Planning your finances goes a long way towards achieving long-term monetary stability. In this regard, much like your medical health, your "financial health" needs your care and attention too; thankfully managing the latter is much simpler. There are the just four basic things you need to keep in mind to ensure your financial health is taken care of. Eventually, once you are in the habit of following these practices, you will automatically take care of your personal finance situation.
Save before your spend
Analyze your monthly income and inculcate a commitment towards savings. Savings could be in any form – cutting down unnecessary expenses, streamlining shopping needs or any other measures. The idea is to get into the habit.
Invest what you save
There are many investment options available in the market. These include tax saving mutual funds, fixed deposits (FDs), bonds, PPF and more. Which one to invest in depends entirely on the kind of commitment you would like to get into, so it is best to consult your advisor before investing. A tax saving mutual fund will have a minimum three-year lock in period. A PPF account would have a 15-year lock in and FDs have a variety of options starting from a couple of days to several years. Many leading banks in India provide you with an option to create an FD account online.
Protect yourself and your family
The uncertainties of life can destabilize things very quickly. Hence, it is important to make sure you have a proper life insurance policy in order to protect your family. How much of a cover should you opt for? In my opinion, at a minimum, it should be 10 times your annual salary. Also, make sure you have health insurance to cover any accidents. Generally, there is health insurance provided by your employer, but if not, make sure you get yourself at least a basic health policy.
Analyze your spending
How often do you check how much you have spent on your groceries? Do you keep track of the number of times you went to your favorite fast food joint? How much did you spend on fuel this month as compared to the last? These are just a few questions you need to ask yourself and critically analyze the answers. A spreadsheet or a personal finance app can help you perform this analysis. Track your credit card usage and make sure you pay the outstanding on time. Late fees can definitely be avoided by having timely alerts reaching your inbox or your mobile phone. Also, see to it that you hold the right kind of credit card. There are many options available in India, which provide specific benefits. For example, some offer cash back on retail purchases, while others offer fuel surcharge waivers. Most cards have very good loyalty points systems that can be used to buy other important things in your life!
In conclusion, these four points may sound simple and actually, they are simple! All that is required is inculcating a savings mentality, investing in the right kind of instruments, getting insured and yes, not forgetting to analyze your spending pattern. Please contact a professional financial advisor to get better guidance and start improving your financial health.
Note: The author, Aditya Prasad, is currently the Chief Evangelist at Perfios Software Solutions and has 12 years of experience in sales and business development.
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