While total financial independence isn’t an easy goal to reach, most people wish to at least spend their lives without struggling to make ends meet. Financial planning could help you meet your long-term goal; however, you need to put the plan into action.
Here in this personal finance blog, we will discuss ten such money moves which could help your finances in the long term. These aren’t just investment tips, but also steps which would help you optimize your returns.
1. Inculcate a habit of saving and investing: You must inculcate a habit of saving and investing even a small amount of money every week. It’s not only about the money that you save; it’s more about the habit which you’re inculcating. For making things easy, there are several apps which could help you save and even invest small funds. Take advantage of such apps and get into the habit of saving at least 10 percent of your income.
2. Reduce your core expenses: No matter whatever you do, try to reduce your fixed expenses. A reduction in your monthly expenses could help you achieve your long-term commitments. Doing this effectively can help you reach your financial freedom much easier and earlier.
3. Workable Household Budget: Developing and sticking to your spending plan is the best way to meet your financial goals. You should ensure that your budget is not only realistic but also sufficient for your needs. Usually,, people slash the spending allowances much below the maintainable levels and then they give up on entire budget when this does not work for them.
4. Track your accounts, bills, and debts: A good credit score is an important facet of an individual’s financial fitness, even if you don’t take on debts often. Your credit score could affect your insurance premiums and mortgage interest rate. low debt-to-credit ratio and timely payments are crucial factors for a good credit rating. You can use personal finance apps to keep track of your limits, due dates, and balances.
5. Emergency Fund: One thing you must count on is that you might need to pay for an unforeseen expense. An emergency fund could help defray the impact of such unexpected expenses on your budget. You should try to keep aside at least 6 months of living expenses; however, if it seems overwhelming, you could start with a lesser amount. Remember that your emergency fund is only for emergencies; in case necessary, try to make it difficult to access your emergency funds so that you don’t get tempted to use it in case of non-emergencies.
6. Life Insurance Policy:: In case you have a spouse, kids or parents who are dependent on your income, it is very important to have an insurance policy with an appropriate cover. The last thing that your dependents would need is to worry about how they would go about paying the bills while they are dealing with your loss.
7. Contingency healthcare plan: Most people don’t like to think about this, however, at some point, you could find it unable to make their own healthcare decisions. It is advisable to address this contingency long before such a situation actually occurs.
8. Debt-Free Lifestyle: When you are starting out initially, some of the debts are inevitable. Educational loans and mortgages are a necessity, and most households carry debt which comes from credit cards. As and when you have funded the retirement plans and the emergency fund, work on your debts and pay off your loan and the credit card bills before the schedule.
9. PPF and EPF investment options: They provide better returns than most of the other debt investments. Banks and other financial institutions have drastically reduced deposit rates after the huge inflow of funds post demonetization. Public Provident Fund and Employees’ Provident Fund still provide attractive rates.
10. Advice from experts: The last tip to the readers is to seek advice from professional financial planners. Some might ask why you should pay INR 10,000–20,000 per year for their financial advice. Advice from expert financial planners would cost you some bucks but would really be fruitful in the long-term.
