Financial planning comes with the whole deal. Your plan tells you how to handle money, where it goes and how to optimize it for the best purposes in your life. So are your finances in order? Do you know where your financial plan is taking you? If you don’t, don’t worry. We have your back on the best financial planning tips:
Focus on Financial Literacy
We don’t learn basic financial skills in school and if you still haven’t started building your personal finance knowledge, then today is the day. Pick up books on personal finance, read our blogs, watch our videos and continue listening to our podcasts for more on making a financial plan. These are some of the easiest ways to become financially literate.
Whatever medium you choose, you should learn and adapt financial skills every single day. Financial literacy not only helps you manage your money better but also helps you avoid getting conned by scammers.
A lack of financial literacy will also leave you with high credit card debt and little or no savings at all. According to a global financial literacy survey, only 57% of adults in America are considered financially literate. You could take a step today and make these statistics better!
Make a Budget
Making a budget is the most basic step to taking control of your finances and making a financial plan. Don’t look at the process as a tedious task of filling in numbers. Budgeting is for your financial freedom.
You choose a way of making your budget. You can use your notepad, an Excel sheet or any online budgeting tool. Whichever way you pick, just stick to it.
Once you choose your style, divide your income into your needs, wants, and savings. Follow the 50-30-20 rule which simply means you keep 50% for your needs, 30% for your wants, and 20% for savings. Revisit your budget regularly because your income, expenditure, and priorities will keep evolving with time.
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Set Financial Goals
Imagine you step out of your home and you just keep walking without knowing your destination. This is like saving without having a goal in mind.
Your goal could be anything short-term or long-term. You could have a goal of repaying your student loan, getting rid of credit card debt or saving up for your retirement.
Once you have a goal, set a timeline and then start saving money. Track your progress and when you meet your goal, don’t forget to reward yourself!
Want a pro tip here? Always be realistic with your goals. Don’t overburden yourself by setting goals that are not achievable.
Have an Emergency Fund
All of your financial planning would go for a toss if you are hit by an emergency like a job loss, unexpected medical bills or a natural calamity. You need to have an emergency fund for such situations.
Financial experts advise saving up to three to six months’ worth of your living expenses but you could decide the amount according to your income. You could even save nine to 12 months’ worth of living expenses, it’s totally up to you.
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Buy Insurance
What will be the use of all this financial planning if your health is not secured? Buying health insurance should be your top priority. You also need to take life insurance, home insurance and auto insurance if you drive. Don’t avoid these necessary expenses. Buying insurance can save you much more in the long run.
