Six Personal Finance Tips To Get You Started
Managing your personal finance is about maximizing the value of your capital so you can realize your dreams and goals. Whether planning your next vacation or early retirement to spend more time with your family, living your dreams require funds.
Why do you need to plan your personal finance strategically?
A well-thought-out financial plan ensures that you and your family are safe during unforeseen tough times.
Manage cash flows
Efficient management of Debt
Regular rebalancing of your investments
Correct asset allocation as per your age & risk profile
Identify your financial goals
Ensure adequate risk covers
Weed out insufficient financial products
If you want to ensure a profitable outcome for your finances, you must take care of a few things:
You must be aware of your income and expenditure ratio
Any debt you may hold like credit cards, student loans, mortgages, etc.
Any investment you have made and how good the investment is today
Understanding how these all play together will help you determine which of the upcoming tips would be effective for you.
To become financially stable, here are some personal finance tips for better management:
1.Ensure that your savings are age appropriate.
*If you are in your twenties, start a Systematic Investment Plan (SIP) with an equity mutual fund and open a PPF account.
*If you are in your thirties, start saving for building assets.
*If you are in your forties, start realigning your finances towards financial freedom.
All these schemes have different features and tax benefits/ implications. Consult a Financial Planner before investing.
2. 50/20/30 Budget Rule
Budgeting will help you in figuring out how well you manage your expenses. Here, the 50-30-20 rule of budgeting comes into play wherein you spend 50% for necessary expenses; set aside 20% of your income for savings, and use 30% for discretionary goals/expenses.
Personal finance advisors opine that if handled correctly, this rule of money will help you meet all your investment goals.
3. Understanding Taxes
One of the most crucial elements to ace your personal finance management is having a clear understanding of personal income tax. Most people do not understand taxes. To meet your financial goals, you must be familiar with taxes before you get your first paycheck. When a company offers you a starting salary, you must calculate whether that salary will give you enough money after taxes to meet your financial obligations. Based on that, you can plan your savings and retirement goals.
The same applies to your investments. Never look at the pre-tax returns to compare two investment options. They may have different taxation rules. Hence, the best comparison is made with post-tax returns that you get in your pocket. This is called the ‘yield’ of a product.
4. Safeguard your family with Health Insurance
When you have a job with health insurance, check to see if your employer offers high deductible plans that will save you money on your premiums. When you search for health insurance, look into the Health Insurance plans, and compare quotes from different companies to find the lowest rates. If you have health issues, consider a more expensive plan which can be cost-effective in the future.
Otherwise, contact a personal finance advisor that can guide you to good health insurance.
5. Prepare an emergency fund
You can sleep better at night by following a simple strategy to stay out of financial trouble. It is essential to have an emergency fund. Even on the tightest budget, no matter how much you have in student loans or credit card debt, and no matter how low your salary is, you should always put little money away every month for an emergency fund.
The benefit of this emergency fund is that in case of an unforeseen expense, you need not dip into your savings which are tagged to long-term financial goals.
6. Seek help from an expert
If you have any questions about your personal financial needs and solving the financial agony of your life, do not be afraid to ask your Financial Planner. Decide which aspects of your finance you need help with before you talk to any personal financial advisor. When you first sit down with an advisor, be ready to explain your particular money management needs.
It is best to choose a personal financial planner who gives unbiased advice and can help you in all areas of your life, including retirement plans, debt repayment, plans for protecting your family, and estate planning.
Follow these six basic rules to have financial security. Live the life you always wanted!