Few Imporant Tips On Financial Planning
Published On Jan 24, 2022 11:00 AM By InsuranceDekho
Table of Contents
- Tips For A Better Financial Planning
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. It comes with objectives, such as determining capital requirements, framing financial policies, and ensuring that the scarce financial resources are utilized the best possible way.
Instilling the habit of financial planning in young adults is a tough job. However, when they volunteer to plan about their finances, one wouldn’t know where and how to begin.
Tips For A Better Financial Planning
Here are 10 key tips to getting ahead financially.
1. Get Paid What You're Worth and Spend Less Than You Earn
It may sound simple, but many people struggle with this first rule. Make sure you know what your job is worth in the marketplace, by conducting an evaluation of your skills, productivity, job tasks, contribution to the company, and the going rate, both inside and outside the company, for what you do. No matter how much or how little you're paid, you'll never get ahead if you spend more than you earn. Often it's easier to spend less than it is to earn more, and a little cost-cutting effort in a number of areas can result in savings. And, it doesn't always have to involve making big sacrifices.
2. Stick to a Budget
An important step to consider when trying to get ahead financially is budgeting. After all, how can you know where your money is going if you don't budget? How can you set spending and saving goals if you don't know where your money is going? You need to set up a budget whether you make thousands or hundreds of thousands of dollars a year.
3. Pay off Credit Card Debt
Credit card debt is the number one obstacle to getting ahead financially. Those little pieces of plastic are so convenient to use, and it's so easy to forget that it's real money we're dealing with when we whip them out to pay for a purchase, large or small. Despite our good resolves to pay the balance off quickly, the reality is that we often don't, and end up paying far more for things than we would have paid if we had used cash.
4. Contribute to a Retirement Plan
If your employer offers a 401(k) plan (or another type of employer-sponsored retirement savings program), you should consider contributing to it if you can afford to. Often, with 401(k) plans, your employer will contribute the same amount that you put toward your account up to a certain percent. This is often referred to as an "employer match." If your employer doesn't offer a retirement plan, consider an IRA.
5. Have a Savings Plan
You've heard it before: Pay yourself first. If you wait until you've met all of your other financial obligations before seeing what's left over for saving, chances are, you'll never have a healthy savings account or investments. Resolve to set aside a minimum of 5% of your salary for savings before you start paying your bills. Better yet, have money automatically deducted from your paycheck and deposited into a separate account.
If you're contributing to a retirement plan and a savings account and you can still manage to put some money into other investments, all the better.
7. Maximize Your Employment Benefits
Employment benefits like a 401(k) plan, flexible spending accounts, medical and dental insurance, etc., are worth big bucks. Make sure you're maximizing yours and taking advantage of the ones that can save you money by reducing taxes or out-of-pocket expenses.
8. Review Your Insurance Coverages
Too many people are talked into paying too much for life and disability insurance, whether it's by adding these coverages to car loans, buying whole-life insurance policies when term-life makes more sense, or buying life insurance when you have no dependents. On the other hand, it's important that you have enough insurance to protect your dependents and your income in the case of death or disability.
9. Update Your Will
If you have dependents, no matter how little or how much you own, you need a will. If your situation isn't too complicated, you can even do your own with software like WillMaker from Nolo. To better protect your loved ones, consider writing a will.
10. Keep Good Records
If you aren't careful about keeping thorough records, you're probably not claiming all your allowable income tax deductions and credits. Set up a system now and use it all year. It's much easier than scrambling to find everything at tax time, only to miss items that might have saved you money.
How are you doing on the above checklist? If you're not doing at least six of the 10, consider resolving to make improvements. Choose one area at a time and set a goal for incorporating all 10 into your lifestyle.
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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.