Being Financially Prudent!

For us Indians, it is very common to get financial prudence lessons right in our childhood. Our parents advise us not to waste food, use our pocket money wisely, reuse the books and clothes of our siblings, not indulge in luxurious purchases, and remain within our means. But as we grow old, we often slowly forget these lessons. With higher incomes and a plethora of the latest technology gadgets available in the markets, we start purchasing impulsively and indulge in extravagant habits. Hence it is necessary to keep reminding ourselves of the importance of being financially prudent. You can become financially prudent by following these five steps: 1) Creating a monthly budget: Make your monthly budget by listing your income and expenses. Once you know your monthly income, you can plan your expenses accordingly. If you are a salaried person, your monthly income is fixed. However, in case you are self-employed, you will have flexible income and you need to include only revenue which will realise for certain. 2) Avoiding impulse buying: Try avoiding indulgence in impulse buying which shall keep your expenses within your budget. Oftentimes, when you buy impulsively, you purchase items that are not necessary and you miss out on good deals. 3) Having a dedicated savings plan: Set a dedicated savings plan, so that every month a specific amount is transferred directly into savings or investments. You could use an ECS (Electronic clearing service) mode so that you don't have to take extra efforts to transfer the amounts on fixed dates. For a good savings plan, you can create a SIP (Systematic investment plan) for good mutual funds, or transfer amounts to recurring bank accounts or post office savings accounts or in DEMAT accounts for investments in shares. Set aside money to be safe and secure through good insurance products such as health insurance, term plans, car insurance, house insurance, office insurance. 4) Avoid falling into a debt trap: Don't be over-ambitious and fall into a debt trap by borrowing money at high-interest rates. Additionally, calculate your EMI (Equated monthly installments) discreetly and ensure that you can pay the EMIs with ease. 5) Making and following a long term financial plan: Based on your aspirations, start work on a long term financial plan and consistently follow it. When you start earning, your immediate investments could be purchasing a car, home, etc. for which you may have to obtain loans from the bank. Therefore, you need to plan your monthly withdrawals on account of EMI's depending on your monthly income. Your long-term financial plan needs to include your other family requirements such as your children's education, your retirement needs, etc. Don't forget that managing your finances meticulously is very important for good, healthy, and happy living. Being financially prudent helps you to manage your risks better, secures your future, and ensures a Great Life for you!