The most important aspect of your personal finance is money management. Read on to know about five signs that indicate you are managing your finances well.
“Rule No 1: Never lose money. Rule No 2: Never forget Rule No 1”. This quote by the legendary investor Warren Buffet underlines the importance of money in our lives. It is not only important to have adequate money for our needs but it is equally important to work towards increasing that money over time to create a corpus for future expenses and in line with inflation figures.
It is thus important to regularly review your financial plans, and ensure that your money is growing in a healthy way.
Spend Less, Earn More
To ensure a successful management of finances, you should work towards maintaining a bigger gap between your earnings and spending. This will enable you to save for the future and will help you deal with any kind of financial emergency.
Budgeting
This phenomena in personal finance tell a lot about your money management skills. Budgeting helps you understand your expenses and income, and helps you in identifying your unwarranted expenses. Once identified you work towards curtailing such expenses.
Where Are You Spending
If you are aware of your spending and ensure that it is not going beyond your income, then you are on the right track with your finances. However, if you are spending beyond your capacity, then you are banking on borrowing that can result in a debt trap. No matter how small is your expense, you should be prudent enough to decide its worth. Also, it pays smartly if you ensure value for your money through the planned expense and grabbing discounts, offers to bag the best deal.
Working Towards Your Goals
Almost every aspect of your life is affected by the health of your finances. Your desire to buy a car, owning a dream house, planning a luxury holiday or even retire early are all dependent on your finances. Thus it is imperative that you identify your life goals and chart your financial strategy in such a manner that it helps you to achieve your life goals. Prioritising your goals will be of immense help and go a long way in achieving them in an orderly manner.
Having A Financial Plan
Another step that works wonderfully in managing finances is having an investment plan that can multiply your money. This includes savings, investments in shares and debentures, FDs, real estate, investing in gold, bonds, ULIPs etc. While working on a financial plan, do consider these key elements:
- Your budget is the key to the success of your financial plan so stick steadfastly to your budget.
- The plan should cater to both the short-term and long-term goals and make adequate provisions for both.
- Creating an emergency fund must be a salient feature of your financial plan and is a key element responsible for the success of your financial plan.
Finally, there is no harm in seeking help if you have no idea about financial management. You can take the services of a financial planner or can ask for help from your friends and or relatives who are good at managing money.
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