We have all been there. As the tax year is over, a lot of us will reflect on how we’ve handled our finances last year. Making certain changes in your lifestyle and thinking and certain simple resolutions can go a long way to help you improve your financial condition in the coming year.
1. Review Your Past Year
Reviewing the past year is always a good place to start. How did you handle your finances that year? Did you miss out on anything? Focus on the positive points as well as the parts you missed out. Try to rectify those in this year. Calculate your past investments and how they fared. This analysis will be very helpful in providing you with insight so that you can make the decisions for this year.
2. Plan Your Budget Accordingly
We’ve all heard it. Budgeting may seem like an overused cliché by now, but it remains one of the most effective ways to handle your finances. This simple, yet important device can help you gain a better understanding of your earnings and where your money was invested. You require these insights to grab a better understanding of your financial condition. If you find out that your expenses have been too out of control, the chances are that it was spent on mostly entertainment and going out for eating. Sometimes these expenses are very difficult to recognize. Keeping a budget will help you control making such extravagant choices. The most logical way to handle things is to let go of the excessive outgoing expense and then analyzing your particular spending habits. If you want to improve your financial condition, then the best thing to do is to limit the expenses on each of these sectors.
3. Make Savings a Priority
When it comes to the financial situation, you need to understand and follow one simple equation only: Income- Savings= Expenses. Always ensure that you set aside the amount you want to save from your income and then spend on your regular necessities.This will also ensure that you don’t skip on your long-term goals such as retirement planning. Systematic planning on your investment can help you too. You can also auto transfer the money into a child’s account. If you are a salaried person, then opening a separate savings bank account can help you automatically transfer some of your monthly income in there.This is the most efficient way of saving consistently.
4. Be Prepared for Emergency
All plans go down the drain when you fall ill or lose your job. If you have not saved up before, such emergencies can make you lose sleep. In such situations, people often use up the savings they have set for life goals. In case of a salaried person, they have to start saving from scratch. Not to mention the pressure of paying for loans and emergencies. A delay in loan payment can damage your credit history too. Emergency funds are the best way to handle such situations. Always think ahead and make certain savings from time to time. If you are doing fine so far, then keep reading. There are many more factors you can find to consider through a blog about personal finance tips.
5. Keep a Check on Your Debts
A lot of people tend to go overboard with loans in the middle of their career and end up in a heavy debt situation. The easy availability of finance from various financial institutions lead to temptations very few of us can resist. Our lifestyle enhances with every increment in the paycheck. With time, we tend to become slaves to this lifestyle habits. You may not realize it overnight, but research shows that most people end up spending about 505 of their earnings into these liabilities. As a result, you contribute lesser into the life goals. The best advice under such circumstances is to try and resist such temptations at all costs. Not all liabilities are bad though. For example, a housing loan is not such a bad thing, as it increases your assets. Credit card loans, however, can land you into troublesome situations as they have a very high-interest cost. If raising debt is something you cannot avoid, then try to keep the EMI at least within 25-30% of your entire earnings. If you follow these rules by heart, you will start to see improvements in your financial condition.
6. Set Your Priorities Right
Everyone has a set of goals in the back of their heads. It can be a higher career goal or purchasing a new house or car, or even providing a great education to their children. Each of these goals is long-term and they are very important to each of us. But a lot of times, our goals get influenced by peer pressure without us even realizing.This creates an amount of extra pressure on us to achieve them because we start valuing ourselves by them. These goals do not reflect your finances,and with time, you will realize that some of them are completely unattainable, no matter how hard you tried. Eventually, this creates disappointment and depression in us. Always, practically set your goals and make sure that it is only you who is making that decision and not under anyone else’s influence.
7. Recognize the Important Needs and Start Investing in Goals
You may have a goal or a set of goals, but how many of them are you sure about? Are you certain that you will achieve them under a certain period or you are just going towards a vague goal which probably will never be attained? If you have a goal like an early retirement or a foreign trip every year, after retirement, then they are not very well planned out. When you set your goals, you need to consider your current financial condition as well as the factor that it might change overtime, for better or worse. If you are unsure about your primary future requirements, then chances are you will inevitably be going to fall short of meeting them.
Start investing in your goals from an early stage and progress in a planned way to avoid any stress in times of urgency.