Every day is not Sunday and that is the reason why you should always have a full-proof finance plan to fall back upon during emergencies. There is always a misconception amongst people that they have many years to save up and have an elaborate portfolio, but the truth is, when it comes to finances, there is no such thing as ‘the right age’ or ‘the right time’.
People want to save, but they have no guidance around the same. Perhaps, for them, this article can be handy.
India Today spoke to entrepreneurs and Chartered Accountants, who shared nine tips and tricks to up your finance game.
1. Review and adjust your budget
- A budget is the cornerstone of any sound financial plan. It’s essential to review your income and expenses regularly, categorising them into necessities and discretionary spending.
- If you find that your expenses are outstripping your income, it’s time to make some cuts. Look for underused subscriptions or services that you can eliminate, potentially saving hundreds over the course of the year. Remember, a balanced budget leaves room for savings and investments.
2. Review your monthly bank and credit card statements
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You should read your bank statements thoroughly or else how are you going to identify your unnecessary expenses?
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Abhishek Soni, Co-Founder, CEO Tax2Win suggested, “Start by thoroughly reviewing your monthly bank and credit card statements. This will help you understand your spending patterns, identify unnecessary expenses, and track your financial habits.”
- “Look for any recurring subscriptions or services you may no longer need. We should limit our credit card usage as it leads to impulsive and unworthy buying. Also, payment of more than Rs 10 lakh in a financial year attracts the attention of the Income Tax department,” he added.
3. Expand financial knowledge
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Knowledge is power, especially when it comes to finances. Take the time to educate yourself on financial matters.
- Understanding concepts like compound interest, debt management, and investment strategies can empower you to make informed decisions. There are numerous resources available, from books and online courses to financial newsletters and workshops.
4. Emergency fund
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An emergency fund acts as a financial safety net for life’s unforeseen events. Aim to save enough to cover three to six months’ worth of living expenses.
- If you’re starting from scratch, even setting aside a smaller amount like $1,000 can be a worthy initial goal. Place this fund in a high-interest savings account where the balance can grow, yet remains accessible for emergencies.
5. Credit health
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Your credit score is a critical component of your financial profile. It affects your ability to borrow money and the interest rates you’ll pay.
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Annually check your credit reports from the major credit bureaus for inaccuracies that could impact your score.
- Dispute any errors and protect against identity theft by changing passwords regularly and using password managers to enhance security.
6. Stick to finance basics
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This is probably the best tip and its application is super simple. Deepika Vasani, Chartered Accountant and Educator said, “In school, we are taught the formula that Income – Expenses = savings. However, if you alternate this formula and apply it to life, it is the best finance tip for 2024.”
- “Keep your savings aside as soon as you get your salary/income. The rest can be used for your expenditure and you have a fixed amount of savings safeguarded at the beginning of each month. So here’s your formula for life, Income – Savings = Expenses,” she added.
7. Build a passive income source
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Gone are the days when you could just rely on one source of income for your survival. This is the age of relying on multiple income streams for a better and more stable life.
- “Surviving on just one income source is never a good strategy, especially with the evolving digital era and AI automation. Explore unconventional avenues like content creation, YouTube channels, and online platforms to supplement your income,” Abhishek Soni said.
8. Retirement planning
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Irrespective of your age, it’s never too early or too late to focus on retirement planning. Begin by assessing your current retirement savings and use tools like retirement calculators to gauge if you’re on track to meet your goals.
- If there’s a shortfall, consider increasing your contributions. Even small, consistent additions to a 401(k) (tax-advantaged retirement account) or an index fund can compound over time, significantly impacting your nest egg (a substantial sum of money or other assets that have been saved or invested for a specific purpose) due to the power of compound interest.
9. Opt for a mix of high, medium and low investments
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Just investing blindly may not end up reaping the desired results. Allocating your funds in different types of investment is the key.
- “The OG rule is to never put all your eggs in the same basket. Your savings can be distributed between 3 types of investments – high-risk investments (crypto assets, venture capital, etc.), medium-risk investments (bank FD, bonds, funds) and low-risk investments (savings account, mutual funds). This helps balance the risk on investments against the ROI,” Deepika Vasani suggested.
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