financially prepared for all needs through a comprehensive and time bound planning.
2. Make your own finance budget
Budgeting your finances helps establish more control over finances. It helps a person to be in a better position to handle the cash flow to pay immediate dues and also make provisions for life stage goals. However while doing the budgeting exercise, one needs to make a reasonable budget as we cannot save all and spend nothing at all. While making one’s budget one must remember to allocate money for all necessities as well as for some disposable money for hobbies and interests. One must ensure that some money is set aside for savings – savings should not just be the left over amount after expenses.
3. Paying the credit card debt
Credit card is one of the major obstacles when it comes to getting financially ahead if not used appropriately. Credit card should be used as a convenience because it saves you the hassle of carrying cash and also provides a few days of credit. Make it a point to wipe off credit card debt and do not get trapped in revolving credit.
4. Don’t forget retirement planning
One should start planning for the retirement as early as possible i.e. planning from the very first job. By starting early and being invested, your savings will have more time and potential to grow. One of the best methods to plan for retirement is to buy retirement plan by life insurance companies as they let you plan in a safe, secure and self-completing manner. The retirement products of insurance companies are designed in such a way that they protect the value of your principal along with giving steady returns. It also has the provision that in case of de3ath of policyholder, retirement planning for spouse does not get impacted as the life insurer pitch in with future premiums.
5. Money stacked away in savings account – NO NO NO!
Do not let your money remain idle in your savings account as it only depletes over a period of time as the interest amount provided by banks never seem to match up with the inflation rates and also the interest amount by bank is taxable. Between maturity of one instrument and re-investment into another we should try to reduce, if not eliminate, time gap. Do your own research on investment instruments. Do not blindly rely on intermediaries.
6. Track your expenses:
One needs to keep track of monthly expenses. Tracking the expenditure will help one understand where the money is being spend and how the small expenses add up and lead to be one big amount. Tracking one’s expenses will help one to understand where one can reduce expenses and how to provide for those needs that require additional spend.
7. Control your urge to spend
If you are someone who buys everything and anything in the name of sale, it can be one of the reasons for over spend leading to imbalance in financial planning. In such a scenario one needs to distinguish between their needs and wants. Spend your money on things that you require than what you want.
The author is Senior Director and COO, Max Life Insurance