Income is the source of sustenance only if it equals the expenditure. So, when you are in hand-to-mouth state, planning is largely focused on increasing chances of survival by cutting on expenses wherever possible. Financial planning, however, becomes an important thing to do when you have surplus to take care of. Here are the most effective financial planning tips you can follow to make it big for yourself in the future.
Your net worth is your financial identity. Everything ranging from that weekend outing to buying a house in future depends upon this figure. Thus, it deserves all of your noble and kind attention. Whenever that big day comes when you decide to do financial planning, note down all liquid and non-liquid assets with their corresponding present market value at one place. Do periodic check by:
- Referring to market specialists for immovable assets’ price
- Taking a look at the current deposit amount under various heads in the bank
This can help you know your buying power critically. So, when you are supposed to take any critical decision pertaining to big purchases or to address any unforeseen spend issue, you are able to do it with better confidence.
Financial calendar is the planner of meetings that you ought to have at least once in a year. Like you have set the reminder for health check-ups and religiously show up at the doctor’s clinic, same way you create a schedule where you meet the entities who help you with knowing important facts about you. These facts can be – your credit report, your tax liability pertaining to wealth, your asset evaluation report, and so on. The point mentioned above of paying attention to net worth gets a systematic garb when you create a financial calendar for the same.
It is the basic activity that is quite easy to do too, especially when the flow of income is constant. Even when the income tends to waiver, it is necessary to fix maximum expenditure cap. Let surplus go into savings which can help either in making a big financial move in coming times or helps you sail through tough times with head held high. Budgeting is useless without maintaining discipline. So, stick to expenditure vows you make to relish its positive outcomes.
If budgeting has been done right and you are sticking to the boundaries, this becomes easier to do. 20% of the income is certainly for future. There is a post-retirement phase that will be much dependent on how much you saved in earning years. So, do not disappoint yourself at that time by saving regularly during the earning years. If you have more than 20% to save, nothing like it, but 20% is the minimum and should never be touched.
Credit cards, loans and other similar schemes do not pinch much as the actual money is not given from the hands. Paying in cash creates that psychological barrier which should be there in your mind while spending. So, if you are trying to make your financial plans work, it is advisable to try living on cash only for a certain period. It has found to be a great contributor to savings and you actually learn to control expenses.
Sometimes, a luxury holiday or that luxury watch can be an outcome of your whimsical thinking only. So, instead of giving into impulse buying, think about that expenditure more critically and from all aspects. Is it being done at the cost of some saving for future? Is any expenditure made only to impress others? Have all alternatives been explored before making the choice? When you have written the answers to such questions, you might not be doing impulse buying at all, which is actually a very good thing for the achievement of big financial plans.
Taking a loan is okay till the time its repayment is giving you some benefit in the form of tax rebate. Many countries promote infrastructural developments by encouraging people to take loans to buy property. Still, it is your sincere obligation to find if that EMI is matching your pocket size or not. There is a loan available for almost everything these days. But, the cumulative impact of all the loans taken at once can shatter your mental peace. Instead of depending on sleeping pills to combat pressure of loans, it is better to sleep tight with no unnecessary liability in mind.
Always do an overall cost check before taking any product on loan. You will be surprised to know that loan’s cost increases the product cost substantially, which you regret only later. So, spend on any big thing only when it is time to enjoy the fruit of savings you accrued.
Yes, any financial planning can be deemed successful only when you are there to enjoy its outcome. Also, you will be able to stick to the plans only when the health bills are not drilling a hole in your pocket. Thus, it is very much necessary to make health a priority. When you are making a financial plan, do make a work-out plan too. Sticking to both will help you two ways. First, you will be productive enough to let income flow regularly and increase it, too, at important milestones. Secondly, you will be enjoying the process of financial planning better as the unwanted health bills will not dampen your spirit.
In addition to these, it is important to have a good quality friend circle. People who coax you into spending and showing off are the first to disappear when the testing time starts. So, live to please yourself instead of others if you want to have effectiveness in your financial planning.
Jul 28, 2020