Losing weight, eating less junk, exercise regularly, read more, write more.. the list is endless. Like most people I am also guilty of not keeping up with resolutions made on every new year’s day. Every year we get one more opportunity to make up for it. This is about the Financial new year – Apr 1st. Professionally I come from the financial background and hence this date assumes a lot of significance in our field. But across all Indians, this day is definitely crucial date with respect to the beginning of the new budget cycle for the nation. So I have decided, why not start our personal budget too from the same day. This new financial year let us make ourselves more aware to become financially independent.
Each of us may define financial independence in different perspective. In the initial years when one has just started earning, the choice to spend on anything without having to justify to anyone gives a great feeling of independence. In this new found freedom, most people tend to get carried away and we splurge a lot. We get a lot of advice from elders in the family to not waste money and save more. I am not preaching here to be stingy but one should know where to draw the line, as saving for the rainy day is an absolute necessity.
Let us see where to begin and how to make some changes in our life to be more financially independent.
- Save, then Spend – No matter how small or how big one’s earning may be, we should set a target % of the total income as saving, and always stick to it. As and when our income grows you can increase the % or maintain at the same level at least; thereby ensuring that your saving is increasing. Allocate your spending on necessities first and then splurge on luxuries guilt free !
- Emergency Fund – Set aside first lump sum of your saving in an emergency fund to the extent of at least 3 – 4 times your monthly spend. This will act like a personal insurance created on your own, which will be your fall back option in case of any exigency.
- I follows S – Saving regularly is definitely the first step to take, but it doesn’t stop there. Investing is the key for successful financial planning. One can start with simple steps like Voluntary contribution to PF, PPF, NPS. These are government backed schemes with more stable returns and also aide in tax saving. There are several other options available for investing in the stock markets as well, either directly or through mutual funds. But before choosing such options always weigh the risks carefully and read in detail about such products.
- Set Goals – We have several goals in life for which target based saving/investing always helps to keep us on track to achieve them. Don’t set goals that are too big to manage which might feel very overwhelming due to staggering amounts. Try to break them into smaller targets which are flexible. While one could save for multiple goals at the same time, we should try to maintain gap of few years between the goals so that it doesn’t feel burdensome.
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