Money is essential for survival. But how often do we stay on track with our financial health? Most people have poor financial planning. They invest in the wrong places without thinking too much about it. They default on loan payments, increasing the amount of debt, and end up taking another instant loan to clear the first one. Not a pretty picture! So, what can you do to ensure you stay financially stable? Here are a few fool-proof & practical methods to keep your finances in the pink of health.
1. Emergency Funds
Sometimes, life deals us a bad card and then all hell breaks loose. You could get laid off. That age-old leaky roof in your home will need fixing and the car insurance comes due. In order to meet the surge in expenses, most people end up taking an instant loan and hope that it’ll tide things over for a bit. Now, that’s the last resort. But you don’t need to go that far. Having an emergency fund can help you sort out basic expenses without having to rely on loan providers, much less, the loan sharks. Even better, you won’t have to incur additional expenses in interest.
2. Going Overboard
In this fast-paced age of consumerism, having more of everything is synonymous with a better life. Two cars are better than one, even when money is tight. A designer wear tux that steals the limelight is reason good enough to swipe the credit card. An Instagram-worthy, expensive restaurant dinner makes up for exhausting the month’s savings. In short, we tend to go overboard, only to end up depleting our monthly income and eventually turn to easy loan options. Sometimes, the best option is not to spend more than you earn.
3. Staying Debt Free
Emergencies happen. Expenses keep adding up and money gets spent. There’s no denying that. But most often, people end up in a vicious cycle of debt. Here’s what happens. You swipe that card or take out an instant personal loan. Then something comes up and you end up defaulting on the interest payments, more often than you can afford to. The interest rates keep compounding and before you know it, you can barely afford to pay the interest every month, much less the principle amount. Getting in to debt, especially if you do not have the funds to pay it off, results in a cycle of debt that only continues to grow and causes a dent in your financial health. The best way out? Pay it off!
4. Planning For The Long Run
Live in the moment, or so, they say. And it’s a great adage. Except that many people take it too literally and in doing so, they spend like there’s no tomorrow. Most of India’s work force these days barely adhere to future planning. And this could cost them big in the long run. Basic fixed expenses such as the children’s college fund, medical bills for aging parents, the mortgage on the house, etc. can be accounted for by consciously planning for it, well in advance.
5. Doing Your Homework
Speaking of long-term planning, it is wise to invest in financial instruments. These could be debentures, shares, UPIs, mutual funds, or even by offering easy loans through P2P platforms. However, most people go about it the wrong way. Choosing a plan that doesn’t work for you often ends up costing you more. So, be prepared to do your homework. Analyse different financial products by the amount of investment required, the time period, the coverage or benefits, the pay-out amount, and more. This will help you plan out the future better and ensure financial security.
And that, in a nutshell, are few simple, but practical ways to ensure that you’re financially sound. Have we missed out something? Add your suggestions in the comments below.