We have come across many a person whose finances are all messed up. With little to no savings, they would be deep in debt too. They get a regular income, but they have left their finances at a mess. They haven’t started even the basics of Personal Finance Planning. If this sounds like you or someone you know, take out your notepad and copy these important points so that these points are implemented.
1. Begin a budget
A budget consists of your monthly income, expenses, savings, investments, financial goals and the time frame to achieve them. This is kept to keep track of your money. By keeping a budget you will know that you are spending money on mostly useless items overrated by advertisements and sales. Don’t fall into such traps and put more money into your investments.
2. Review your investment portfolio
This means you start investing if you haven’t started. If you have started already, its better you go through your portfolio once again and review it. You may want to exit some funds and add some new funds. You might want to devise a new investment strategy. There are many things you would want to do and even if you do not want to do anything, at least you would have gone through your portfolio.
3. Insurance should not be forgotten/ignored
Life is so unpredictable! Anything can happen anytime anywhere. You might get injured and might need Health Insurance to reduce the cost burden on you. You might leave this mortal world while you have dependents so you would require Life Insurance to take care of immediate financial needs after you are gone. You might be traveling somewhere for which you have to have Travel Insurance. Your vehicle might get damaged and you require Auto Insurance. You might need Home Insurance to protect your home. The point here is to get insurance.
4. Keep a Rainy Day Fund
Don’t freak out if you don’t know what a rainy day fund is. But if you don’t have a rainy day fund, you WILL freak out. A rainy day fund means an Emergency Fund. Experts recommend keeping 6 to 12 months of your regular income in your emergency fund so that in case of emergencies, you can use this. Examples for Emergencies are the loss of active employment, Accidents, etc. There is enough reason to freak out if you don’t have an Emergency Fund.
5. Save for Retirement from now
You went to school with your parents hope that you would do something and get success well in advance, similarly, you should begin saving for r3etirement well in advance. Start as soon as you start earning. Compound interest works better the younger you are, due to more availability of time for your retirement. As you age, your time for saving for retirement becomes limited. Invest in your Employee Provident Fund, Public Provident Fund, National Pension Scheme or 401(K) diligently.
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