Taking personal finance management into your own hands can make a huge difference in achieving financial balance. Learn the smart money moves and find out here!
Personal finance management can be an intimidating task, but having a sound financial plan in place is key to achieving success. From budgeting your income, to creating an emergency fund, to investing for retirement and beyond, understanding the basics of personal finance management can pay off in the long run.
Sometime its painful when results are not seen as you have expected. But patience is the key factor when you have done correctly you may get what you have anticipated sooner or later.
Here are some of the few tips which would really make it simple for you when executing the plans. It all boils down to making your budget, tracking the progress, make use of the facilities you have at your disposal and planning your tax regime etc.
Make a Budget and Stick To It.
Creating a budget and sticking to it is one of the most important money moves you can make. Start by tracking your income and expenses for several months in order to get a better picture of where your money is going.
Find out the recurring payment obligations you have. These may be your monthly loan EMIs, Insurance premiums, mobile bill, TV bill, internet connectivity bill, grocery bill etc. These obligations are in the nature of monthly regular pay-out which you are going to pay anyhow.
The other thing is to include expenses on unseen expenses. These may include- car maintenance, maintenance charge of any sort of household assets, and expenses on things related to family and friends etc.
Inclusive of all the expenses, create a spending plan that ensures you have enough money to cover essentials like rent of mortgage payments, as well as future goals such as saving for retirement or building an emergency fund. Setting spending limits for non-essential items is also important in establishing financial balance.
Make the budget within the comfortable limit inclusive of the amount that you invest or going to invest. Be honest when budgeting as if it fails it would have a bad impact on your confidence.
Track Your Progress with Spending Reports.
Monitoring your spending is key to long-term financial success. Set aside time each month to review your bank statements and credit card bills.
It seems trivial but actually it allows you to closely track your income and expenses, while also giving you an idea of where you can make cuts or adjust any spending limits.
Create reports from this data to give yourself a better understanding of your finances, so that you can move forward with a smart money plan.
Use Automatic Savings Strategies
Money management tools come in many forms. One of the best smart money moves you can make is setting up automatic savings strategies, such as the Multi Option Deposit Schemes of the bank. How MODs work is pretty simple.
Your bank sets a limit to your bank account. Beyond the limit, if excess fund is available in the account, system automatically push the excess funds creating an account with FD rates. It means, your idle funds now get returns at fixed deposit rates.
You’ll be able to save money while you go about your day without having to think about it, and those small amounts will add up quickly over time.
Leverage Retirement Accounts.
Retirement accounts are a great way to save for the future and leverage the advantages of compound interest. Every dime you contribute to a retirement account comes with potential tax breaks in certain accounts, like NPS- National Pension Schemes and annuity plans of insurance companies.
Furthermore, since this money is only accessible when you turn 60, it’s extra incentive to leave it alone while it grows. Though annuity plans are flexible. It allows you to get benefits instantly or at deferred mode. You can choose on your own when registering for it.
Even in mutual fund, you may get a handful of good retirement plans. Make sure to research what options are available to you that provide maximum benefit!
Take Advantage of Tax Benefits When You Can.
Paying tax smartly on time with proper income profiling will be beneficial. Normally people think of taxing by the end of the financial year which does not serve any purpose but for the exemption only.
To capitalize on it, investment as per your income profile to be done every year at the earliest possible. It would not only get you the income tax exemption that you are looking but it would also generate good returns if done on time as well.
Tax deductions can be an easy and effective way to reduce your taxable income and even improve your overall financial security. Additionally, certain types of accounts like PPF account and life/health insurance policies qualify for special tax breaks that could make a huge difference in your long-term savings plans.
Before making any significant financial decisions or investments, consult with a qualified tax advisor who can tell you which strategies would work best for you.