Generally, you set your life goals after thoroughly evaluating your financial situation. Therefore, staying financially healthy is of utmost importance. When there is economic uncertainty, it is crucial to consider inflation when you make your financial plan.
Importance of keeping a check on your financial health
Financial health is crucial for several reasons as discussed below:
- Living life on your terms
Keeping a track of financial health allows you to live life on your own terms, make timely payments of your bills, and avail of loans when needed. You must make a monthly budget and stick to it as much as possible, and keep a check on your spending habits.
- Stress-free life
Often, you may worry and stress about meeting your financial obligations. Checking on your financial health reduces your worries because you are able to meet your various expenses while having some savings to live your dreams.
- Emergency funds
If you have any debts, it is recommended you pay these at the earliest. Maintaining an emergency fund is crucial to improving your financial health. This will give you a fall-back plan in case you lose your job or face some immediate fund requirements. If you do not have an emergency fund, it is crucial to begin one immediately.
Timely planning your investments
Investments are an important component of your financial planning. There are several products such as debt, equity, mutual funds, fixed deposits, insurance, and many more to choose from.
Before you make your investment decisions, it is recommended you determine your financial goals and analyze your risk profile to choose the right products. For short-term goals, you may opt for debt and debt-related instruments because the returns on these investments are stable and guaranteed. However, if you invest for the long-term, equity and equity-related instruments are recommended. Although these are more volatile, the returns when you invest in equity instruments are higher in the long-term. If you do not want to invest directly in the stock market, you may invest in mutual funds that focus on equities and related instruments.
Another important aspect when you invest in different financial products is regular monitoring of your portfolio. Periodic monitoring of the returns will allow you to modify your investments as necessary and helps you make informed decisions.
Financial discipline is crucial to achieving stability. One way to inculcate a regular habit of saving is to invest in mutual funds through Systematic Investment Plans (SIPs). With an SIP, you may invest a small amount at regular intervals in your chosen fund.
Retirement planning
When you are young, you think you have plenty of time before you need to start planning for your post-retirement years. However, it is never too early to plan for these years. Ensuring financial independence even when you no longer have a regular job gives you peace of mind.
One benefit of starting investment planning for the retirement years is the power of compounding. With this, the returns on your initial investments are reinvested, which helps you accumulate a larger corpus over the long-term. Moreover, when you start early, the amount you need to save to build a retirement corpus is smaller. As you grow older, you will need to invest a higher amount to build your corpus.
Insurance coverage
Another important component of investment planning is procuring adequate insurance coverage. Insurance coverage ensures that your loved ones do not have any financial difficulties in your absence. Health insurance is also crucial because you are able to avail of the best medical care in case of an illness.
Being financially healthy is not as difficult as it may seem. Therefore, this New Year you may seek advice from a professional expert to help plan your finances.
