Are you having troubles making your ends meet? Or are you looking for ways to get rid of the debt trap? If yes, then you might often wonder how to turn your finances around. Depending on the gravity of your financial situation, it could take some time to be back on track and attain financial literacy.
That being said, don’t fret. With the right steps, you can easily turn the tables around. Planning is one of the greatest traits of human beings. Failing to plan is planning to fail. Financial planning is a step-by-step procedure which is adopted to meet one’s financial goals.
This article will provide a 5-step guide to bring your financial life in order.
Make SMART goals and work towards achieving it
To ensure that your financial objectives are clear and achievable, your goals should be SMART, i.e.
S – Specific (significant, simple, sensible,)
M – Measurable (meaningful and motivating)
A – Achievable (agreed and attainable)
R – Relevant (reasonable, realistic and resources, results-based)
T – Time-bound (timely, time-limit, time/cost limited, time-based, time-sensitive)
Adopt a systematic approach to investing
Along with being offered several investment options, investors are also offered the choice to decide the way they want to invest in mutual funds. If you cannot afford a lumpsum investment, consider dividing your investment into small, insignificant parts to achieve a significant corpus over time. A systematic Investment Plan, commonly known as SIP is a means to invest in mutual funds systematically. SIP investments have numerous advantages.
Squeeze your savings as much as you can
Wealth management begins with saving as much as you can. And contrary to popular belief, it is not what is left after paying all your expenditures. Try making savings a target and work your budget accordingly. First and foremost, compare a few savings accounts and get one that benefits you for using it. If your saving target requires you to spend scantily for the initial few years, so be it. The target savings can be worked backward based on your investment horizon and it must be a religious discipline for you.
Plan your tax outgo
Let’s be honest. Nobody likes to pay taxes, but rather than leaving everything to your CA (charted accountant), it is sensible to be more smart and proactive while paying your taxes. There are different types of investments available to an investor that provides tax benefits of up to Rs 1.5 lac u/s 80C of the Income Tax Act, 1961.
Ensure that you fully maximise these tax benefits.
Make sure to review your financial journey
Making a financial plan is just a meagre part of the intricate process of financial planning. Several paramters could change along the way. Your financial needs might change along the way, or your mutual fund investments might not perform up to their mark, or the markets might change drastically. All these situations call for a regular review of your financial objectives and plans. An annual review is essential, although portfolio shifts can be done as and when required.
Now that you have understood the importance of financial planning and how to create one for yourself, what are you waiting for? Get right to it and become financially independent.