Hitting the gym or park regularly and pursuing a healthy diet can get you in incredible shape over time. Now imagine if there was a way to get your finances in the same – extremely fit condition. The good news is, getting financially fit is just as process-driven as getting healthy.
Making some simple lifestyle and mind-set changes can get you on the path towards financial fitness.
Here are 10 investment tips to get your finances in shape over the long-term.
Start with an investment plan
Half the battle is won when you plan right. Armed with an investment plan, your financial moves are more proactive, than reactive. There is a sense of purpose in managing money and you are not deviated easily from the course set by your investment plan.
The biggest advantage of planning early is to reap the benefits of the power of compounding as it leads to the foundation for time value for money. Even if you invest small amount for several years, it could grow into a large corpus.
Diversification across types of investments
We have heard this sage advice several times – do not put all your eggs in one basket. By diversifying your money across different types of investments – equities, debt, fixed deposits, you can balance risk versus rewards by adjusting and re-balancing each asset in an investment portfolio according to your risk appetite. While the asset mix varies across investor segments, investors with time on their side (at least 10 years) consider investing money in equities.
Prioritize life goals
Problem with life is that there are way too many goals and aspirations for the money at your disposal.
But there is an easy way out – prioritize your goals based on your requirements.
The more urgent ones should feature right at the top – typically this includes child’s education and marriage, retirement planning. Then you have urgent goals such as purchasing a dream home, followed by the less urgent ones.
If the investment planning and goal prioritization process appears too complicated or time consuming and there are many who find it so, then hiring a financial planner may simplify the exercise considerably. For a fee, the financial planner / investment planner can chalk out a detailed investment plan for your various goals.
Save first, spend later
Most individuals/families first spend from their salaries/income and save the rest of the money. This saving strategy should be reversed so that money is saved upfront – say 10% of income – and the balance is made available for expenses. Also, capping expenses, especially the unnecessary ones is a key to successful financial planning.
Automate your savings
One way to get your savings on a steady path is to automate the savings process. Start an automated savings plan that ensures a part of your income is regularly set aside in an investment of your choice. This is how ULIP policy (unit-linked insurance plan) work wherein a fixed amount is regularly invested in the fund.
Manage your taxes
By managing income tax one can cut quite a bit of stress from their life. The reasons why people tend to procrastinate is due to insufficient understanding of income tax. If you prepare your taxes on time and spend enough time understanding what you need to pay, you’re less likely to make a mistake and suffer from it. That is why a proper management of your accounts will immediately help your tax filing and therefore, reduce stress.
Get life insurance
Every earning individual must consider buying life insurance policy that provides host of living benefits. Today there are new-age ULIPs available in the market which help investors meet their important life goals such as child’s higher education, worry free retirement, and travel around the globe, purchase dream home etc. besides financial protection. You can also get term insurance to secure these goals for your loved ones in case of your untimely death. Hence one has fewer worries about finances not just post retirement but also during the working years.
Whether you like it or not, life has many surprises in store that can dig a hole in your finances. They may be in the form of medical emergencies, loss of job, urgent repair of house or vehicle etc. So to counter these challenges in a way that secures your own and your family’s financial future, one needs to have an emergency fund with at least six months’ household expenditure to face financial emergencies more effectively.
With these investment tips, your finances can get a healthier look thereby giving you an edge in almost all money-related scenarios.