Unfortunately, personal finance is not a favourite subject of many and hence so you might be fairly clueless about how to manage your money. All it takes to get started on the right path is the willingness to do a little reading and you don't even need to be particularly good at math. A key to Financial Success; although is making resolutions to improve the financial situation is a good thing to do at any time of year, many people find it easier at the beginning of a new year. Regardless of when you begin, the basics remain the same. Here are the top ten keys to getting ahead financially
- Self-control: The sooner you learn the fine art of delaying gratification, the sooner you'll find it easy to keep your finances in order. Although you can effortlessly purchase an item on credit the minute you want it, it's better to wait until you actually need it. This is so because some of our purchases are emotionally driven and we start thinking that we don’t need it.
- Take control of your Budget: If you don't learn to manage your own money, other people will find ways to mismanage it for you. Some of these people may be ill-intentioned while others may not know what they're doing. Budgeting is a basic, but important, tool. Knowing what you earned and where your money went makes you aware about your financial situation. Keeping a check on expenses has two benefits. First, you can know the excess outgo, and, second, you can analyse the spending habits of your entire family members. By creating a budget, you can limit each expense so that you do not live beyond your means. Also, if the budget is going out of control, this will help you know where to take corrective action.
- Start an Emergency Fund: One of personal finance's often repeated mantras is "pay yourself first". No matter how much you owe in loans and debts and no matter how low your salary may seem, it's wise to find some amount; any amount of money in your budget to save in an emergency fund every month. This can really keep you out of trouble financially and help you sleep better at night. Ideally, one should be able to meet about four-six months' expenses in case of an emergency. If you have been falling short on this account, calculate how much your ideal emergency fund should have and start saving from this month to reach the required level.
- Start saving for your retirement now: Retirement planning is full of questions. “How much money do I need to save?” “How much money do I need in retirement?” “What investments are right for me?” While retirement planning is full of important choices to make, don’t allow yourself to be overwhelmed into inaction. Because of the way compound interest works, the sooner you start saving, the less principal you'll have to invest to end up with the amount you need to retire, and the sooner you'll be able to call working an "option" rather than a "necessity".
- Control Debt: It's not surprising that most of us go into heavy debt as we reach the middle of our career. Easy availability of finance brings with it a temptation to enhance our lifestyle with every rise in the pay cheque. The dependency is so much that almost 50% of our earnings go into paying our liabilities. This lowers contribution for life goals. Avoid such temptations and do not overburden yourself with debt.
- Insure yourself: Life is full of uncertainties. Not having adequate protection for your family can create a lot of difficulties. It is important to identify the amount of protection required for your family and buy it through the right means. Analyse what insurance covers you need to protect your family. Buy the right instruments. Don't make the mistake of combining insurance with investment. Some basic covers are health, disability and home
- Get a grip of your taxes: It's important to understand how income taxes work even before you get your first cheque. When a company offers you a salary, you need to know how to calculate whether that salary will give you enough money after taxes to meet your financial goals and obligations. You need to devise means of efficient tax planning either by yourself or by recruiting a good tax expert.
- Guard your health: Health is wealth. If you are not healthy, it affects your career, your family environment and your finances. Work-life balance is most important now considering the amount of stress you have to experience in your career. If you have not been good at it, exercise regularly and eat healthy so that the chances of illnesses get reduced and your payment for medical bills may be reduced if not eliminated.
- Guard your wealth: If you want to make sure that all of your hard-earned money doesn't vanish, you'll need to take steps to protect it. If you rent, get renter's insurance to protect the contents of your place from events like burglary or fire. Disability insurance protects your greatest asset - the ability to earn an income - by providing you with a steady income if you ever become unable to work for an extended period of time due to illness or injury. If you want help in managing your money, find a fee only financial planner to provide unbiased advice that's in your best interest, rather than a commission-based financial advisor, who earns money when you sign up with the investments his or her company backs. You'll also want to protect your money from taxes and inflation, which you can do by making sure that all of your money is earning interest through vehicles like high-interest savings accounts, money market funds, CDs, stocks, bonds and mutual funds.
- Create a will: Passing your legacy to your children is important. But many family members go for litigation over inheritance. These cases can go on for years. Till then your family will be deprived of the assets you have built for them. To avoid such situations, write a will specifying your wish. A well-written will can resolve many disputes and keep love and affection among your family members intact.
Remember, you don't need any fancy degrees or special background to become an expert at managing your finances. If you use these financial rules for your life, you can be as personally prosperous as the guy with the hard-won MBA.
