If you’ve always been afraid of financial matters, even when you’re dreaming, this might not be pleasant to hear, but it is time to face your fears. There was never a time more crucial to learn more about finances and your financial well-being. Financial happiness doesn’t come easy when your money isn’t right. Debt, overdrawn accounts, and meagre income can drain you emotionally.
This situation is all too common. No matter the industry, we’re all experiencing the effects of COVID-19 in some way or the other. But some people have discovered how to be financially happy.
What’s their secret? Though it seems complicated at first, and to be honest, some of it is, it’s still a lot easier to grasp than you realize, and taking a systematic approach can help you build habits that benefit you in the long run.
In most cases, it’s all about adopting smarter financial habits. Financial stability stems from healthy financial habits. And there is no better time to start learning them. It’s only reasonable to create nice and simple with this list of 7 practices that all financially healthy people follow.
Yes, the age-old phrase that every parent says at least once every year. This is an obvious one, and if you haven’t started already, you need to start now. Why should you save? So you have enough of it when you need it or can make more of it. How do you do it? How we go about saving money usually depends on these two questions. Do we have sufficient funds for:
The easiest method to save is by spending less than you make, which is easier said than done, we know. However, here’s how you can start:
1) Save at least 10-15% on average to preserve your lifestyle, even if or when you retire. This may seem not very easy, but COVID-19 has streamlined life, so maybe it’s time to rethink what seems essential but isn’t.
2) Put this amount aside as soon as you receive your paycheck. Even better is to think that this amount is not yours. Whatever expenses you have, you make do from the rest of your pay, which inevitably compels you to prioritize.
3) If an unexpected expense or an emergency makes you use your savings, be sure to return that money the next month with the amount you were supposed to save anyway.
The point of a budget is to plan, not to confine. If you want to make the most of your money, which is basically what personal financial well-being is all about, then you must plan for certain things:
1) Plan the amount you’ll spend each month, based on what money you have left after setting aside your savings. Try not to exceed this budget.
2) Plan big purchases and keep an account of unexpected expenses like a hospital visit by adjusting your budget or dipping into your savings.
3) To better understand how to plan your finances, try to enrol in financial wellness programs. Ask your employer if they offer an economic well-being program that you can benefit from.
When you began your career and kept a keen eye on your spending patterns. Well, now that you’re a few years in, you may have lost that habit. This is how you can keep things in check:
1) If you do not understand what is essential and what isn’t, the best way to find out is to track your expenses. This has become a lot easier now that the world is moving towards payments made electronically. Just keep a check on your transactions once every month; it works wonders!
2) If you’re having trouble doing this proactively, you can use a financial wellness app. Today, most of the available applications can track your expenses and send you transactional notifications in the form of messages and emails.
When we say impulsively, it does not mean buying the latest smartphone or some designer bag because it was salary day; it means overspending when there is no need to do so. Impulse shopping burns bigger holes in your pockets than most other expenses. Try to make small sacrifices for a larger reward, save wherever you can.
1) cook meals at home instead of getting a take out. Small choices like this go a long way.
2) Opt for zero-cost options. Utilizing “buy now and pay later” solutions or monthly instalments for more expensive purchases can help spread out the cost of your essential items and is an excellent way of sticking to your financial plan.
You can only attain financial stability by reining in your expenses.
If you’re wondering who will benefit from all of these savings, the answer is you. It is for you, the person that wants to take a trip to the Maldives next year or wants to buy your dream house a year after that.
Young adults in their 20s or 30s often think that investments aren’t a priority, but one thing that every one of us has learned during the pandemic is that it does not hurt to be prepared. However, it may not be very nice if we are not. You can start by investing a share of your savings for a rainy day, or so you can make new career choices as you desire at 40 but without risking your financial well-being:
1) It sounds complex, but we promise you don’t need to be the “Wolf of Wall Street.” You can start by investing through low-risk investment options that give you consistent returns and are tax benefits, like the public provident fund.
2) Guess what? Contrary to popular belief, stocks are not the only things worth investing in. Shocker right? But you could actually explore investing in instruments that help you save money over time, for example, a good health insurance plan with comprehensive coverage, so you don’t have to borrow from your savings and spend out of pocket when there’s an unexpected medical emergency.
None of us can start fresh if we’re carrying financial baggage that’s holding us back. Like people, all debts are different. A high-interest debt, like a credit card debt, isn’t the same as low-interest debt, like a student loan:
1) Keep a record of how much you owe at any given moment and make on-time payments.
2) When you’re in debt, start by first paying off the ones with the highest interest rates.
3) If you have excess liquidity, use it to clear off loans. Nothing is better than a debt-free life.
“Better safe than sorry.” -- This should always be your strategy for your financial health.
What this means is, do not just pay off your loans on time.
1)Make sure to be on time with every payment that you can. Whether it is your rent, phone, or gas bills, anything is due. Again, if you have trouble with this, set up auto-debit or reminders. Using digital tools can help you plan better. You can also use any of the hundreds of financial wellness apps available out there. It really does help to keep a healthy routine for your finances.
2) Do you remember the last time you filed your tax returns right before the deadline and had to invest randomly? Ya, not cool. Try to plan your assets, and do not wait for the mail from your company’s human resources team reminding you to file your taxes.
3) If your billing cycle falls at the end of the month when you know you won’t have the money, talk to the company and ask if they can change your billing cycle. A simple action like this could help you avoid unwanted stress and ensure that your credit score does not get sabotaged by delayed payments.
The truth is, financially healthy people know how to manage their finances. They don’t go from paycheck to paycheck, and they make sure never to take on debt they cannot handle. They learn to master their cash flow management, and in turn, their finances move forward every month.
To be successful in the journey of financial planning, it’s essential to take the first step, even if it is a baby step. A simple finance planning list for starters can help you ensure that your finances are in much better shape, getting you ready for all the new challenges that await you.