At some point, everyone wants to get full financial freedom but it is a very difficult goal one can reach, but proper planning can help to avoid wasting their life struggling to get something.
However, planning only works if one can put it into action without acting on the plan it is not going to help.
Evaluate Your Net Worth
It is a necessary task to know your bottom line. To know the net worth, simply collect all the financial statements like bank accounts, credit cards, and mortgage statements, pay bills, and enter the value in the financial software.
Do not forget to include your current balance, the rate of interest, monthly payment, and your car value, house, and major things value. Now the financial software will calculate the net worth by subtracting liabilities from assets.
Create a Workable Budget
One should create and stick to a spending plan which is the best way to meet financial goals. But while making the budget make sure it is appropriate and realistic to actual needs because most people are habitual to cutting down the budget to the lowest without thinking of real spending and giving up the entire budget when it does not work for them.
To make a workable budget assess spending habits before creating a budget. Track each and every single bug that comes across your way, incoming and outgoing for an entire month. Try out personal finance software to do this task.
So many software directly compile your spending and saving data from a bank account and credit card account, consider it as a starting point, and increase it to three months, six months, and so on. Make the necessary changes to your budget so that it will work.
Create an Emergency Fund
Life is full of uncertainty, you never know what unforeseen events can happen so it is wise to keep emergency funds for such unexpected expenses to keep up with the budget. Make a goal to keep six-month living expenses but if this is too far to achieve start with a smaller goal.
Make sure you have ₹1 Lakh in emergency funds and make sure not to use these funds in general life so that they will be beneficial for a financial emergency.
Save for Life’s Second Inning – Retirement
If people are too lucky to have a job that offers an employer-sponsored pension (retirement) plan like provident funds, gain the benefits from it. It is recommended to contribute to these retirement plans more than the employer contributes to them.
Each time your salary increases try to increase the contribution to a retirement plan. It is also beneficial to buy an additional pension plan.
Keep Records of Debts, Bills, and All Accounts
If one is to maintain good credit, one can get a discount on interest on loans like mortgages and insurance premiums. A good credit score can be developed by paying all the debt payments on time and having low debt. One can keep track of the expenses by using personal financial software which tracks balances, limits, and due dates.
This personal finance software sends or shows you an alert before the due date of payment. However, if not able to manage all the expenses then the financial software can produce all the bills and due dates in one place which helps to prevent late payment and late fees.
Develop a Debt-Free Lifestyle
At the starting point having few debts is inescapable. Most people have mortgages and student loans along with credit cards etc. Once you have collected funds for retirement and emergency now start by clearing all your debt to develop a debt-free lifestyle.
If it is difficult to pay off your debt in the current situation try to keep ₹1 Lakh in emergency funds and use the rest of the money to pay off your loans ASAP.
Purchase a Life Insurance Policy
Buying life insurance is not so easy these days because all the life insurance companies are offering the best coverage at an affordable price so choose wisely while buying a life insurance policy. There are types of life insurance policies like term plans, whole life insurance, and universal life insurance plans with certain features that vary.
One of the difficulties to deciding how much life insurance an individual needs. To make it easier to use assets and liability which will help in calculating a comprehensive life insurance coverage. If one has a spouse and children who depend on the same income then it is important to have a life insurance plan. Life insurance coverage helps to survive in a financial emergency.
Make Final Arrangements
It could be a bit uncomfortable to create your own funeral, but doing this can help dependents survive when there is a financial emergency. Well-planned and prepaid funerals can cut down the dependent’s burden.
The Bottom Line!
Managing personal finance in a better way can help at a needy time. Buying an insurance policy and paying off all the debt will make the dependent happy because they do not have to worry about paying the debt. It is a good habit to create a debt-free lifestyle.
Let us know your thoughts on how to manage your personal financial life in a good way where you can easily pay off all the debt and live a happy life.
Keeping emergency funds is very beneficial for everyone because helps at the time of financial crisis and individual can survive with the emergency funds. Also individual should invest their money in securities and other type of investment.
Well written post individual who don’t have much finance knowledge can also understand by simply reading this, how to avoid common mistakes in their financial life. But My points is keeping Emergency Funds is very important because if don’t have this fund, it can be very dangers to survive in case of any misshaping or financial emergency .