Don’t let the money that you save lie around in your bank account. Keep a certain amount for an emergency and invest the rest in the best options for investment. You have to educate yourself about the options available. Try to increase your investments steadily every month.
Everyone today is obsessed with fitness, physical and mental. However, there is another type of fitness which is equally important – financial fitness. When you talk about financial awareness or financial education what are we actually talking about?
Financial Education can be defined as the process by which financial consumers/investors improve their understanding of financial products, concepts and risks and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help and to take other effective actions to improve their financial well-being.
So how can you make yourself financially aware?
Understand Your Current Situation
For this, you have to take a very close look at how you are performing financially. You would need to look at some hard truths. It is important that you understand the inflow and outflow of your finances. You have to check whether your outflow is more than your inflow and if the answer is yes, you have to ask yourself why? Look at your debts, liabilities and investments. Look at debts and see whether you can clear them with a loan. For example, if you have high credit card debts, try paying them off by taking a loan. If you are already paying for a loan, look at closing the loan by taking another one at a lower interest.
If you have made investments, look at how your investments are performing and whether you can do anything to make them better. Maybe, making changes in your investment portfolio can improve your returns. A good investment is an investment that can make a good amount of money for you, when compared to other investments that have the same amount of risk associated with them. A bad investment is an investment that will cause you to loose money, or make a lot less money, when compared to other investments, that have the same amount of risk associated with them. Therefore, the key to understanding the difference between good and bad investments is research. Be constantly vigilant of the changes which are happening within the gamut of investments and avail the help of a financial advisor if need be.
Once you are aware of your investment options, start planning your investments and how mush you will put into that investment.
Plan, plan and then… plan a little more
Once you are aware of your financial status, look at the situation in a way you would look at a soiled cloth. No matter how much dirt is present, washing the cloth will atleast fade the marks if not completely remove it. In the same way, you can atleast improve your situation if not become completely burden free. To achieve this, you need to plan your spending and creating a budget would definitely help you in that. Also, as you do not leave on a road trip without a map, do no make your plans without setting robust and practical financial goals.
For example, you can create a table with two headings, ‘Wants’ and ‘Needs’. List all the things that you have purchased in a month under these headings. Take a honest look at the table once you are finished and then see whether any of your ‘needs’ are actually just ‘wants’. Once you have done that, from the next month onwards avoid purchasing any of your wants till the time you are not absolutely sure that you can afford the cost.
Once you have taken care of this you can then, look at saving as much as possible in a month.
The Keyword is `Invest’
Don’t buy an investment without analyzing it carefully. Options, futures, and start-up ventures are all gambles. You may want to take an occasional fling on such investments, but do so with money you can afford to lose.
A word of caution. Your investment decisions won’t be right all the time, and some of your funds will under perform your expectations. But as you weed out consistent under performers over the years, you will generally achieve a reasonable and stable investment portfolio.
Finally, put time on your side. If you have ambitious financial goals, one of the best moves you can make is to start saving as soon as possible.