Diwali, 'The Festival Of Lights', is known for making new beginnings. The celebrations are marked with stunning fireworks. Houses are elaborately decorated with glowing 'diyas' and 'rangoli'. People wear new clothes, buy gifts for relatives and exchange sweets. Diwali is believed to be the festival that brings wealth and prosperity. It is believed that those who worship Goddess Lakshmi on this day would be bestowed with all riches. This is the best time for investors to get the blessings of Goddess Lakshmi and gear up with money management strategies to lead a life of financial self-reliance. Here are 10 simple ways that will help you manage your finances well and make you financially sound.
1. Manage your money
The first step is to save, save and save. Saving money can be an effective way to achieve financial self-reliance. Ensure that you save at least 10% of your salary each month. But do not put it in a piggy financial institution. Idle cash in a piggy bank doesn't grow. Also, the savings account may not fetch greater returns. Instead, you could invest in a liquid fund.
2. Regulate your expenditures intelligently
Try making a budget plan. Unless you have a budget plan, you won't be able to control your capital. A spending plan demonstrates how much cash you have and how and where to spend prudently. Start by classifying your expenses -- immediate, unavoidable, unnecessary etc. A budget plan shows how much money you have coming in and how those funds are spent. It’s one of the most important ways to build your financial future as it helps you get the most out of your money.
3. Maintain A Personal Balance Sheet
List your properties like the bank balance, financial investments, home value and worth of other properties. Calculate your net worth by comparing your financial assets with your financial liabilities. The difference between the two is your personal net worth. The best way to increase your net worth is by decreasing your liabilities and increasing your assets. The balance sheet is a listing of liabilities, assets and equity. In personal finance, this becomes a summary of things you own such as bank accounts, investments, home, car and other assets.
4. Managing Money Judiciously
If you do not invest, your money won't grow. Investing need not be a hard. Goals that need a horizon of 3-5 years are called medium-term goals. After recognizing your goals, you can chose the financial investment instrumentsYou can start a Systematic Investment Plan (SIP) at a nominal amount of Rs 500. Under SIP, a set amount gets deducted from your savings and is purchased as a mutual fund scheme of your choice.
5. hAVE Investment Portfolio
Creating your first financial investment profile is an accomplishment. Constructing a portfolio involves distributing your financial investment like equities. Putting all your money in equity isn't a prudent action. Once you have created a profile, you need to rebalance it regularly to keep the portfolio threat within expected limits.
6. Planning For Retirement
Planning for retirement is important. Health care costs are raising with each passing year.
What you do not understand is that the earlier you begin, the richer you retire. While planning for retirement, you need to clear up a couple of factors like choosing an age at which you intend to retire. In addition to that estimate exactly how much cash you will certainly require every month to fulfill your post-retirement expenditures.
7. Manage Your Debt Carefully
The absence of debt monitoring may eat up a significant component of your income. You might end up borrowing fresh car loans to repay previous debts. Pay off your credit card outstanding. The interest charges on credit card outstanding can eat up much of the cash flow that could be used for other objectives. Paying off your high interest debt is the key to achieve your long term financial goals.
8. Get Your Risks Covered
A term insurance coverage plan should be a must. The term insurance coverage plan offers you greater threat insurance coverage. Currently, there are several term insurance plan options in the market to choose from. Don't expect returns from your life insurance policy. Apart from life insurance, you may need sufficient health insurance coverage.
9. Planning Your Estate
Estate planning is very important in securing the future of your heirs and protecting the interests of your loved ones. Without such a plan, your heirs could end up having a bitter legal battles for years or even decades. You should keep a plan ready to transfer your wealth and assets, including property, personal belongings, life insurance, pensions and any other assets in the event of death.
10. Plan Your Taxes
From a tax planning point of view, you can use a number of tax savings alternatives. Like the reductions offered from Sections 80C with to 80U that are given up the Income Tax Act. One of the most efficient means to make the most of Section 80C is to buy Equity Linked Savings Scheme (ELSS). It has the shortest lock-in period as contrasted to all the other tax-saving choices readily available under Section 80C. In this, you can conserve taxes as much as Rs 45,000 as well as make use of a deduction of approximately Rs 1.5 lakh. (The author is head of Money Mantra, a Mumbai-based financial advisory firm. He can be reached at firstname.lastname@example.org)