Do you spend your entire income before the end of the month? When was the last time that you wanted to go to a nice dinner but could not? Have you ever taken the count of your expenses? Or cared to allocate your hard-earned income to only activities that you consider significant? With the help of financial planning, you can not only check your spending activities but also see the growth of your money. Financial planning is a plan which takes into account the amount of money you earn, your long-term financial goals, and how to achieve them efficiently. You can control your income, expenses, and investments by making a comprehensive plan to cover any future risk and fulfill your financial expectations.
If you are a student or parent, take a pen and paper. After that, think about the expenses for the upcoming month. Now, read the following pointers which will guide you as to how you can effectively spend your income on the expenses which you anticipated.
What are the key elements of financial planning?
Retirement Plan– Always keep in mind the retirement plan when you plan on how to spend your income.
Comprehensive risk management – For all the types of risks that you can anticipate, try to take insurance policy for them.
Long-term investment – Do not focus on short term objectives alone.
Tax reduction strategy – Save tax! This will leave you with more income to spend.
Estate plan – You should always have an investment plan in real estate to secure your heirs incase of any contingency.
How do I achieve it?
Start by keeping a track of your expenses
You cannot start the process of financial planning without knowing where you are spending your money. Moreover, writing them on paper and in a physical form would help you get a better hold of them. After that, start prioritizing them according to their nature. Whether they are fixed and variable or urgent and non-urgent or necessity and luxury or avoidable and unavoidable etc? You can use various apps or even your account history to be precise while maintaining a list.
You get that sense of security when you save some money and know that in case of any emergency you have got money in your pocket. So, when you get your income save at least 10% of it. This way, you can achieve your financial goals systematically and before time. You can avoid borrowing from your peers while making more money by investing the same.
Do you know that a credit card is the most expensive medium to borrow? This continuous cycle of borrowing and accumulated interest can put you in a debt trap. Nobody wants to want to end up there! So, make a strategy in advance and pay them off. You can even go to a debt consultant company to credit your debt and avail personal debt settlement services.
Do not refrain from buying an insurance policy just because it is not your need now. At times, you come across situations you do not anticipate. If you are not prepared for such situations you will suffer. Hence, instead of bearing loss at that moment, you can secure yourself from any damage caused to physical properties or even life.
If you are still left with surplus money, kudos to you first! But do not be so excited to spend all your hard-earned money all at once. Instead, be smart and invest the same in SIPs, mutual funds, investment bonds, physical commodities, and others. This will expand your money and make you richer too!
To conclude this, let us revise how to begin your financial planning! The first step is to identify how much money, assets, and liabilities you owe. This will aid in setting the financial goals, your priorities, and determining your current net worth. After that, prepare a monthly budget and divide your expenses under various headers. Most importantly, pay your debts! You can avail yourself of personal debt settlement services as well. Being debt-free in New York can save a lot of your expenses. At last, instead of spending your surplus or you saving the money in your piggy bank, purchase insurance or invest to expand your money. Now, when are you starting with your financial planning?