Every responsible person thinks about a secured financial future for his/her family . However, acting to secure the financial future one needs to plan in advance. Here are some steps that could help you towards financial freedom in the future.
SALARIED AND WORKING INDIVIDUALS
Manage expenses: Financial advisors say expenses are the backbone of an individual’s financial planning. To spend judiciously, learn the difference between needs and wants. Once you know the difference, it becomes easy to control unnecessary expenses. Remember, as you manage your expenses, your savings would increase which could be invested smartly for wealth creation in the long run.
Identify financial goals: Zero in on financial goals and set deadlines for each of the goals.The next steps are to measure those goals and regularly check your progress. Be flexible for course correction in case of any divergence from the planned course.
Buy risk covers: Have adequate insurance to protect those who are dependent on you financially . Buy a life insurance plan. Also have health cover for the whole family and insure your house.
Don’t sign any papers without understanding the basics: A large number of investors depend on friends, family members, colleagues and others for investing. If you don’t have any experience of investing, at least try to understand the basics before you sign on the check.
Take calculated risks, not blind ones: You should not be afraid to take risks but should not invest based on tips. Aversion to risks could also be due to lack of understanding of investment products. So try to under stand the basics of investing and finance.
Don’t fear numbers: Often women are found to be fearful of numbers, which eventually lead them to depend on others for their financial decisions. Women should not fear numbers but should be in-charge of the situation and take decisions about what they really want financially. Number crunching could be delegated to someone else.
Ensure inflation-plus returns: Always ensure that your investments give you returns which can beat the inflation rate. Else you would end up with a negative real rate and in the long run you will not create wealth.
Don’t run out of cash: You should always be careful about having cash and cash equivalent at your disposal which is enough to meet your regular expenses for the next six months.
Match your income and expenses: Always make sure you have a regular source of income which, on a post-tax basis, matches your expenses. Seen another way, at times it may be necessary to limit expenses in case incomes do not match up to the same. You can also consider the systematic withdrawal plan (SWP) route to save on taxes.
FOR BOTH THE GROUPS
Have a plan B: Have a contingency plan in place in cluding a loss of job, in case you are unable to work, or any other adverse situation.
Get a good financial advisor and make him / her your friend: Choose a financial advisor after proper due diligence because if you get a good person to handhold you with your financial plan, he she, like a friend, will remain with you for life.Also get himher to guide you through various aspects of investing, including tax saving.
Credits Economic Times