Honestly there is no short cut, or rather we would say that the only shortcut is financial planning discipline. So what all does personal financial planning include? In a nutshell it involves prioritizing your goals and organizing your finances so as to meet your targets in the easiest possible manner.
Checkout these four key steps that will help you budget your finances in the best possible way.
Rule No 1 rule for financial planning – Identify Goals and Prioritize
The goals can vary from higher education to marriage to buying a car. Once you have jotted down the list, prioritize and eliminate the avoidable ones e.g. buying a car can be delayed by a few years if you are looking forward to get married in near term.
Rule no 2 – Create an Emergency Fund and Cover the Risks
A very important financial planning tip is to create an emergency fund. A typical emergency fund usually caters to situations like loss of job as it happened during recession or loss of income due to an accident or illness, etc. The emergency fund should be sufficient to meet your expenses for around 6 months.
So if you spend Rs 15000 a month, keep aside Rs 90000 for this fund. Apart from this cover the risks – risk against accident, disability, ill health and death. This is a must in order to take care of you and your dependents, in case, God forbid, something bad happens. You can cover yourself through an appropriate mix of term plans, personal accident insurance,
Rule no 3 – Budgeting Finances – Create Goal Based Funds
The third most important tip while planning your personal finances is to create goal based funds. A goal based fund would look like -
Saving 2,00,000 in 2 yrs for a car
Saving 8,00,000 in 3 years for marriage, etc
As per the goals set, calculate the monthly savings that you would need to make. Accordingly you would get to know how much you can spend in a month. So instead of spending and then saving, first save and then spend.
Last but not the least – Organize your Finances
What do we mean by this? Now that you know how much you need to save to achieve your financial goals, control your spending. Cut out on leisurely expenses. It doesn’t mean cutting out on your leisure, but it simply means finding alternate sources of entertaining yourself. Instead of watching movies in a multiples, opt for smaller, cheaper theatres, or better watch them on a rented DVD. Ladies can cut down their visits to beauty parlors and opt for self – do packages, etc.
By following the above four golden rules you can can be sure that you have put yourself on the path to financial success.