Being in a tight spot financially has an overall impact on one’s life. Every decision you make, from your daily mode of transport to the kind of places you go to for meals, from your choice in clothes to the kind of gifts you buy for your loved ones get affected. It also hampers your productivity and happiness.
If you are unable to manage your personal finances because of lack of planning then it’s imperative you start working today to create a management system that works best for you. We’ve compiled a few essential tips to boost your personal finances.
Set financial goals
The first step to boost your personal finance is to start with a mindset that will help you stay dedicated on your plan. Start by thinking about what you want to achieve in the short-term and in the long-term, accordingly setting financial goals. This will help you to stay dedicated and will also help you create a financial plan accordingly to achieve your goals.
Create a savings plan
It is imperative that you create a savings plan. It doesn’t hurt to have extra cash by your side for when you need it, right? You can make big purchases with your savings or create an emergency fund that will back you up in the times of need.
Create a spending plan
Just like the savings plan, create a spending plan. The motive for this is to limit your spending so that you don’t splurge beyond your means. Your spending plan must cover all your necessary expenses like bills, loan payments, and other monthly expenses. If you can afford to, make sure to give yourself some breathing room for the occasional expenses and extravagances.
Track your spending
Creating a spending plan won’t make much of a difference if you don’t track your expenses. Record your transactions so you can look back at them at the end of the month to understand where your money is being spent.
Though this step might seem excessive, keep in mind that most people only need to do this for 3-6 months to get a good idea of their expenses. Once you have understood your spending patterns, you can always rely on the average numbers to estimate your expenses.
Focus on income and not expenses
Changing your financial perspective can go a long way to help you. Focusing on income instead of expenses can bring in positivity. Start thinking where you can get more income from, instead of worrying about your expenses.
Create an emergency fund
Creating an emergency fund will cover your unforeseen circumstances. Situations like the loss of your livelihood or health related emergencies require some financial backup. It’s better to be prepared than to worry about it when you’re in that moment.
Cancel unused subscriptions
If you have unused subscriptions like those of magazines, gym subscriptions, or apps that you don’t use, then cancel those. Saving hundreds of rupees now can save you thousands annually, and lakhs in the long run.
Pay off debts
It easy to say that one can pay off debt but the actual process can be tedious. The most important thing you can do here is to pool your resources and use it to pay off the debt. If you find that you’re stuck in debt, go through our helpful resources to learn how you can break out of credit card debt or some unconventional ways to get out of debt.
Hunt for discounts
If you are finding it difficult to manage within your means, then you may want to keep your eyes peeled for discounts. Just think about how much you will save if you opt for discounted products. Buying things on discounts offers great short term benefits.
Have a backup source of income
Your backup source of income can be anything from investments in mutual funds and group savings like KyePot’s digital chits to income earned from a side business. It never hurts to have extra income. In the long run it will be beneficial to you if you have some extra cash stashed aside.
Start planning retirement
Always plan for retirement. It doesn’t matter if you are in your 20s, 30s, or 40s, it is necessary to start saving towards your retirement. A simple and smart way of going about it would be to grow income in your 20s and preserve income in your 40s. This way you can come up with a good retirement plan accordingly.
It doesn’t hurt to negotiate your salary, especially if you have changed jobs or are being underpaid compared to your peers. The worst response you’ll receive is a ‘no’, but it’s definitely worth a try!
Get credit reports periodically
Credit reports help you keep an eye on your credit score. Use it as a report card to understand and manage your overall credit standing. If you have loans or credit card debt, make it a point to check your credit report every six months. If you have are debt free, checking your score once a year is sufficient.
These tips can help you to get a head-start to make a personal finance management system. Remember, it’s better to have a plan but it’s even better to have a few back up plans up your sleeves.