Having a firm financial basis is vital for living a self-sufficient and safe life. The choices you make regarding your finances from ages 22 to 60 will govern your lifestyle in retirement. Adopting certain core principles ensures that your financial journey is free of hassles. This article describes important considerations you should make while managing your finances.
1. Include a Nominee and Joint Holder
While opening a bank account or purchasing a financial product, make sure to include a nominee and joint holder. This way, in the event of your demise, your investments are transferred without any challenges to your loved ones. It may appear extraordinarily basic, but this can avoid unnecessary delays or issues.
2. Create A Will
It is critical to have a will to outline how you would like the distribution of your assets, savings, and insurance policies to take place. It clearly specifies who is entitled to which assets without complicating the succession process for the family. Without a will, your affairs will likely be left in a legal quagmire.
3.Design a Personal Budget
A carefully designed budget allows you to monitor your expenditure and savings every month. For example, if your monthly income is Rs. 50,000, try to set aside Rs. 25,000-30,000 for fixed costs (rent, bills, groceries) and spend the rest. This systematic shift keeps your finances on track.
4.Reduce Lifestyle Creep
It is very simple to let expenses increase along with an increasing income. Still, you should restrict raising your spending to quite a large extent. For instance, if your salary increases by Rs. 10,000, aim to raise expenses only by Rs. 3,000-4,000 and put the balance into savings. This method allows for comfortable living while still saving money.
5.Distinguish Between Needs and Wants
Differentiating between needs and wants is one of the all-important traits of self-control. You may need a vehicle, but a luxury car is certainly a desire. You can manage to save better by paying closer attention to your needs and reducing excessive spending on luxury items.
6. Create an Emergency Fund
An emergency fund of 6 to 12 months’ salary is key to being financially secure. Take for example, if your salary is Rs. 50,000, try to have between Rs 3 to 6 lakhs in savings. This money aids you in managing during unfortunate circumstances, like losing a job or a medical emergency.
7. Avoid Debt
Debt is dangerous as it can pile up quickly and overspend your finances in the longrun. Try to refrain from taking loans and using EMIs unless it is absolutely essential. Having low debt balances increases financial stability and relieves stress.
8. Credit Card Payments Timeliness
Not paying credit card bills on time results in high charges and late payments fees. To avoid these consequences, always check your credit card statements frequently and ensure payments are made on time. Checking your credit score becomes easier with a good payment history.
9. Limit Your Purchasing Power
Your financial targets can be easily disrupted by buying things impulsively. Instead of random spending, make a list before you head out to shop and make sure you don’t exceed your budget. Before reaching for your wallet, analyze if you really need the item to avoid buyer remorse.
10. Investing in Public Stock Exchanges
Securing long-term saving is easier by investing in financial instruments with a high lock-in period, such as PPF, ELSS, and NPS, which come with tax advantages. These options also tend to protect funds for later use.
11. Spend Time And ATM Money On SIP Investments
Setting up an automated bank transfer will make it so that bank account deductions are done consistently. Doing this means you will get money towards mutual funds without the need for doing anything further.
12. Credit Card
Retaining a good credit score above 700-750 greatly increases the likelihood of being able to acquire credit or loans. If not needed for an emergency, refrain from grabbing loans out of convenience, but do remember to pay all your bills in a timely manner.
13. Avoid Fake Fishing Investments At All Costs
Make sure to avoid even well advertised fake investment opportunities which claim returns more than set from the start. These techniques get described as schemes because they make people pay upfront and leave without even touching the fake results. Stick to terms of real investment options, cyber security comes first.
14. Plan Your Finances on a Calendar
A financial calendar can motivate and direct you towards your financial objectives. Whether your goal is to purchase a house, save for a trip, or even plan for retirement, you need to set goals with specific limits, so that you can reach them systematically.
15. Use the 50/30/20 Rule
The 50/30/20 rule is an easy method of handling your income:
- 50% for requirements (shelter, utilities, groceries, etc.)
- 30% for your investment (SIPs, mutual funds, retirement funds)
- 20% for non-essential purchases (traveling, fine dining, hobbies, etc.)
Following this will help you save and invest better while also allocating amounts to avoid overspending.
16. Keep Your Financial Information Secure
Handle your personal financial documents with extreme caution. It is best that sensitive documents like your PAN card or Aadhar card be securely stored, and only used when necessary. Make a note of where you provide your documents, to avoid situations of misuse.
17. Eliminate any Printed Documents that are Not Useful
Your personal financial information should be kept private. Do not keep documents out that can get misused. It is best to carefully shred any printed documents that are outdated to decrease chances of identity theft.
