Personal finance is one of the important aspects of one’s life, it is about managing finances, reaching financial goals, fulfilling financial needs, planning for retirement and family financial security, saving and investment.
However, all the above things directly depend on income, expenses, living standards, requirements, and financial priorities. But to achieve financial success in life there is a common thing required i.e financial planning and management. However, if you are among those who have already tried hard but still can’t see any remarkable change in their finances then it is time to rectify the mistakes and consider planning your finances once again so that you can see your money growing in 2021.
Here are some of the correction that you need to make in your personal finance in 2021:
Don’t let money lie in your savings account
This is common with many people. They let money lie in their savings account and are proud to see that saved amount in their account. But this makes no sense. The truth is money can’t grow when kept in your savings account, it loses value as inflation rates are higher than the meagre interest that it makes. This is because the money kept in your saving account gives you an interest rate of 5 to 7 % annually whereas if you invest the saved amount in other portfolios it can give you much more return than this. But before you invest, it is important to choose your investment tool properly, as the wrong choice can even result in loss.
Don’t let laggards ruin your investment portfolio
This is true with most of the people who try to play safe. When you pick most of your investments which offer fixed returns, you get very low returns as compared to the other investment portfolios. This may be money kept in your savings account, FDs, RD’s, or some government scheme. All these schemes provide decent returns that can prove to be laggards for your personal finance and investment portfolios. Hence, it becomes very important to diversify your investment portfolio. Doing this will not only provide you with good returns but also minimizes the chances of losing your hard-earned money.
Make an investment Budget
Till now you might have heard about making a monthly budget but to achieve financial success it is very important to make an investment budget. This starts with calculating your monthly expenses and then total savings. Now you need to create your investment budget in such a way that it uses a maximum of your saved funds to create more wealth. But remember you can not invest all your savings, you need to keep some emergency funds and some amount in your savings account as well.
Don’t get tempted by the stock market
It’s true that the stock market yields maximum returns. Still, it is not suggested to invest all your money there. This is because investing in the stock market is quite risky and if invested without proper knowledge it can cause huge loss. So, to be on the safer side you can invest a minimum amount here too after doing proper research. However, you should not get tempted to see others profit as most of the losses remain hidden and go unnoticed.
Take time to research and understand
Anyone who is new to investment shall take time to learn about investment and its value. One should find good investment options as per his/her requirement and investment making capabilities. Many are willing to invest but remain unaware of using money in the right way. So, before investing in any portfolio it is important to know the performance of that very portfolio in the last few years, interest offered, risk tolerance, and minimum and maximum investment amount allowed under that. However, it is also important to keep future requirements and present scenarios in mind before starting any investment.
Investments to make in 2021:
- Public provident fund (PPF)
- Unit Linked Insurance Plan (ULIP)
- Investment in Gold
- Direct equity
- Mutual Fund (SIP)
- Real estate
Before you plan your investment it is important to analyze your finances. Making a budget is one of the basic steps which everyone should include in his/her financial planning to get maximum benefit. Remember you can’t invest all your money in one place, hence diversifying your investment is one of the best things to do. To gain maximum returns try to invest in both portfolios which offer fixed cumulative and non-cumulative returns.