Personal Finance Tips: A Guide to Get Your House In Order And Achieve Better Financial Planning And Health!

• Economical living can help you lower your spending and get control of your personal finances.
• It will also help you lower your debt.
• Furthermore, it helps to increase savings or investments to achieve retirement and other financial goals.
• Follow the 50-30-20 or 20-4-10 rules as per your financial plan.
• Get a life cover at least 10 times your current income.

Have you figured out how much money you should spend to maintain your current standard of living even after retirement? How much do you have to save or invest in creating a large corpus for a comfortable life in your old age? Can prudent personal finance management and spending help you reach your financial goal? If you want to learn about the answers to these questions, keep scrolling down.

1. Get Your House In Order

You can get stressed and overwhelmed if your personal finances are cluttered. If your personal finances are unorganised, you must organise them quickly to sort them out.

If you don't get a hold of your finances, you may find yourself in huge debt in no time. You may also miss your next equated monthly instalment (EMI). In that case, you may have to pay a late fee. In fact, missing a few EMI payments may also adversely affect your credit score.

Poor financial planning and unchecked spending habits may ultimately make you save less. To get your house in order, try out a careful way of living. Reduce wasting your money unnecessarily.

In fact, the amount of money you are saving through careful and sensible living can help you save and invest to create a large corpus for retirement.

Also Read: Personal Finance Audit: A How-To Guide!

2. Organise Your Personal Finance

To organise your personal finances, the first thing you need to do is estimate your yearly earnings. Secondly, get a detailed list of your assets as well as liabilities. Once you jot them down, you'll clearly know your current financial condition.

• If your yearly income is greater than your spending, you can save or invest more by following frugality.
• If your spending is more than your earning, you must re-evaluate your spending habits.

For example, try to limit your dining out every weekend to once a month. This will help you lower your spending habits. You are not stopping to enjoy your life. Through frugal living, you are just tuning down your spending habits.

3. Create An Emergency Fund

A recent report by the Public Health Foundation of India pointed out that around 55 million Indians were pushed below the poverty line due to high medical costs in India. As out-of-pocket expenditures in Indian healthcare are one of the highest in India, around 70% of the population in India is just a hospital bill away from sliding down into poverty.

Is your financial situation also thoughtless, like the majority of Indians? If yes, you should start creating your emergency fund. It will take care of unforeseen circumstances, such as:

• Medical emergency
• Unexpected car breakdown
• Sudden loss of job, and
• Other unexpected costs

Try to create an emergency fund equivalent to at least 6 months of your monthly expenditures. If you are a freelancer, an independent professional, or a businessperson, you should create a collection that is equivalent to 12 months of your monthly expenditures.

4. Choose The Right Income Tax Regime

In India, there are two kinds of income tax regimes:

• New tax regime: According to this regime, you pay taxes at lower rates. However, you can’t get any deduction benefits.
• Old tax regime: As per this regime, you pay relatively higher tax rates than the new regime. But you can also get the benefit of around 70 permitted deductions.

Also, choose the right income tax form as per your profession. If you earn significant income from bank deposits, you may have to fill out Form 15G/H if no TDS is involved. For no or a lower TDS deduction, you may select Form 13.

5. 50-30-20 rule

This is one of the most followed rules in financial planning. It helps you decide on your extent of spending, investing, and saving. According to this, you should:

• Spend 50% of your income on buying essentials according to your needs.
• Spend 30% of your income on your wants.
• Save or invest the rest 20% of your income.

6. 20-4-10 Rule

Are you planning to purchase a car? If yes, try to implement the 20-4-10 rule of financial planning. According to it, you should:

• Make a down payment equivalent to 20% of the total cost of the car.
• Pay EMIs for 4 years.
• Keep your EMIs to an amount that will not exceed 10% of your income.

7. Insurance

If you are getting life insurance, try getting one that's 10-fold your annual income. When buying a health insurance policy, always start early. You'll get more coverage and additional benefits if you start paying premiums on your health insurance at a young age.

Also Read: Financial Planning: 7 Essential Pills To Follow This Year And In The Future!

Final Words

To enjoy healthy personal finances with adequate savings/investing for a comfortable retirement, follow these 7 essential financial planning tips. By following these tips carefully, you can streamline your personal finances and lead a stress-free life now and in the future.