Financial Planning 101

Financial planning is, actually, the process of mapping out one’s expenses and the overall cash flow to avoid monetary emergencies and shocks. It is essential in managing money while still achieving life goals. It includes ensuring proper utilisation of financial resources in the best possible way with the help of financial policies. Knowledge of such policies and other provisions like cashback programs are necessary to manage one’s finances properly. Here are some tips on financial management.

Manage Money

While this is an obvious thing to do, it is often overlooked probably because it’s boring. This doesn’t require any financial experience but only some commitment. Deciding to start saving is the first step in doing this. Savings is the only way to attain financial independence. While credit cards can be beneficial at times, they are one of the most expensive forms of debt, and frequent use can lead to a debt trap. Keeping one’s savings updated is the only way to avoid debt traps. Saving can also help in getting wealthier by systematically achieving goals. Saving at least 10% of the salary can be very beneficial. Investing these savings in FDs or liquid funds is also recommended as keeping idle as it is pointless.

Regulate Expenses

Lifestyle choices can be a vital factor in determining one’s expenses. Unplanned expenses for business finance are unwanted and might not leave money for necessities. Preparing a budget is essential in regulating cash flow. The budget is supposed to show how much money is coming in and all the upcoming expenditure for a fixed duration. The expenses can be further categorised into urgent and non-urgent. These needs can then be prioritised to properly regulate expenditure. Committing to the budget is essential as the temptation to spend more can be very overpowering. Using available benefits like cashback programs are also a good way of managing expenses. Have you tried the check stub maker to create a payslip for your employees?

Surplus Cash

Surplus money should be dealt with judiciously as it determines one’s future. Surplus money is prone to be spent unnecessarily, and planning this out can contribute to more savings and financial stability. Surplus money can also be invested to make profits and counter inflation. The earlier one gets into investing, the more beneficial it is. Planning out goals and splitting them into long-term and short-term goals is the best place to start while investing. Goals that can be achieved in 3 years can be short-term, and others can be long-term. The next factor to look at is the risk factor in investments. Keeping the approved depreciation at 20% can be considered low risk, whereas anything over that is high risk. Once the risk appetite and goals are organised, the type of investments can be easily selected.

Taxes

Doing taxes is all about being efficient. All benefits like exemptions and deductions should be claimed without fail. It is recommended not to indulge in tax evasion as it has serious consequences. Consult an accountant if calculating taxes seems too complicated.

Planning for Retirement

Retirement is unavoidable, and planning for it beforehand can ensure that it’s comfortable. As retired life can mostly be sedentary, one can be more prone to ailments. With healthcare costs going up regularly, having funds set aside for treatments can be very beneficial. It is recommended to plan early for retirement even though it might seem unnecessary. Plan out the retirement age and post-retirement expenses per month. This can help know how much corpus funds are needed and what investments might be beneficial towards that.

Financial management can be overwhelming at first because of the various factors involved. Getting guidance from a reliable source can solve this and make one confident in managing their own finances.