Financial planning is an essential part of everyday planning. Financial planning ensures that our finances are sorted at all points of time and that we do not have to struggle in matters of money. Money is a necessity and if not too much then an optimum amount of it is surely required to keep us safe and happy. Here are a few financial planning ideas which if practiced regularly can save you from getting into a financial crisis.
- Differentiate between necessities and luxuries
It is always good to spend on your necessities instead of splurging on luxuries. For example, a visit to the hair salon to get a haircut is justified while a spa treat at the nearest spa center is not really a need but just a want. Once in a while splurging on such things is fine but care should be taken to not get into the habit of overspending on unnecessary items.
- Save a little each month
No matter how cramped up you are in terms of your monthly expense, it is always advisable to save a little bit from every salary. This will mean keeping aside little amounts that in no time will yield benefits that you would not have imagined when you initially started. This will also keep you covered for any emergency financial need that may arise like car repair or medical expense.
- Draft a basic monthly budget and stick to it
No. budget is not synonymous to stinginess. It is always good to draft a monthly budget which lets you know your basic monthly needs. This way you will be able to set aside money for your regular needs, bills etc. and can get to know where exactly is your money going and how much can you cut down and where.
- Avoid excessive use of credit cards and instead use cash
Credit cards provide us the ease of quick and extra money. But remember that no matter how easy it may sound, ultimately you are supposed to pay for whatever you spend. Hence, wise use of credit cards is advised so that you do not end up accumulating a huge bill which becomes difficult to pay back.
- Get a retirement plan
Keep in mind that you might need to compromise greatly on your lifestyle once your regular monthly income stops. Hence, invest in a retirement plan so that even when you stop earning, you are comfortably provided for.
- Diversify your investment portfolio
Even if you have a savings scheme and a retirement plan, try to diversify your investments so as to include mutual funds, endowment policies etc. This will ensure that apart from safety of your money, you get to grow your money too.
- Use credit smartly and maintain a good credit history
Credit cards sure are to be avoided so as to minimize credit related hassles. However, if used the right way, you can use credit to your advantage. Also, pay all your bills and loan installments on time so as to maintain a good credit history which is important for seeking a loan or any other financial assistance from banks.