Last Updated by Richbrite on May 21st, 2021 at 07:00 am
At some points, everyone wants to get full financial freedom but it is a very difficult goal one can reach, but proper planning can help to avoid wasting their life for struggling to get something. However, planning only works if one can put it into action without acting on the plan it is not going to help.
Evaluate Your Net Worth
It is a necessary task to know your bottom line. To know the net worth, simply collect all the financial statements like bank accounts, credit cards, mortgage statements, pay bills, and enter the value in the financial software. Do not forget to include current balance, the rate of interest, monthly payment, and your car value, house, and major things value. Now the financial software will calculate the net worth by subtracting liabilities from assets.
Create a Workable Budget
One should create and stick to a spending plan which is the best way to meet the financial goals. But while making the budget make sure it is appropriate and realistic to actual needs because most of the people are habitual to cut down the budget to the lowest without thinking of real spending and give up the entire budget when it does not work for them.
To make a workable budget assess spending habits before creating a budget. Track each and every single bug which comes across your way, incoming and outgoing for an entire month. Try out personal finance software to do this task.
So many software directly compile your spending and saving data from a bank account and credit card account, consider it as starting point and increase it to three months, six months, and so on. Make the necessary changes to your budget so that it will work.
Create an Emergency Fund
Life is full of uncertainty, you never know what unforeseen events can happen so it is wise to keep emergency funds for such unexpected expenses to keep up with the budget. Make a goal to keep six-month living expenses but if this is too far to achieve start with a smaller goal. Make sure you have ₹1 Lakh in emergency funds and make sure not to use these funds in general life so that it will be beneficial for a financial emergency.
Save for Life’s Second Inning – Retirement
If people are too lucky to have a job that offered an employer-sponsored pension (retirement) plan like provident funds, gain the benefits from it. It is recommended to contribute to these retirement plans more than the employer contributes to it. Each time salary increases try to increase the contribution to a retirement plan. It is also beneficial to buy an additional pension plan.
Keep Records of Debts, Bills and All Accounts
If one can able to maintain good credit, it can get a discount on interest on loans like mortgage and insurance premiums. A good credit score can be developed by paying all the debt payments on time and low debt. One can keep track of the expenses by using personal financial software which tracks on balances, limit, and due date.
This personal finance software sends or shows you an alert before the due date of payment. However, if not able to manage all the expenses than the financial software can produce all the bills and due date at one place which helps to prevent late payment and late fees.
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Develop a Debt-Free Lifestyle
At the starting point have few debts is inescapable. Most people have mortgages and student loans along with credit cards etc. Once you have collected funds for retirement and emergency than now start by clearing all your debt to develop a debt-free lifestyle. If it is difficult to pay off your debt at the current situation try to keep ₹1 Lakh in emergency funds and use the rest of the money to pay off your loans ASAP.
Purchase a Life Insurance Policy
Buying life insurance is not so easy these days because all the life insurance companies are offering the best coverage at an affordable price so choose wisely while buying a life insurance policy. There are types of life insurance policies like term plan, whole life insurance and universal life insurance plan with some certain features they vary.
One of the difficult to decide how much life insurance individual needs. To make it easier to use assets and liability which will help in calculating a comprehensive life insurance coverage. If one has a spouse and children who depend on the same income than it is important to have a life insurance plan. Life insurance coverage helps to survive in a financial emergency.
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Make Final Arrangements
It could be a bit uncomfortable to create your own funeral, but doing this can help dependent to survive when there is a financial emergency. Well planned and prepaid funeral can cut down the dependents burden.
The Bottom Line!
Managing personal finance in a better way can help at the needy time. Buying Insurance policy and paying off all the debt will make dependent happiness because they do not have to worry about paying the debt. It is a good habit to create a debt-free lifestyle. Let us know your thought on how to manage personal financial life in a good way where one can easily pay off all the debt and live a happy life.