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What is Financial Planning?
Financial planning is a step-by-step process for achieving one’s life objectives. A financial plan serves as a guide as you travel through life. It essentially assists you in gaining control of your income, spending, and assets, allowing you to manage your money and reach your goals. If you look closely at the instances above, you’ll see that there is one thing that unites them all: money. To achieve your objectives and aspirations, you must have a sufficient quantity of money. More essential, you must have money at the proper time.
As a beginner, are you wondering how you can start off with financial planning? It can be tiny baby steps, but it still has to be steps that are taken. So here is your guide to financial planning.
Steps in your Financial Planning Journey
1. Hold up a Little Stack
We all need to have some candy stashed up for a rainy day. Financial security has somehow turned out to be one of the most essential parts of financial planning lately. It can either be your savings account or checking account, but having a small load of money to use in a time of hardships is the first way you can get your safety belt on. On a personal note, I would suggest you get it in a fixed deposit. For instance, look up SBI FD interest rates, ICICI bank FD rates HDFC rates, or a bank that you can rely on, find out the ones that can give you the best interest rates, and seal some money for an emergency.
2. Understanding the Concept of Income and Expenditure
Income and expenditure do not work like a see-saw, and both of them have got to be on the same line for financial stability. It is actually good if your income is on the higher side and your expenditure on the lower, and not the other way around or you would be falling in the circle of debt. Being spendthrift comes around a lot more than we expect, but it is also crucial to understand that it can’t always be around. For that not to happen, the only way is to understand your expenses and align them with your income.
3. Draw the Line with a Budget
Setting a budget, you probably do it. But do you do it well enough? Let us take an example, you go out for lunch with your friends on the weekend, while you still have laundry and cleaning up to do. You assume you are going to be back home before the sun sets, so you are all done and ready for work the next day. Instead, you fall prey to some things that all of us would fall for. Your friend asks you to go over to their place for a drink or go out for some karaoke, and what would you say? Who can say no to some fun, right? You put your chores away for the next week, of course. This is what happens with money too. When you draw clear borders around how much you spend and save this month, you would not be crossing that line.
4. Save! Save! Save!
Saving is not always rusty or hard to do. It is actually beneficial when you look at it. So you walk to work every morning, and on your way to work, you buy yourself a can of soda before the day could start. You spend Rs.30 every day on your soda, it refreshes you and pumps you up hyper on sugar making you all happy, but at the end of the month, you have already spent Rs. 900 on soda. Not only that but you have also been hyped up on an unhealthy drink that gets you going to the gym or adapting a new diet for the next few months. Instead, what if you can switch to a bottle of water, you do not spend anything and also stay healthy. So here is the biggest financial tip as a beginner, cook instead of taking out, good on your health and your money, walk instead of taking the cab for short distances, and more.
5. Keep an Eye for Debts
Good credits and paying your bills in precision and can knock on your door as debts. So the basic do-about for these temptations are; do not spend more than you earn, keep away from impulse spending, quit using your credit cards, compare purchases, and mostly pay with cash. The most common outcome of debts is bankruptcy, and we all know it. It is mostly what happens when one spends more than they earn.
6. Insurances are not a Drawback
You know the types of insurances that have emerged in the market today, are you travelling? Take a travellers insurance. Buying a new car? Never forget the insurance. On rent? Then get renters insurance, and insurances are an indispensable layer of protection for you, and not only for you but also for your family and friends.
7. Invest too!
Saving is good, on the other hand, investing is too. Invest small and safe to start off, but invest. Who does not like to watch their money grow, right? So make it a point to invest your money, be it gold bonds, mutual funds, or government bonds.
8. Know to Distinguish Between Want and Need
There are some necessities that you must meet, such as saving for your children’s education and marriage or preparing for your retirement. However, your desires, such as a planned overseas trip or purchasing a new BMW, might be postponed or even ignored for a short period of time. First things first, right?
“Financial planning is like navigation. If you know where you are and where you want to go, navigation isn’t such a great problem. It is when you do not know the two points that it’s difficult.”
– Venita VanCospal
You can always get a professional’s help if you do not know where to start or if you are finding it complex. But if this is your plan to just start somewhere, these basic steps have got you covered for the start of that journey.