Financial planning for beginners: Top 10 golden rules
Financial planning is an inevitable part of your life. Even if you do not have a six-digit income, you can still lead a comfortable lifestyle with a smart and elaborate financial plan.
Before you begin your financial planning to create wealth and secure your future, let’s look at these pointers to nudge you in the right direction:
- Know your financial objectives
The financial goals and objectives of all individualsare unique. Right from buying a new car or a house to starting a business venture, everyone has goals and aspirations they want to achieve. It would be best if you had a clearpicture of your goals before you start your financial planning.
- Start early
During the early stage of your life, many of you might not take your finances seriously. However, it is imperative to begin financial planning early. When you’re younger, you typically have fewer responsibilities, which can help you save more. Planning your finances at a young age gives you a head-start onaccumulating enough wealth for your future needs.
- Draft a budget
A budget can help you keep a tab on your spending as it helps you record all your out-of-pocket expenses. With a budget, you will identify your monthly spending as well as develop financial discipline where unnecessary spending is concerned.
- Consider the needs of your loved ones
At times, you might have financial dependants in your family. Whether it is your spouse or a parent, you need to consider their needs as well in your plan. Consider their goals to ensure that they’remet without compromise.
- Reduce unnecessary spending
After receiving your salary, you might want to buy expensive items to pamper yourselves. Although you deserve a little pampering after all the hard work, do not go overboard. Cut down on unnecessary expenses and keep aside at least 10% of your income every month.
- Clear your past liabilities
When you are young, you might borrow loans to fulfil your dreams. For instance, you might have taken an education loan for higher studies, etc.Debtsshould be cleared offas soon as possible to ensure that the financial burden is not passed on to the future.
- Choose the right investment options
Investing is crucial to a well-executed financial plan. When you select the right types of investment vehicles, you can create wealth to fulfil your long-term goals. As several investment options are available in the market, conduct thorough research before reaching a decision.
- Consider your risk appetite
Your risk appetite depends on your age and financial responsibilities. Typically, your risk appetite is high at a younger age and vice versa. As your financial obligations are ideally minimal during the early phase of your life, you can afford to take risks. However, your risk tolerance recedes as you turn older and your financial dependants increase.
- Build a retirement corpus
Since retirement is a crucialmilestone in your life, you should include it in your financial plan. On doing so, you will be able to generate adequate funds for a securepost-retirement life.
- Consult a financial advisor
For hassle-free financial planning, consult a financial expert to do the math for you so that you have equal investments and savings.
Financial planning aims to ensure a safe and secure future for everyone, and the sooner you start, the easier it gets. Happy investing!