To manage your personal finance efficiency, you should consider your personal needs, risk factors and prevailing situation. Read on to know more.
No one will dispute the fact that a prudent and structured approach is imperative to add value to one’s personal finance. In simple terms, a strong financial backup will definitely stand in good stead to weather any storm.
So, what’s the way forward? Let’s take a look at some ways that could help you increase your wealth with minimal effort.
Budget A Good Friend Indeed
A budget helps in tracking the expenses and can prune the excess outgo. It gives a clear picture of where you stand in respect of from where the money is coming and where it is going. Going out for movies on all weekends and dining out could be reconsidered. And the best part is that you will learn to live within your means by limiting the expenses. Moreover, if the budget is going haywire, corrective measures could be taken without much delay. More savings means more disposable income. So, take the budgeting tool to secure yourself.
Who’s First On Payment List—You
Pay yourself first is a cardinal rule that one should not break. Just keep this equation in mind: Income-Savings=Expense. What should come first? Savings. A chunk of your income should be set aside as savings and then only comes the expense. A bank account earmarked for savings or a suitable systematic investment will be handy. The name of the game is, save first and then spend and not the other way around.
Meet Emergencies Head On
An emergency fund is a necessity. It may sound clichéd but we have to time again remind ourselves that future is uncertain. One may lose their job or fall ill or a business crisis may be around the corner and we should be prepared to face it. Here an emergency fund can help you come out unaffected. This fund would enable you to face uncertainties without tapping into the savings. And during tough times EMIs might be staring at you and a default could be a blot on your Credit Score. This emergency fund should be such that it can sustain you for at least 4 to 6 months by meeting all the expenses. So, save a bit to build an emergency fund.
Rein In The Debt
Availing a loan is just a swipe away but that immediately puts you in debt. Take debt only when you are really pushed to the wall. Don’t think of upgrading your lifestyle whenever you get a hike in pay. And don’t factor the future earnings to borrow more from the banks. This can be detrimental to your personal finance goals, to say the least. Ideally, the total EMIs should not cross the 25% to 30% mark of your net income. If they are touching 50% or more, that’s not good at all. The basic crux is that cash flow should be managed quite comfortably without any hiccups.
No Substitute For Sound Investment
Parking your saving in the right slot can only augur well in the future. A healthy investment practice is the backbone of any effort to build personal financial security. And make sure that the risk factor in the investment portfolio is minimal or non-existent so that your hard-earned money is intact. Investments can be made in debt instruments, equities, Mutual Funds or gold. But one thing should be kept in mind: don’t overinvest in one particular area and make sure that your portfolio is diversified. This would help in reducing risk and ensuring constant income from many sources.
There isn’t any hard and fast rule on how to manage personal finance. But there are certain parameters and indicators that could be kept close to the heart while improving the financial stability. Do consider your personal needs, risk factors and prevailing situation before making the choices.