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