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Financial planning for Beginners - Top 10 Golden rules

https://cleartax.in/s/beginners-financial-planning

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Financial planning for Beginners - Top 10 Golden rules
Financial planning is the process which provides you a framework for achieving your life goals in a systematic and planned way by avoiding shocks and surprises. Read on to find out the top 10 rules that help to plan your finances better.

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Try making a budget

  • Create a full inventory of expenses in front of you: Categorize them into fixed and variable; urgent and non-urgent; necessities and luxury; avoidable and unavoidable.
  • You can create a hierarchy of needs and decide which one’s to address first. It’s all about prioritizing. 
  • Accept that you have limited resources and unlimited wants. But you have to manage your resources. The sooner you accept this fact, the better you can control your impulses towards avoidable expenditures.

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Financial planning

 ...is the process which provides you a framework for achieving your life goals in a systematic and planned way by avoiding shocks and surprises.

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Maintain a personal balance sheet

It’s a statement wherein you can jot down your assets and liabilities.

  • Pull together your bank statements and other proofs of the liabilities
  • List down your assets like the bank balance, all investments, home value, and value of other assets.
  • Take a sum of all the assets to arrive at the total value of your assets.
  • List down your liabilities the (car loan, home loan, credit card balances etc.)
  • The sum of all the liabilities will show the value of the money you owe.
  • When you subtract the value of liabilities from assets, you get your Net Worth.

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Planning for Retirement

What you don’t know is that the earlier you start, the richer you retire. It happens due to the “magic of compounding”.

While planning for retirement, you need to clarify a few points like deciding an age at which you want to retire. Along with that estimate how much money you will need every month to meet your post-retirement expenses.

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Manage your Debt wisely

Manage your Debt wisely
In case you have a lot of debt to shoulder, start paying off the most expensive one. 

The credit card has been regarded as the most expensive form of debt. As soon as your salary gets credited each month, pay off your credit card balances in full. Don’t fall for the lure of paying off the minimum balance. 

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SIMILAR ARTICLES & IDEAS:

Investing defined

Investing is about laying out cash or assets now, in the hope of more cash or assets returning to you tomorrow, or next year, or next decade.

Most of the time, this is best achieved th...

Productive assets explained

  • Productive assets are investments that internally throw off surplus money from some sort of activity. 
  • Each type of productive asset has its own pros and cons, unique quirks, legal traditions, tax rules, and other relevant details.
  • The three most common kinds of investments from productive assets are stocks, bonds, and real estate.

Investing in Stocks

  • It means investing in common stock, which is another way to describe business ownership or business equity.
  • When you own equity (the value of the shares issued by a company) in a business, you are entitled to a share of the profit or losses generated by that company's operating activity.
  • Equities are the most rewarding asset class for investors seeking to build wealth over time without using large amounts of leverage.

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Smart retirement planning boils down to a few simple truths.

  • Time is on your side.  The earlier you start saving money, the more time you give compounding to work for you. 
  • Take risks when you're young.  Althoug...

3 Financial Basics

  1. Create a Financial Calendar: prevent yourself from forgetting quarterly tax payments and to get credit reports.
  2. Check Your Interest Rate: Pay off loans, open saving accou...

Budgeting Like a Pro

  • Consider an All-Cash Diet, as limiting yourself to physical currency combats overspending.
  • Set aside 1 minute a day to check on your financial transactions, to identify problems, track goal progress and set your spending tone.
  • Allocate at least 20% of your income to financial priorities like emergency funds, debts and retirement fund.
  • Budget about 30% of your income for nonbasic spendings, like entertainment. Abiding by the 30% rule, you can save and splurge at the same time.

How to Get Money Motivated

  • Draft a Financial Vision Board, it motivates and helps you to stay on track with your financial goals.
  • Set specific financial goals stating the reason, the way, numbers and dates.
  • Adopt a spending mantra, a phrase that serves as a rule of thumb for how you spend.
  • Love yourself. Taking control of your finances is part of that.
  • Make bite-size money goals. Make the bigger ones but also small step goals to get there.
  • Don’t be a financial fatalist, and switch to more positive mantras.
  • Get your finances and body in shape. The discipline associated with regular exercising translates to managing your money well.
  • Appreciate what you have now, instead of being a consumerist.
  • Get a Money Buddy. Studies indicate people pick up good habits from friends with similar traits.