Painless Ways To Fix Your Finances
A family financial plan should involve the dreams, goals, resources, and responsibilities of the entire family. For a financial plan to work, you need the support, persistence and dedication on the part of your family members. Without the participation of the entire household, you’ll face a continual uphill battle when it comes to your finances.
Here are 10 painless ways to walk through family finances:
Write down expenses daily. Tracking the money spent by noting down your expenses daily, in a disciplined way, has found many households talking responsibly about money. It is a great connect between generations and teaches the value of money easily. It also helps to further analyse where you need to spend and where you can avoid spending.
Budget for savings. Once your goals are defined by cementing your dreams, set aside the amount that you need and channelise it by a systematic investment plan to make dreams like buying a car, going on a vacation, buying a house etc come true.
Have emergency funding. We all love our lives to go on as planned. However, life has its story which may be different. Under such circumstances it is important to keep atleast three months’ expenses in cash or bank deposits or cash equivalents, short term investments etc to meet unforeseen expenses.
Have cover for all life and general insurance to mitigate risks. It is important to face challenges in life bravely. However, it’s also important to cover the risks of untimely death of the breadwinner, or serious health issues of a family member, household risks or risks in travel, adequately.The price to cover this emotional security is the premium. Insurance needs to be seperated from investment (remember the risks cover is important). So take steps in the right direction – like buying a term plan or floater for family health.
Pay off credit card loans and debts. Debts are a burden but if you do need them, keep the costs in mind. Credit card funding is very expensive but the ease of the use of plastic and the easy availability has made it a very popular source. The rate of interest and the rollover facility of the loan (in which you have the option to renew the loan upon maturity) make analysing the cost difficult. However, once you know the time value of money and the rate of interest, you may decide that this avenue is a complete no no. Repay these loans as early as possible.
Take risks when young. Ageing is very graceful but responsibilities, priorities and expectations are inversely propotional to age. Some investments give high returns but have high risks and so they’re suitable only when you are in 20s 30s and 40s.
Get an early start. Lifestyle patterns make saving difficult, but beginning early gives a headstart. It’s best to create pockets of savings early in life.
Channelise savings well. Ensure that your savings are channelised into well-thought-of investment avenues. When you save, you are doing it at the cost of personal consumption. Never put all your eggs in one basket. Understand the possible risks along with returns. Diversify your investments.
Question your needs, comforts and luxuries. We all imbibe a standard of living based on our income and spending patterns. It is wiser to be proud of your own small house rather than aping a big rental one occupied by your peer.
DIY instead of outsourcing. Many times we get our burdens off by outsourcing services. But, in the process, we lose our money as well as privacy. Designing your house or other such work can very well be done by yourself instead of outsourcing it. This will help you tighten your budget.