Have you always failed to keep up with your financial commitments? Are you the kind who always ends up spending more than saving? Well, you are not alone. Today most of young people deal with a similar situation. If you too have a mismanaged financial life and aspire to sort it out then you will have to take your finances more seriously.
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There are some major changes you have to implement in your lifestyle and spending habits. Once you are able to control your urge to save money, there are a few necessary habits you must include in your finance checklist to sort out your financial life.
Listed below are the things you must consider:
To bring your personal finance in track, keep a close tap on the money you have saved every month. Set a budget at the beginning of the month and try to stick to it. At the end of the month sit down and calculated how much money you have spent towards attending your necessities and how much has been channeled to your savings account and investments.
This habit will help you to prioritize your needs and you will be able to resist the temptation of going overboard with your expenses. Implementing strict financial discipline is difficult and sometimes we tend to spend extra money to break the monotony. But if you are focussed and dedicated you will be able to mold your habits and implement savings habits over time.
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We can categorize our expenditures into two types. The first is the money that is spent to buy a quality lifestyle like expenses incurred on entertainment, food, travel, necessary bills and payments can be categorized as your lifestyle expenses. The second types of expenditure consist of your debts and investments. For example expenses in the form of home loan EMI, debts such as personal loans and credit card bills. The second category of expenses can be seen as credit expenditures sometimes. Since these are also investment expenses these must be tracked separately every month. This will help you to maintain a good credit score and be creditworthy in the eyes of financial institutions such as banks.
This is one of the most important aspects of financial planning. Unlike budgeting and saving, cash flow tracking is easier to implement. You simply need to know the way you spend your money. Once you understand this you can chart out your cash flow.
For instance, say you have three accounts namely salary account, savings account for emergency funds and one rd account dedicated to your investment goals. The first step you must take towards creating a cash flow system is simply by tagging this account. By naming the accounts you will be able to create a structure and efficiently plan to manage your money. This way you will be able to scan through your expenses each month without having to keep meticulous details of your expenses.
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To make your financial life easier, you first need to prioritize between your needs above your wants. While classifying what your needs are and what qualifies as wants there are some basic needs that outweigh other requirements. For example, buying a home, buying a vehicle and paying for necessities life telephone or internet are absolute necessities in today’s world.
On the other hand, purchasing a luxury car or an expensive dress from an international brand will surely qualify as want. Such wants have the potential to ruin your financial goals. It’s ok to spend towards fulfilling your wishes but only after you have saved enough to take care of your savings and investments.
See Also: Why Women Need to do Financial Planning?
It is easy to set yearly goals, but yearly goals get delayed as each month passes and at the end of the year people hardly end up saving money or reach their goals. The reason is simple; people often fail to keep up with their plans. So instead of setting unrealistic goals, it is important to break them into achievable goals.
Instead of fixing an annual savings goal it is important to lay a monthly savings plan. Break your yearly plan into monthly goals and you will see the changes. You may also set periodic goals as per your convenience. This will help you implement financial discipline and stays focussed as well as achieve your savings goal.
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