There is never a bad time to start taking care of your financial health. With Covid19 disruptions rocking our world in the first quarter of 2020, it indeed is the perfect time to retrospect and look forward in positivity and review the health of your financial plans, budgets, and savings.
If you think you have not been doing very well financially, there may be many reasons for the same. You can pause and realign your finances. It only requires some calculations and financial discipline from your side. New resolutions are a dime a dozen, but it is time for the most important resolution of them all -taking care of your financial health.
Here are 5 smart tips for your journey of a good money situation in the future. So that no emergency, could ever knock you down ever again.
|How to Get Personal Loan Easily from Your Home||COVID19 Relief Moratorium: Bajaj Finserv Shares Easy Guidelines for Deferring EMIs|
The budget is the basic framework of any financial health management effort. It is the way in which you track your expenses and tell your money where it will go. The basic approach of a good budget making is to build a zero-balance budget. In this, you put your income on one side and expenses on the other side. When you have done including all incomes and calculating all your expenses against it, you should be left with zero balance on both sides.
There are four primary heads for building a budget. Consider these four walls of your house. These four walls are food, clothing, housing (including rent, Home Loan EMI, electricity and water bills), and transportation. Paying for medical and life insurance can be considered as the roof of your house. In addition to these, you must also budget for the education of your children and try to put at least 20 to 25% of your income as savings for your retirement.
It is also very important to save some money for entertainment and splurging. This part of your budget will help you when your children come to say that they want to go on vacation. You must also budget for recurring expenses like car insurance, house tax, home maintenance, etc.
Not many people realise that they need to have money saved for emergencies, and when the emergency occurs, they run towards Credit Cards and Loans. Many among us are facing unmatched liquidity crunch owing to the pandemic outbreak. This is primarily because they have no or very low emergency fund.
You need to save around two to three month’s income for an emergency. It is very important to identify what is an emergency and what is not. Here are some hypothetical examples of what is or isn’t an emergency. Everything that is a recurring expense is not an emergency. For instance, the insurance of your car has to be done every year, at the same time. It is not an emergency! You have to plan for it because it comes at the same time every year and is easy to predict.
Another example is buying a new television because one of your friends got a new TV. It is not an emergency you can save for it and buy it. Your children need new school uniforms after summer vacation, not an emergency. You should have planned for that because children grow up.
Now let us look at some cases which are an emergency. Layoffs at your company, the Covid19 outbreak, these are emergencies; and, they hurt your finances! You were walking home and got hit by a car and now need a knee replacement. This is an emergency. A fire broke in a colleague’s house, and it was burnt to the ground. All these are emergencies, you never plan for.
|Personal Loan on Aadhar Card||Calculate Loan EMI|
It includes Personal Loans, Credit Cards, and Car Loans. We do not need to cover for Home Loans at this point, simply because a Mortgage is a very long term commitment. It will actually be very difficult for anyone to fast pay a Home Loan on salary. It is best to start by paying off a loan which is taken on things that tend to lose value. Most of the things you purchased on a Credit Card will depreciate, including the car you had purchased on a car loan!
The best approach to paying off consumer debt is to start paying the smallest loan first. This may not sound very mathematically smart. But it is psychologically very smart. Most people will tell you to pay off the loan with the highest interest rate first. The problem with this is you might not see a lot of progress and get demoralized very soon.
Thus what works best is paying off your smallest loan first. Once that goal is accomplished, you can start directing the money from your smallest loan towards the second smallest loan and then the third loan and so on. Once you are done with all your consumer debt, then you can start considering fast payments towards your Home Loan.
Higher education is not what it used to be a few years back. The cost is increasing very fast, and the competition to get in has been increasing at a much faster pace. You will have to have extra money when your children start going to college for their higher education, especially for people who want to provide international level higher education to the children. A mixed approach, which includes secured investments like Fixed Deposits, National Saving Certificate as well as medium risk investments like Equity Linked Savings Schemes and Unit Linked Insurance Plans can be considered a good way to save money for children’s education.
You work all day and night for your family and loved ones but then this is also your life, and you need to have some enjoyment out of it as well. This is where getting an extra job or any other income source only for yourself comes into the picture. This is the money that you earn for yourself and spend on yourself. Just like there can be many ways to earn this extra income, there can also be many ways to spend this extra income. The only objective of spending is to please yourself.
Remember that good money management is as much heart as it is mind. This is where you satisfy your heart that you are doing your best to manage your money but also live a full life.
To apply online for Home Loan, Personal Loan, Credit Card, Business Loan & LAP visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 100+ Banks and NBFCs. We have served 7 million+ happy customers since 1989.