4-Point Formula for a Successful Financial Life
Who does not want a happy, healthy financial status? However, not many people seem to be quite there! What is causing the gap between finance and management? When it comes to financial planning, it is not that people do not know the importance of financial planning. Rather, it seems that most of us miss out on taking the right steps towards financial planning. Financial happiness plays a huge role in our lives, and you, too, can achieve financial happiness by clearing your debt and maximizing savings. For this, you will need a personalized savings plan.
A savings plan is an insurance product that gives you the benefits of insurance coverage while generating returns for you over the long term. You can check out Tata AIA Life Insurance to get yourself an optimum savings plan.
However, an efficient savings plan alone would not save you from a financial emergency. Constant monitoring and small but wise changes in your lifestyle might just do the trick for you. If you want to be financially happy, you need to be disciplined when managing your finances. In this article, we will explain the importance of financial planning. Not only that, but we will also discuss the steps involved in financial planning to help you achieve your objectives.
Why is financial planning important?
A simple answer to this question is: Money does not grow on trees! You can't assume you will have it when you need it. You might not have a working income source in rough times, or you might just need more than you had planned. The more money you have, the more prepared you will be for what may come. Life can be unpredictable. Medical bills, children’s marriage, education costs, and regular inflation rates are all good reasons why you should plan for your future financial happiness today.
What is financial happiness? Financial happiness is a situation when you are content with your financial status. Ideally, this is a stress-free phase in one's life. You feel you have enough savings to tackle life’s challenges. To reach a position where expenses do not bother you, there are certain things you must do.
How can I be financially happy?
For this, you must first evaluate the things that make you financially "sad". These things could be overdue debts, too much expenditure, no financial planning, and no savings.
So, how can we deal with each of these problems? We can go about eliminating each of these troubles, one at a time. The following are the most important steps in financial planning that will help:
1. Retire your debt
You know that the longer you take to retire your loan (taken from any bank, no matter how relaxed they claim to be), the more interest you pay on the principle. It is always a wise choice to repay any amounts you owe others. We know there may be an early payment charge on loans. However, we can certainly avoid it using legal ways of repayment. Just read up your policy papers on loans and drawn amounts. You can always request the bank to provide you with more clarity. Do not leave pending borrowings in your name. It can mean trouble for your family in your absence. Moreover, it is safer to never rely on borrowed money.
Warren Buffet says it is not the money you earn but the money you save that will make you richer. However, there is an inherent problem with today’s millennials. Though they secure higher-paying jobs than the generations before them, they do not have substantial savings. This is because they usually splurge on unnecessary things. It is always wiser to sit down at the end of your day and calculate what you have spent and how much could have been easily saved.
3. No financial planning
This problem arises when you live in the moment. While it is a good practice to live life in general, this does not help on your path to financial happiness! You need to have a monetary plan or a budget. You need to pre-calculate all the expenditures that may come your way in the future, whether it is 5, 10, or 40 years down the line. It will also help if you begin preparing for your future goals today. An efficient way to do so is by getting a savings plan or savings insurance. As discussed earlier, insurance products can be an excellent way to minimize financial loss.
4. No savings/ investments
Investment is the new savings, and you need to put your hard-earned wealth in great investment vaults to make sure that your money can beat inflation. The rate at which things become more expensive day by day, i.e., inflation grows, the power of money is reduced. What you have in your bank account is limited. So, you need to park it somewhere safe and smart. Your money will work for you if you know the right places to invest and save. For that, we have various investment products as well. You could go for mutual funds or stocks. You could go for physical assets, such as real estate or precious metals, if you're not into financial assets. This is where an investor has to make a call because we have so many options to choose from. However, you should keep in mind, while insurance is not an investment, it can help you minimize several expenses. This is why insurance products like auto insurance, health insurance, or even savings insurance should necessarily be a part of every individual's financial planning strategy.
We hope this article has helped you gauge the gaps and shortcomings in your financial planning strategy.