Basic Financial Planning Tips
When a person starts to earn, it feels like the world is a place worth living, because you know you can buy everything you like (not really!! but yes to an extent). Is it feasible to spend every ounce of your hard earned money in shopping for everything you like and love? Or is it better to save every penny of it? Or should you make a mid-way deal? Money sometimes makes us go frenzy. Financial planning is as important as other things because future is never certain. It is always better to balance out your savings and expenses habits.
As a beginner, it is never easy to understand the ratio or the way to balance out your finances and currency. Well to easy up the financial planning for beginners, here are few Financial Planning Tips for Beginners.
Set your goals right
Everyone has different idea when it comes to financial planning as no two people have their priorities same. For some saving their money and accumulating their wealth might be a satisfying idea, while for others wealth may be just an illusion. Set your goals in manner that it makes you happy and practice to spend your money according to the goals defined.
Work on your spending
Understand the way you are spending your funds before you plan out your future. So, first gather the information regarding your spending habits before planning your budget. Collect the information to know where you are at right now, before planning on from where to cut out your expenses. Once you have the idea, you will gradually draw your plan.
Estimate your budget
Once you know your expenses, you will know your fixed expenses like your rent, insurance etc. It is difficult to fix them or cut on them, but you will realize that it marks a big dent on your income. After you have planned on your fixed expenses, look out for the variable expenses like, eating out, shopping etc. These are the expenses you can manage easily as going out or eating out will not harm your health.
Do not just cut the expenses
When you start with Financial Planning tips, the first thing every person plans to do is to cut out on the expenses. Sure, there are times when you have to cut on your expenses to meet your goals, but this is not the only way to do it. Make sure that you increase your income, rather than just decreasing your expenses.
Understand the value of your money
As a financial tip for beginner, it is necessary that you understand and learn the value of your money. Money is something you earn against your time, efforts and energy while doing something productive. Respect the money you have earned.
Try and save 20% of your income
Develop the discipline to save at least 20% of your income. You can use RD, Mutual funds, PPF etc. but do not forget to go through the benefits and disadvantages of these schemes. Keep a track of your saving activities and do not get fascinated with the idea of withdrawing the money you saved.
An emergency fund
Accumulate your first 3 months saving and keep it at some safe place, so that you can use it in case of emergency like health issues or any.
Back yourself with adequate insurance plans as a tip for financial planning. Opt for health insurance, accident insurance and life insurance before, even if the company you are working with has sponsored your insurance coverage. Get the insurance plan according to your requirement.
Do not neglect your tax
Buying insurance policies does not mean that you can save on your taxes this way. Buy insurance policy to cover yourself from uncertain risk which will automatically do some tax saving.
You might get many loan offers from various banks, but do not get lured by them easily. If you are not sure about your goals, it is easy for you to get carried away with those loan offers. Until and unless, you do not get a hold on financial planning, it is better not to get indulged in any loan offer as repaying the loan might disturb your financial planning at early stage.
- Warren Buffet, world’s best financial planner, once said “Rule No.1: Never lose money.”
“Rule No.2: Never forget rule No.1”
This is the best rule one can learn when it comes to the Financial Planning tips.
As you start financial planning at the very beginning of your life, it will be very easy and productive for you to work on your future goals. You will get more returns in future and more savings to deal with the known and unknown situations.
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