Personal Financial Planning: The Importance of Financial Habits

Personal Financial Planning

The Importance of Healthy Financial Habits

Spend wisely, save smartly, and lead a long, wealthy life

You earn enough to make ends meet. You pay your bills on time. You create a monthly budget and stick to it. You’ve saved up for a rainy day, and even have a retirement corpus up and running. Congratulations! You’re what one would call a prudent individual – one with healthy financial habits.

We continue to live in uncertain times, with COVID still around, and the financial markets cautioning us each step of the way. When the chips are down, it always helps to know where your money is, how much longer your savings will sustain you, and how you can continue to lead a decent life.

If you’re new to financial planning, it’s not too late. Adopt the following steps, and earn your way to financial freedom.

Regular Updation of Financial Plans

Personal financial planning won’t be all that successful if all you do is ‘plan’, but not review and update said plan. Monthly reviews and regular checks and balances in your financial plans will help you move closer towards your monetary goals. The market can see sudden shifts, your life could undergo a change that compels you to review where your finances stand. And this change could be something as routine as moving out of a rented flat, upgrading your home, or even a drop or increase in your earnings. A prudent person is one who tries to be as prepared for unforeseen circumstances as possible.

Set Attainable Financial Goals

When we draw up a budget, we know how much we’re earning, what our expenses are for the month, our savings, and so on. It helps to set small, attainable financial goals that will help increase our income. Never put all your eggs in one and the same basket. For instance, putting away the same amount of money in mutual funds alone may not suffice in accomplishing that financial goal you had set for yourself. Consider increasing the money in mutual funds and how the stock market works. When you begin earning a certain amount, consider investing in immovable property. Try and find out about passive sources of income. Are any of your policies about to mature in the coming months, and if yes, what can be done with that corpus amount? When you set small goals and work towards accomplishing them, you can set yourself up for bigger financial goals.

Pay off Credit Card Bills On-Time

Owning a credit card is seen as a marker of pride. It says to people that you’ve ‘arrived’ in the financial world. But one must be wary of credit card bills too. Owning a credit card does not wish away your expenses. Use any credit card smartly, and make your payments on a timely basis if you don’t want to pay higher interest or accrue more debt for non-payment. Keep a track of your credit score, and ensure it’s healthy, if you wish to qualify for higher loans in the future.

Up-skill your Portfolio with New-age Investments

It helps to keep abreast of the developments in the financial world and add or subtract from your portfolio. Learn how you can diversify your investments by maintaining a balance between equity and income based funds, as this will help you mitigate risks. Understand everything about peer-to-peer lending, and look towards such instruments for up-skilling yourself. Also, just because something is in vogue, don’t put your hard earned money there. For instance, it may not be a wise idea to invest heavily in cryptocurrency, so be cautious with what you invest and where.

Know your Finance Experts

Nobody knows everything about managing money, and that’s the best part because you don’t have to do everything on your own. Look to financial experts on different platforms – people who’ve burnt their fingers and now want to teach others how they can prevent mishaps in their financial journey. With the help of such finance experts, you’ll learn how to make the most of tax savings instruments such as housing loan rebates, PPF, etc. Your money is yours alone, and you’ve worked incredibly hard to earn it. Don’t let it just sit in a bank account.

Make talking about Investments a Part of your Daily Conversation

How often do you discuss the latest viral song with your friends? And about that new restaurant you’ve been meaning to visit that your sibling won’t stop raving about? These conversations are extremely common, but perhaps we need to up-skill even our talk. What’s a good investment portal? How many shares are good? Is it a good time to invest in real estate? The more often we make such dinner table conversations, the more we’ll learn about healthy financial habits and begin to implement them.

Building and maintaining healthy financial habits are doable. All it takes is consistent effort. The first step towards cultivating healthy financial habits and achieving your financial goals is to understand the importance of financial planning. Hope this article helped you to gain some understanding of the financial habits and their importance. Let us know your thoughts in the comment section below or if you have any questions related to financial planning, post it here! – Our financial experts will be happy to answer them.

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