In this post, I am going to list down the steps all of you must take to secure your finances no matter how much you earn. It won't be elaborate. Very precise and to the point. Following are the few steps you should take -
1. Find out where does all your monthly income go?
Make weekly expense charts under different heads such as conveyance, entertainment, food, rent etc. Track your expenses for at least three months and see the pattern of your expenses.
Here, do not worry. You only need to track your cash outflows and not get rid of them. But one thing you must do is segregate your necessary vs. unnecessary expenses and calculate how much you can save each month and in the next 12 months.
2. Assess your current financial situation. Create a list of your assets and liabilities. This will help you in your financial planning and goal creation.
3. Now that we have identified the cash inflows and outflows, ask yourself the following questions -
a. Have you set aside an emergency fund?
b. Do you have adequate health insurance?
c. Do you have adequate life insurance?
d. Have you planned for your retirement? (you might wonder who plans for retirement in 20's right? Trust me, start saving early, compounding does wonders in the long run. There is a reason why it is called the eighth wonder of the world)
e. Have you planned for your other goals in life? For example - your wedding, your car, your children's education, your first home etc.)
4.The important question is how much is enough. I will write detailed posts on each of the above. However, for you to begin with -
a. Emergency fund - six months of your salary
b. Health insurance - this would depend on various factors. Depends on your ability to pay premium, your medical expenses in the past, medical conditions, age etc.
c. Life insurance - generally 10 to 12 times of your annual earnings. Remember, when we talk about insurance, its strictly term insurance and not any other form of insurance.
d. Retirement and other savings - This would depend on your goals. set those goals, there are plenty of calculators available online to help you. But please remember to set achievable goals. How can you achieve these goals? There are plenty of routes depending on your tenure. Direct equity and Mutual funds for long term, mix of equity and debt for medium term and debt for short term.
5. This is the most important step. This is the time to execute and implement. The steps listed above are basic minimum steps towards financial freedom. Don't be lazy and start working towards it.
6. Monitor your goals. This step must be performed annually and hence would come much later.
Read this post for more than one time. Understand the requirements. You may also do a Google search for the importance of each item in the financial planning process.
My following posts would be why we need all the above, how to proceed and where to go. Each one of them would be discussed individually.
Feel free to give suggestions / improvements.
Cheers!
Make weekly expense charts under different heads such as conveyance, entertainment, food, rent etc. Track your expenses for at least three months and see the pattern of your expenses.
Here, do not worry. You only need to track your cash outflows and not get rid of them. But one thing you must do is segregate your necessary vs. unnecessary expenses and calculate how much you can save each month and in the next 12 months.
2. Assess your current financial situation. Create a list of your assets and liabilities. This will help you in your financial planning and goal creation.
3. Now that we have identified the cash inflows and outflows, ask yourself the following questions -
a. Have you set aside an emergency fund?
c. Do you have adequate life insurance?
d. Have you planned for your retirement? (you might wonder who plans for retirement in 20's right? Trust me, start saving early, compounding does wonders in the long run. There is a reason why it is called the eighth wonder of the world)
e. Have you planned for your other goals in life? For example - your wedding, your car, your children's education, your first home etc.)
4.The important question is how much is enough. I will write detailed posts on each of the above. However, for you to begin with -
a. Emergency fund - six months of your salary
b. Health insurance - this would depend on various factors. Depends on your ability to pay premium, your medical expenses in the past, medical conditions, age etc.
c. Life insurance - generally 10 to 12 times of your annual earnings. Remember, when we talk about insurance, its strictly term insurance and not any other form of insurance.
d. Retirement and other savings - This would depend on your goals. set those goals, there are plenty of calculators available online to help you. But please remember to set achievable goals. How can you achieve these goals? There are plenty of routes depending on your tenure. Direct equity and Mutual funds for long term, mix of equity and debt for medium term and debt for short term.
5. This is the most important step. This is the time to execute and implement. The steps listed above are basic minimum steps towards financial freedom. Don't be lazy and start working towards it.
6. Monitor your goals. This step must be performed annually and hence would come much later.
Read this post for more than one time. Understand the requirements. You may also do a Google search for the importance of each item in the financial planning process.
My following posts would be why we need all the above, how to proceed and where to go. Each one of them would be discussed individually.
Feel free to give suggestions / improvements.
Cheers!
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