Steps In Financial Planning For Your Money

The past year has undoubtedly been tough on nearly everybody's finances. Some people lost their jobs, most others faced unexpected expenses, and many others may have suffered pay cuts. You may or may not have had financial difficulties this year, but whatever your financial situation may be, this year is certainly the perfect time to give your finances an overhaul.

So, as you venture further into 2022, why not take a few minutes to revisit your finances and see if there are any areas that need improvement? And if you do identify any weak spots, you could always include a remedial action in your financial plan to set things right this year.

But if you're having trouble figuring out where to begin, here are 5 key areas you can work on in your financial plan for 2022.

Create a budget (and stick to it)

If you don't swear by a monthly budget, that's the first thing you need to work on this year. A budget can help you keep track of your income and your expenses. It helps you understand how every rupee you earn is being spent. And without a budget to guide you, you may inadvertently end up spending more than you earn over the long run.

So, create a monthly budget to chart out how you spend your money. And above all, make efforts to stick to the budget, because the only thing more challenging (and more essential) than coming up with a budget is sticking to it.

Pay yourself first

By this, we don't mean you need to spend money on that premium gadget you spotted on your way to work or on that indulgent new cafe in town. We mean you need to pay your future self first. Or, in other words, you need to save up for your future. You can start by setting aside a percentage of your monthly income. Even saving up as little as 5% each month can be a great way to begin.

One way to make sure you do this is to have a separate bank account for your savings, so you can automatically transfer a fixed percentage into that account when your paycheck is credited. If that savings account does not come with a debit card, that's even better because you won't be tempted to impulsively spend your savings.

Cut down your discretionary spends

Having trouble paying yourself first? That may be because you're spending too much on inessential and discretionary expenses. If there's anything that does not fall under the category of everyday expenses, taxes, debt or insurance, it may be an inessential expense that you could cut down.

In other words, these are the costs of your 'wants' rather than your 'needs.' And cutting down on these expenses will not affect the basic and most fundamental aspects of your life. Reducing your discretionary spending will free up more money to save up for the future.

Start an SIP

Another habit that you can cultivate this year is investing for the future. While saving helps preserve your money, investing can actually make your money grow, so you can pay for all those major life goals. And the best part is that you don't need a huge sum of money to start investing. With a Systematic Investment Plan (SIP), you can invest as little as Rs. 500 per month in the markets.

SIPs help you invest in mutual funds, and no matter what your risk appetite or your investor persona may be, there is a mutual fund for you in the Indian financial markets.

• Want to invest in high-risk high-reward assets? Equity mutual funds are the answer.

• Want safer investment options? Consider debt funds.

• Is liquidity your priority? Money market funds can help.

• Prefer safe haven assets? Gold mutual funds fit the bill.

Improve your debt situation

No matter what great financial habits you may have, if you have too much debt, the better part of your savings and your investments will likely go towards settling these liabilities. So, this year, resolve to pay off any high interest debts like credit card dues and personal loans. And try to avoid taking on more loans and liabilities.

Paying your EMIs on time can also help improve your credit score, and that's always a good thing to check off. If you're having trouble repaying your debt, check if there are refinancing options available to you, so you can negotiate a lower rate of interest or better terms for your loans.

Conclusion

These are simple habits and goals that you can easily incorporate into your financial plan this year. And remember that the trick to sticking with your financial plan is to keep it simple. Making too many decisions at once and resolving to rectify every weak spot may be a bit too ambitious, and it comes with a greater failure rate. So, keep it simple and easy, because small steps are all you need to get started on your journey towards financial freedom.

Lessons 2021 taught us about investing

Now that you have a fair idea about the new financial plan for your money, why not take a quick look back at some of the lessons 2021 taught us about investing? That can help you manage your money better this year. All you need to do is check out our blog to get a peek at these insights.

Read it here

IN ADDITION TO THESE ASPECTS OF YOUR FINANCIAL PLAN, WHY NOT ADD A BONUS ELEMENT FOR YOUR INSURANCE?

If you do not have an adequate life cover yet, the ABSLI Assured Savings plan can help you enjoy the advantage of life insurance and so much more. You also get to enjoy guaranteed1 benefits on maturity, so you can meet all those long-term goals on your wishlist.

And that's not all! You can extend the benefit of a life cover to your spouse as well, thanks to the Joint Life Protection option. Additionally, this plan gives loyalty additions year on year too!

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