Early financial management- 5 tips to get you started
Adesh Chaurasia- Early financial management- 5 tips to get you started
People have started to realize the significance of financial planning for a prosperous and secure future. It allows you to gain greater financial independence, accomplish your life goals, and deal with emergencies without having to face financial constraints.
The earlier you start managing your finances, the better outcomes you are going to get. And you do not need to have academic knowledge to be able to manage your finances efficiently. All you need to do is adopt strategies and tailor a personalized wealth plan.
If you feel that financial planning is overwhelming or if you are wondering about how, to begin with, it, then do not worry! I have mentioned five valuable tips that will help you start your finance management journey and pave the way for you to live your best financial life. So let us jump straight into them.
1. Save your money
The stepping stone towards managing your wealth is to start saving your money. You might have some goals for your future like buying a huge villa or sending your kid to an institution abroad. To achieve any of these goals, you need to have savings. Savings will also save you in case of urgent situations.
I know it might seem like an intimidating task, but trust me it is way easier than you think.
Let me suggest to you a savings strategy that has proven successful for many people. It requires you to take out 10% of your monthly income and invest it in a liquid fund. The debt funds that invest money in fixed-income securities are known as liquid funds.
Liquid funds are considered to have lower risks and they ensure higher returns.
2. Keep track of where your money goes
When you read books on personal finance management and learn about the perspectives of successful individuals, you will get to know that it is extremely crucial to keep track of where you are spending your money.
There are many online budgeting tools available today that help you in tracking your expenses efficiently. I strongly encourage you to install a good finance management app that will track all the transactions that you made through your debit card as well as can add the money spent in cash.
At the end of a month, when you go through your expenses, you will get ideas about where you are spending more than required and where you can limit your spending. This will help a long way in managing your wealth.
3. Have a personal balance sheet
Another significant step in this process is to maintain a personal balance sheet. However daunting this may sound, it just means having a record of all your liabilities and assets.
For this, enlist and add the assets that you own and make a sum of all of your liabilities which refer to the remaining balance of all the loans that you have taken.
4. Manage your debts
Following the previous step and keeping a record of your liabilities will also prove helpful in managing debts. Jot down the different types of debts, the creditors to whom you owe them, their total balance, and their maturity date.
Moreover, I would urge you to pay off your credit card balances as soon as you get credited with your monthly income and use credit cards only when there is an emergency.
If you do not make strategies to pay your debts, you will end up taking fresh loans to pay off the earlier ones. You will get trapped in the vicious cycle of debts.
Tracking your expenses and finding ways to save for the debt payments will help you avoid these kinds of situations. You can consider having an emergency savings fund as a backup plan.
5. Be prepared for future risks
Unforeseen events in life can put you and/or your family members in a very difficult situation financially. So, I always suggest young people get these risks covered to steer clear of such financial menace.
Learn about the different life insurance policies and choose the one that is affordable for you. Apart from life insurance, to get quality healthcare, consider taking health insurance as well.
It is never too early to start with financial management. As soon as you start earning, take some time to understand your finances. Begin with these basic steps and you will find yourself in a very comfortable position financially after a few decades from now.