Financial Well-Being Tips: People have said something or the other on financial well-being but the best quote on this is from Jack Benny who said that when your salary is less then try to save something because when you earn more Once you start earning, it becomes impossible to save. It’s paradoxical, but true. Saving money is such a habit that you can become financially stable. Let us know what are its 5 best ways.
Chart your long and short targets
The best way to financial well being is to write your goals on paper. Suppose you want to buy your first house and it can also be your dream, but just having a dream is not enough. You should have accurate information about all the things before buying a house. Like, how much money will I need for the down payment? How much funds will I be able to raise through debt? Although at the beginning of your career your goals may be short term like buying a car or saving money for your own wedding. Hence being short term goals, plan for them through low risk debt funds. Whereas, by starting early on long-term goals, you can leverage the power of time and equity.
start investing early
When to start investing? There are no hard and fast rules, but start saving and investing with your first pay cheque. Suppose a person invests Rs 20,000 per month at 15% for 5 years, then he has invested around Rs 12 lakh, which grows to Rs 18 lakh after 5 years. By investing Rs 5,000 per month for 20 years at 15%, the total investment is Rs 12 lakh, but your money grows 6.33 times to Rs 76 lakh. In both the cases the investment is same but the effect is very different.
show discipline
Consistency and discipline matter a lot when it comes to your overall financial well-being. First of all, investors should adopt SIP approach to invest lumpsum for long term mutual fund investment. In this way the rupee cost averaging works out in a favorable manner.
make savings a habit
Roger Babson rightly said, “People should tell their money where it goes instead of asking where it goes.” The budget of the house is useful to control the finance. It tells where each rupee comes from and where each rupee goes. There are two steps to take control of your finances. First of all, get rid of high cost debt. For eligible loans like home loan, car loan etc. the monthly EMI should not exceed 40% of the gross income. Warren Buffett says that do not save what is left after spending, but spend what is left after saving.
shock proof your wealth
Once you have created a corpus, the first priority should be to protect the money from external shocks. Having an emergency fund of 4-6 months’ worth of earnings can avoid unnecessary drawdowns.
