As a recent graduate, you may have already felt the need for money, and its important. Unable to manage money, minimized salary and unfulfilled money expectations have already taken shape inside you as frustration for a blurre future. Money is a tool through which you shape the world according to your expectations, the earlier you know it sooner you leave the rat race. Failure to realize this fact results in a miserable life with poor spending money.
So you want a happy, fulfilled life? Happiness comes when you choose a lifestyle you want to live and align that lifestyle with your career so that you can fulfill your dreams. You and your dreams are only separated by time and money. The way, you have planned your Goal, is the same way you also need to plan your money so that you never run out of money at the time of its requirement.
Earning money is not enough, you need to make sure it’s growing at an appropriate rate so that it can meet all the required goals in your future. Assessment, budgeting, goal setting, planning, execution, reassessment, and monitoring of your money and assets in the journey of your life is called Personal finance.
Some Steps of Successful Financial Planning
1. Financial Assessment
Analyze your current spending on rent, food, transport, shopping, and vacations and write it down. List out the most important, urgent, and unnecessary spending. For example, your most important spending could be food, or rent. Urgent could be your Education Loan and Unnecessary would be your money spent on a daily restaurant if you could eat healthy food in your room, unnecessary online subscription.
2. Goal Setting
Remove Unnecessary spending as soon as possible. Plan your short-term and long-term goals according to your expectation. For example Short term could be buying a bike for Office and long term could be buying a flat in 5 years. List out and write down all your goals for life based on short-term and long term.
3. Budgeting
Limiting your spending in such a way that the most important tasks get required amount and the remaining money will grow for future needs without compromising the current quality of life is called budgeting. You can use the famous 50/30/20 rule, 50% of your earnings goes for the Most important tasks such as eating, travel, and education loans, 30% for a lifestyle like shopping, movie and the remaining 20% would go for saving, investment and emergency funds. For my personal advice try to shift some 30% lifestyle spending to 20% saving or investment fund as most successful millionaires do.
4. Plan Creation
Nothing can replace the importance of plan creation maybe its Business, military, and even personal finance. As in every other field Strategic planning is the road map to achieve the final goal same is the case with personal finance. The plan provides a road map to achieve financial success to fulfill different goals in a specific period. Your plan should include how much you want to spend, invest, save, and have emergency funds to achieve your target goals.
Note: Plan to finish your debt as soon as possible.
Also Read: 7 Tenets of Personal Finance
5. Execution
“An idea without execution is a hallucination”. Proper implementation of a plan is way more than the plan itself. You’ll have temptation, the urge to spend your earnings as soon as you get it but an obligation towards the plan and a better future you have to save. Psychology says “It requires 21 days to make anything a habit” but here you have to maintain your plan for a continuous 50 days and enjoy your fruit in the upcoming future.
6. Monitoring and Reassessment
Everyone knows it’s hard to follow a plan for a long duration as unwanted emergencies always on the way. So monitor you plan every month and make changes as per requirement to achieve long term financial success.
7. Adequate Protection
Unwanted hazards, and emergencies like accidents, death, and disease are unavoidable and proper monetary protection is needed to get rid of these problems. Today’s vast financial world provides a lot of insurance facilities ranging from health, life, home to external body parts, motors, etc and it’s ideal to make yourself out of that endangered situation when you have proper insurance without spending a penny. Insurance Company provides plenty of insurance schemes so make sure you check assured sum and facilities that will be beneficiary from that specific scheme. For Example, Some health insurance may only provide medical operation costs while other may provide pre and post-medical expenses such as medicine, and ICU bill so makes sure you get the most out of it with your hard-earned premiums.
8. Tax Planning
Yeah, I can imagine your angry face when your bank account got debited by Tax payments, but you also have to accept that it’s every human’s basic right to get equal living opportunities through our tax payments. Do you know the Government has laid out many opportunities for everyone to minimize the tax payment? Yes, you can reduce your taxable income, for example, you can reduce taxable money up to 1.5 lakh per annum with paying premiums in Insurance. You can save your returns from government bonds as tax-free.
Tax planning is not about running away from paying taxes but it’s all about finding opportunities to save money without paying taxes. Well, they say “A penny saved is a penny earned”.
9. Mortgages
Everyone dreams to own a home one day and you are no exception to them. You do need a home as you will make a family and it’s better to plan accordingly as soon as possible. Your needs are different than others, some may prefer to have a flat in a busy city while you may dream of having a sea-face villa. So plan for mortgages in alignment with career and your requirements.
10. Investment and Accumulation of Goals
Investment is nothing but a method of putting your money or asset in a way that generates or multiply its value for a specific amount of time with some calculated risk. Your money is limited so do others too, and to make your every dreams possible you need to make sure it’s growing at a particular rate, this is where investment term comes into the picture. From the dawn of civilization, investors are always on the way of finding new investment opportunities to multiply their monetary value, and today’s financial market field with investment options such as Stocks, bonds, real estate, forex, start-up,s etc. Most people think that the stock market is not at all a safe place to invest but to be accurate, with a proper fundamental, economy, and political analysis you can find a great return on investment in the Stock market.
11. Education Plan
Though it is not a perfect time for a bachelor to think about a Child’s education plan some of you may already get married, so it’s better to think early. It’s been confusing as some people say ” Education is free and It’s a fundamental right to everyone” on contrary, the tuition fee is growing, and College fees are touching the sky. So it’s better to take your child education seriously and having a plan for it to make your child shine. Many banks and insurance companies are providing child education saving schemes so go for it and plan accordingly.
12. Retirement Plan
Time Flies fast, Sooner you’ll realize you are in the retirement phase and you’ll surprised how fast time elapsed. You need your retirement days to be peaceful, not to be a burden on someone’s shoulder, right? Then you need to plan it before it’s too late. Retirement plan depends on many factors such as how early you want to retire? How much money do you need to live satisfactorily after retirement? What kind of lifestyle do you want to embrace? Are you going to travel the world after retirement? All these factors will lead to a perfect estimation of much money should you save for retirement plan every month.
13. Estate Planning
This is the last phase of your finance. After you lived your perfect life, you will come across a day when you have to leave behind something for your child, as a legacy continues. Distribution of your asset to your children according to your will is come under Estate Planning.
Like a business, Strategic personal Finance also needs Prioritizing, Assessment, monitoring, and Strong will power to enjoy the fruits of its success in the future. More you become dedicated to it the larger will be your financial freedom.
