It is a good time to plan your finances since you are at home during lockdown.This may not seem like a fun activity to do, but it is an important one. This is the right time to have a glimpse upon how much fund do you have, how much and where to invest. This is basically the time to review, where you stand financially. As in the hustle and bustle of everyday life, financial planning usually takes the backseat.
Here are the tips to effectively plan your finances
1. Examine your finances
Start with going through your finances till date to know where you stand, this will give you an idea about your performance so far. You can review the vital financial changes in terms of earnings, expenditure, health insurance, bills, debts, and investments. Look for the important areas that demand your attention, be it in terms of savings or monthly/annual income. Then analyze and calculate your year-end returns and see if you are satisfied with them or not. If the figures are not satisfying, evaluate where to cut short.
2. Refine Your Budget
Refine and make the necessary adjustment to your budget. If you have made several uncertain plans and commitment that include your finances, it is time to cut them short. Looks for spending and saving pattern to know the necessary changes needed to be made in your monthly and annual budget. You need to get precise to know your exact progress, by clearing the clouds of your fixed and fluctuating expenses. Once you get a clear picture try reducing your fluctuating/variable expenses. This can be done by tracking your bank statements to identify where are you are spending unnecessarily.
3. Go Through Your Credits
Check your credit score online by requesting a credit report. Go through the details and figure out the errors that immediately need to be rectified. Be it a common error such as name, address, or major errors such as incorrect balance, wrong or dormant accounts fix immediately. Checking credit score is essential because it is an important factor that lenders look upon for while giving a loan.
4. Invest in The Right Places
You need to figure out where to invest your money that can reap benefits in the long term. This is the right way to keep your money safe and secure. If you have just started to earn and are not sure where to invest do thorough research. Take certain factors into considerations such as liquidity, returns, and tax liability.
5. Choose the right insurance
Invest in the right insurance. Remember, the real task of insurance is to cover risks. Since many companies also offer returns on the insurance the buyers usually get confused. Investing in insurance is investing in your life. Hence, it is important to buy health insurance
to cover yourself and your family from any unforeseen risks.
6. Keep a certain amount safe for emergencies
Keep a fixed amount secure to be used in emergencies, be it a job or medical emergency. The amount must be equal to 3 to 6 months of household expenses. Invest the amount in a path which is not subject to market risk and can be easily accessed.