Financial management is an art that is not restricted only to the retirement phase today. Simply put, if you are earning, you need to plan your finances well, irrespective of your age. With every one wanting a lifestyle that is second to none, the least we can do is to be wise with our finances.
We will discuss 5 crucial tips here that will help not just to ease out your retirement years but will also give wings to your flights of fantasy while you are still young and going.
5 Tips For Personal Finances
1. Clear all Your Debts
The thumb rule of managing your finances well is to clear out all your debts while you are still earning and have a steady flow of income. Learn to take your debts as a serious liability. It is extremely important especially in the present times when almost 3/4th of the population believes in surviving on loans that pay away their installments to the most unwanted and useless expenditures. That fancy credit card of yours, your loan debt-whether it is for a fancy car or a dream home must be fixed as soon as possible.
2. Have an Emergency Fund
There is no definition that specifies that funds for emergency are only required post retirement. In this utterly unpredictable life, no one knows when one might need an emergency fund in the name of hospital bills or other unforeseen expenses. One should have an emergency fund set aside at all times. It is advisable to invest in health insurance policies or a life insurance policy that can safeguard your future against any kind of emergencies.
3. Invest in Retirement Savings
Making small compromises today can help you have a better future tomorrow, especially for the times when you might not have a steady income flow as well. The task gets easier once you are above 50 years of age since it is easier to get multiple tax benefits and a bigger amount can be transferred to the retirement savings. To have a comfortable unseen tomorrow, it is absolutely prudent and practical to cut down a few unnecessary expenses and unreasonable desires today.
4. Verify your Investment in your Home
Home is one of the biggest investment and asset in one’s life. It is a wise decision to assess your needs in relation to your home- can you downsize it and save some money for future; if it is a perfect size, do you need any further investments on it; have you paid all the loans in its regards?
5. Draw a Rough Budget and Try to Stick to it
While everything might look easy on papers, when it comes to following it in the real life, it might not be that easy. For this reason, one must draw up a rough budget and try to follow it as closely as possible. The most common problem with the finance management is that people tend to underestimate their financial requirements and up in the doldrums later. Practically following a budget laid up in advance, gives you a picture of your expenses and incomes that is close to real and makes it easier to assess if any changes need to be made to it.
The best part about managing your finances is that the sooner you start, the better it is. The biggest myth that revolves around it is the fact that one needs to get serious about managing the finances only in the second phase of earning while the first phase is ideally to eat, drink and be merry!
Abhishek is skilled writer, who loves to write researched articles related to finance and investment vertical.