Life throws a lot at you sometimes. However, there’s no denying that even a modicum of financial stability goes a long way towards assuaging some of those woes.
That’s why it’s imperative to have a financial plan at the ready. It will allow you to sleep at night with the knowledge that, come what may, at least financially, you have a strategy for most situations.
Whether you're on the verge of entering the working life or a grizzled veteran of the rat race, a sound financial plan is something you should not skimp on.
It’s important to assess your cash inflows and outflows, and know where to invest your money. Not all of us are cut from the same cloth. Knowing how to manage your funds according to your needs is important.
Here are some of the main reasons why it’s important to have a financial plan:
Before you go about formulating your financial plan, you need to get a firm grasp of where you stand financially. This means taking a good hard look at your cash inflow and outflow on a monthly and yearly basis.
Leave out any one-time expenditure such as expenses incurred during an emergency, as these do not reflect the norm. Focus on the essentials, such as income, rent, insurance payments, groceries, travel, among other things.
This will leave you with a good idea of your net disposable income that you can put towards investments.
Next, take stock of all your assets, by valuating any land or property you may own, gold, and existing investments such as fixed deposits and mutual funds. Experts recommend subtracting the value of your residence and gold, in order to obtain a more realistic picture.
What are your goals?
First off, pinpoint and prioritize your life goals. Then figure out the kind of funds you'll need to cover the financial component of those goals. Say you're looking to own your own home at some point. You'll need to be cognizant of the fact the price could be significantly higher by the time you get around to it.
Are you well covered?
Before you veer towards any sort of investment, first you have to ensure that you and your family are adequately covered for medical insurance. If you have dependents, ensure they have the necessary term life insurance coverage
Invest as per your needs
One-size-fits-all may apply to particular things but certainly not when it comes to investments. In the same way that an off-road vehicle is better suited to rocky terrain than a sleek sedan, certain investment types are more appropriate for the kind of goals you have. So balance the risk against reward, the rate of return, liquidity and other factors that pertain to you.
Once you're sure, don't veer
After careful consideration, you've finally put together a financial plan. Congratulations. But now comes the hard part; maintaining the discipline to avoid drastic changes to that plan.
Stay ahead of taxes
Always aim for optimal tax savings under the income tax laws of the land. Don't pay unnecessary taxes by investing in inefficient schemes. At the same time, don’t run only after schemes that offer the best tax benefits.
Keep track and consolidate
Savings accounts, credit cards, lockers, debit cards, Demat accounts that you don't use anymore should be done away with. Don't hold on to them since many of them have certain criteria such as minimum balance or auto-renewal which could end up costing you unnecessarily.
Keeping debt in check
Always keep tabs on your existing loans and try to clear your debts at the earliest. After all, it doesn't make sense if your total return on investments is being far outpaced by repaying loans at a high interest rate.
Even when you have checked all the boxes when it comes to putting together your financial plan, you need to ensure it keeps humming along nicely. Timely reviews and subsequent action, if any, will ensure that the performance of your financial instruments is running in line with your long-term goals.
Whether you’re a college student or a young professional, for those occasions when a bit of quick credit could go a long way, nothing fills the void quite like the mPokket online loan app.
If you are seeking an instant student loan or salaried loan and wondering where to turn, simply download the mPokket app. Register by uploading a handful of documents, and post-approval, borrow instant personal loans of up to Rs. 30,000! mPokket instant loans for students and loans for salaried are both credited straight to your bank or Paytm account within 10 minutes.
You might also like: 6 ways to deal with self doubt at work
Subscribe to get the latest news and updates no spam, we promise.