We all want to live a financially secured life. But there is a misconception that by just getting a decent job will ensure that you lead a financially secured life. But the fact is that your job gives you an opportunity to make your and your family’s future financially secured by adopting some financial planning habits. Many youngsters do not know from where to start financial planning.
So, here are few financial planning tips for beginners that will ensure that you and your family have a better financially secured future:-
As soon as one gets into his first job, the natural tendency is to spend and have a good time. But this is not the right way to go about it. The life has just begun and you have a long way to go. Hence, spend wisely just on essential things and start saving whatever you can. The amount that you will save might be insignificant at this moment but it will discipline you for the long run.
When one is young, usually holdup their investment plans thinking they have sufficient time to start investing. But there is another way, the sooner you start, the less you have to save every month to reach your financial goals.
As soon as you get into your first job, invest in term insurance plan, health insurance plan and personal accident insurance. These insurance plans are must have products in your investment portfolio. And also, start young will help you save on premium. This is because insurance cost rises with age. So, start early to save more.
Use Credit Card Cautiously
Getting a credit card is considered to be the beginning of most financial disasters. You buy things generally, you don’t want or wouldn’t have purchased otherwise and are left with fat bills. Hence, it is advised to control your urge and use your credit cards cautiously. It is not a freebie that has been offered to you. Sooner or later you will have to pay and the interest rate charged on credit card is very high.
Build Emergency Fund
It is always advised to build an emergency fund. It is very important to be ready for any unexpected situation as life is very unpredictable and anything can happen. Think, what if you lose your job? Or your company is going through a tough phase and is unable to pay you in time. In such a situation, you will end up defaulting on your repayments, which will not only affect your CIBIL score but also cause immense stress. Hence, it is very important that you build a cash reserve that will help you to sustain for a minimum of three months, if something unforeseen happens. Breaking your Fixed Deposits (FDs) and policies is not a good idea. They are investments for other financial goals and retirement and hence should not be used for temporary crisis.
Pre-pay Your Debts
It is likely that you have an education loan to repay, especially if you have studied abroad, or have accumulated other forms of debts. Organize your debts according to the interest rates levied on them and start repaying. It is advisable to prepay your loans as it will save on your interest outgo. It is important to reduce as much debt as possible, so that you have more cash to invest in various other investment options for long term that will help you to achieve your other financial goals in life. It is advised to start investing as early as possible so that you can get benefit of compounding.
So, hope these basic financial planning tips will help you to move towards making a proper financial plan for yourself and your family.