Living a life free of financial stress

Most of us are the bread earners for our family and do manage our personal finances. In many cases, we tend to wonder after the end of the month, where all our earnings are going, and we are left struggling with card dues, EMIs etc.

Today I am going to share practical ways to manage your finances in a way which will lead to life filled with financial stability

Most important step in this process is budgeting. Some people connect budgeting with cost cutting. It is not at all true. By budgeting, you will be able to understand clearly how much you are earning and allocate funds for various expenses and investments. Many of my clients have found out that they can spend more on leisure activities after budgeting their finances.

Budgeting process has seven important parts:

Particulars Steps E.g. % Example
Income List down all recurring sources of income – like salaries, interest, rental, etc 100% 1,00,000/-
Expenses List down all regular expenses like rental, Home loan EMIs, Car Loan EMIs, School fee of kids, regular household expenses, tax payments etc 60-70% 65,000/-
Net Available Funds Work out the remainder disposable income available on monthly basis 30-40% 35,000/-
Insurance We should take a term insurance plan for a sum which should cover all your debts and fund which provide the monthly income to sustain your family. Don’t take insurance policies for investment purposes whether they are endowment, ULIP etc, 2-3% 2,500/-
SIPs – MF We should start investing early in our life even if it is small % of our earnings, it will have a huge impact on the overall retirement corpus. 15-20% 15,000/-
Emergency Fund As a thumb rule approximately 3 – 6 months of routine family expenses must be kept aside for handling such emergencies.

 

5% 5,000/-
Leisure Activities, Travelling, Outing, Shopping Balance amount is available to you for the fun activities etc. and you are free to spend this or save instead as per your wish.

One important advice please don’t do impulsive buying on credit card EMIs. It is a trap and we repent later and get stressed to repay the debt.

I earnestly request you all to get disciplined with your personal finances and live a life free of financial stress.

Author Bio

Qualification: CA in Practice
Company: SNR & Company
Location: Delhi, New Delhi, IN
Member Since: 12 May 2017 | Total Posts: 2

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2 responses to “How to live a life free of financial stress”

  1. Vaibhav Kansal says:

    Nice analysis sir,
    i will surely try to follow this plan.

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