Habits are to be learnt from our experiences! Especially in financial planning it is must and should to develop good financial habits!
One should develop this financial habits in their initial stages of earning to lead a financially free and secured life.
- Making savings as an priority– In the initial earning life, youngsters spend on parties, electronic gadgets, fashionable items rather to save for their future! They assume it’s too long to think, let’s enjoy the current life style.
But there is a silent killer-“Inflation”. If you enjoy the moment without saving for your future, you couldn’t end to meet your life style expenses due to rising prices. So start saving at least 20-30% of your income from your first salary.
- Prepare Budget- Like our Finance Minister prepares Budget every financial year to analyse government’s revenue and expenditure, we must prepare a budget in advance of the upcoming month to decide where can you spent and which expenses are to be avoided
Advance Budget preparation gives an idea on the expected cash-outflow during the month.
- Stick to the Budget- Prepare expenses list and stick to the list. Don’t spend beyond the expenses list unless it is “Essential Need”.
Monthly expenses are to be decided by the family members by discussing their needs vs wants and prepare a wish list to spend during the month. Don’t spend beyond that
- Invest your money where it would multiply– There are so many capital appreciation investments in India. Diversify your investments among Gold, Equities,Shares,Mutual funds etc to gain maximum benefit.
Follow proper asset allocation among this instruments where you would see your money multiplies in the long-run.
- Invest in “Assets” rather than on “Liabilities”– Before investing, you should know the difference between asset and liability.
Asset is one which you would derive income from that particular asset. Example- Giving house for rent, office for lease etc.
Liability is one which you have to spend on that instrument besides deriving no income. Example- personal use of car, bike etc. You have to spend petrol, maintenance costs etc on them.
- Create “Passive Income”– we can’t work life-long. We have to retire at some age At that time your income ceases, but your expenses won’t stop.
We should not depend on anyone for our basic needs. So we have to create a “Second source of income” which is nothing but “Passive Income”
We should focus on passive income ideas from our initial stages to lead a peaceful and comfortable retirement!
By implementing the above financial habits, you will lead secure financial future