Your financial habits govern your financial health. Making improvements in financial habits can lead to a major effect on your personal finances.
Your financial health is generally the reflection of the series of little choices and financial habits that you keep on adding over time.
Learning financial management doesn’t happen overnight, it takes time, effort and most importantly practice!
Let’s take a small example – You are looking to buy a mobile tablet, that you can afford is- in the range of ₹25,000. But one of your close friends got an iPad last week, and now you want to get the same iPad. Well, there is no need to get the same, but still, you use your credit card to buy that. Now you need to pay the interest on your borrowing from your credit card and on the same hand, you used your savings. These are small bad choices that add up to debt and can also have major issues in the long run.
Analyze in yourself- are you where you want to be with your personal finances? Do you think you can do much better as you have sufficient income? Or are you in a dilemma where your money is draining?
The answer to all your questions lies in your financial habits. All this can be improved and you can achieve your financial goals easily if you practice a balanced financial life where your income and expenses are balanced.
Let’s discuss some of the financial management tips to help you better manage your money.
Budget your Expenses
Whenever it’s about managing your finances, it has to be started with a budget. The budget not only gives you an idea of how much you are spending but also teaches you to live within your means.
Let’s start – you have to make a list of every penny you spent the previous month. Now let’s start the fresh chapter. Analyzing your previous expenses creates a budget for the next month. Cut all the unnecessary expenses, and try to live with your needs, not with your wants. At the month-end, you will surely notice that you have saved much more than what you spent without a budget.
Don’t Delay any of your Payments
When you delay your bills or payments mostly it adds penalties/late fines or an added interest if it’s about your credit card or any of the loan. If you really want to improve with your finances, make sure you are not going to miss or delay any of your payments and bills this year. Also, try to limit the usage of credit cards. Use a credit card only in case of emergencies. Or get a habit of using your credit card for all your payments and expenses, but this is suspected only and only if you are closing your credit card bill every month. Doing this will help you keep a track of expenses too. In addition to this, you should also consider avoiding EMIs on credit cards. In case you have a huge amount due, then try to consolidate your debt by availing a personal loan. This can save you a lot as a Personal Loans have comparatively lower interest rates.
Investment & Insurance
Investments for your future are a must these days, these are the assets which can help you in your tough time and add to your wealth.
Insurance is a kind of investment which adds up to your savings in a fixed period of time and on the same hand provides cover to you and your loved ones. To start with investments- make a list of important investments which you should start with- life insurance, health insurance, retirement investments, purchasing a home, fixed deposit, etc. should be considered. It is always suggested to have at least a sum assured of 10 times your annual income. It is always important to assess your life insurance requirements before buying. The one thing that you should remember while investing is you should go with the investments which offer tax saving and returns both.
Remember with some hard work, patience, dedication and regular practice, you can get your finances in order and reach your goals.