In life, obtaining freedom is one of the most important pursuits. Personal freedom comes with choosing to do what you want, travel where you want, and, most importantly, spend money on doing the things you like. Personal finance is a super crucial aspect of your life because it gives you the freedom you so crave for.
Personal financing can also help you get rid of debts sooner and make the right money choices when it comes to investing – both for long-term and short-term gains.
A good financial future is imminent if you’re consistent with it, and with the right insurance and investment plan, you can achieve your goals financially.
We’re here to show you the importance of personal financing that can help you understand how you should save up at every stage in your life. By doing so, you will be able to incrementally increase your gains and ensure you have a steady flow of savings to keep you comfortable.
Here are Five Reasons Why Financial Planning is Essential –
- Evaluating the financial condition –
Every time you plan for your financial goals, you get a better understanding of your financial condition. This insight can be derived from proper budgeting and taking into account the many incomes, investments, expenses, and savings you’ve made into different schemes and accounts.
In general, budgeting forms a critical basis of the financial planning aspect and helps you evaluate the situation and also know exactly where you’re spending most of your wealth on.
By understanding that savings are more important than your expenditure, you’ll make wiser moves financially and assess your financial health better.
- Gives you perspective on investments –
Your investments can make a big difference in your life. Mutual funds and investment bonds are generally catered to your needs over the long term.
You need to save whenever possible, even if it is a small amount. Every time you invest in a good scheme that gives you high returns, you’ll be able to make a long-term yield.
There are so many different pockets you can save in, including public provident funds, equity shares, mutual funds, unit-linked insurance plans, bonds, real estate investments, and more.
By investing often, you’ll also understand how these mutual funds and bonds work and use it to work around your investments. By this, we mean you’ll be able to make smarter investments in the future, the more you practice the art of saving up.
- Allows you to focus on your financial goals –
If you’re spending recklessly, you’ll end up regretting it later because you won’t be financially sound at an age when you need to be.
To be economically confident, you have to know where your money is being spent and understand the goals you want to keep.
You’ve to build wealth over the long-term and keep a check on the financial path that you generally layout for yourself.
That’s why you must have monthly targets for your savings that you can take out from your salary or income. Keeping aside this amount every month should become more of a habit than an occasional practice because it will help you build a strong financial profile.
- You can buy the things you dream of –
Everyone has dreams. From that swanky car to a beautiful 3 BHK apartment in the middle of the city overlooking the ocean, right down to being able to travel the world.
Most of these dreams require you to have a good amount of money that you can spend. However, to achieve this, you need discipline in the form of money saved.
With personal financial freedom, you’ll be able to buy everything you’ve dreamed of and more! Imagine yourself at the age of 40, with a car and a big bank account balance and investment funds you made at 25, making you more money on the side.
Sounds fantastic? That’s the dream, and you can achieve it only if you invest now.
- Enjoy a stress-free life –
Ultimately, investing in personal finance gives you something many people crave for – a stress-free life.
While money doesn’t solve all your problems, it can still keep you afloat and ensure your necessities are taken care of. Also, in the event of an emergency, it’s one of the biggest saviors.
Making the right investments at the right time means you’re going to have time focusing on other productive activities like your business or nurturing a healthy family.
5 Tips on Financial planning –
Now that you know why it’s essential to plan your life financially, here’s a quick list of 5 tips on financial planning you can follow –
- Save as soon as you receive – One of the best tips you can follow for sound financial planning personally is saving as soon as you receive your salary or income. A good benchmark to saving can be 40% of your income if you’re paying rent and up to 60% if you’re living in your own home. Keep the remaining money for your other spending needs but keep a small amount remaining till the next salary cycle.
- Establish your financial goals – To be able to plan personal finance in a better way, you must establish your financial goals. To achieve this, you must have a clear picture of what you need, versus what you want. Creating doable goals and objectives is the first step in this process, and you can begin by framing them or writing them down to achieve them. Take the investments and savings into account and engage in the many parameters that come with it, including risks and debt management. Account for any of the liabilities that may arise. Review your lifestyle thoroughly before you set aside a fixed amount for the future and gain a better perspective on categorizing your overall goals.
- Start early – The earlier you start the financial saving process, the better are your chances of gaining a better return in the future. From the moment you begin earning, you must look to invest. Start putting your money in long-term policies which provide benefits with better returns in the long run. It’s like a marathon, and while you start small, your gains grow more prominent with time, and gradually, you can draw a large amount to retire comfortably.
- Always have an emergency fund – If you plan your personal finance well, you can keep a sum aside for a rainy day so that there are no problems later in the event of an emergency. These emergencies can strike out of nowhere, and proper planning can take care of your requirements and needs while allowing you to save for the future. Timely planning with adequate investing allows for a proper contingency measure to take care of any emergencies.
- Take care of the credit score – A credit score determines your ability to take on credit in the future. A good credit score reflects an excellent financial history and helps in gaining loans and other credit cards in the future. You won’t have to fear loan rejections with a good credit history, and it’s all in your hands. Don’t default on payments to enjoy financial freedom.
These are some of the reasons you need to have financial freedom in your life. By following our tips and tricks, you’ll soon build enough wealth to keep you satisfied and financially independent.
Still having difficulty keeping those pennies in check? Hover over to FinGurus and we shall provide you financial advisory and tricks on how to save and invest those big bucks that fetch you great returns ahead!