1. Use a Financial calculator
Every individual in the world has some sort of financial ambition. Planning your investments is the most important step you can take in your financial path, regardless of whether you want to acquire a car, save money for retirement, or save money for any other purpose.
You are aware of your time constraints, available funds, and amount needed to achieve your goals. With this knowledge, you may use an
online financial calculator to determine the rate of return you need. Any financial plan element, including principal, rate of return, total amount, and length, can be calculated using this online tool. It is simple to use a financial calculator to determine the fourth parameter after you have the first three.
2. Prepare for the Worst
No one likes to think about worst-case scenarios, but it's essential to be prepared for them nonetheless. What would happen if you suddenly lost your job? How would you cope if you became seriously ill or injured and couldn't work?
Having an emergency fund in place is vital to cover unexpected expenses. Aim to save at least three months' worth of living expenses, and consider setting aside even more if you have a family to support.
You can build this fund via a digital saving account rather than an account in a traditional bank. These zero-balance saving accounts offer other benefits, such as hassle-free documentation and a handsome interest rate.
3. Break Your Goal into Manageable & Smaller Tasks
Trying to tackle a big financial goal all at once can be daunting. That's why breaking the task into smaller, more manageable pieces is often helpful. You can’t become rich overnight. But you can accumulate wealth through a systematic approach.
For example, if you're trying to save for a down payment on a home, start by setting a monthly savings goal. Then, automated transfers or regular deposits into a dedicated savings account can help you stay on track.
If you are starting your career, this chunking of goals will help you achieve your personal and professional goals.
4. Grow Through Your Mistakes
Every mistake costs you something. But financial mistakes are the worse as they “really” cost you. But can you grow and learn without errors? Probably, no! Henry Ford once said, “The only real mistake is the one from which we learn nothing.”
So, the key is to learn from every mistake so that you don't repeat them in the future. If you've made a mistake with your finances, take a step back and figure out what went wrong. Once you've identified the problem, plan to avoid making the same mistake again.
Wrong investment, early or late sale of a stock, or buying an expensive ULIP – You can learn and grow through all these mistakes and become a financially wise person.
5. Audit Your Investment Plan and Tax Strategies Regularly
Investment and tax strategies should be reviewed regularly to ensure they align with your financial goals.
Your risk-taking appetite and the target gain may change according to your changing financial circumstance. Similarly, your tax bracket can also rise or fall next year.
As your financial standing change (hopefully improve), so should your investment and tax strategies. Regular reviews will help you make necessary adjustments to keep your financial plan on track.
6. Make Changes to Your Contribution to Your Retirement Plan
If you're saving for retirement, it's important to review your contributions on a regular basis. As you get closer to retirement, you may need to increase your contributions to reach your goal.
Alternatively, if you have a change in income, you may need to adjust your contributions accordingly.
Your living standard improves with an increase in your income. Therefore your contribution to your retirement fund should also increase to cope with your expenses later in your years.
These 6 tips are there to take the financial anxiety and stress out of your life. Remember, robust financial planning is not a one-time event. It's an ongoing process that should be revisited periodically. Thus, a lot of reviews and changes are a part of the recommendation made in this post.
Naina Rajgopalan has a thing for numbers and a deep fascination to learn about all things finance. She's been money-wise from a young age and has always shared her knowledge and tips with those around her. Being a part of the content team at Freo Save, a neobank that offers a 7% interest rate on savings along with benefits such as insurance on balance, safe & secure banking, and so on, Naina stays updated with the latest of what happens in the banking and fintech industries. She has taken upon herself to share her knowledge with readers across all walks of life to help them manage their finances and budgets better, so they can make better decisions while spending, borrowing, investing and saving.
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The calculations provided are just a guide. You are advised to speak to a professional financial advisor before taking any financial decision.