10 Smart Tips For Money Management
While investing our hard earned money, we should carefully take our decisions. We should not take any decision for which we will have to regret later. Here are some smart tips for prudent money management.
1) Start Saving Early :
We should not delay our investments until we attain a particular age or until our income rises. A small but regular savings from our early life can grow into a huge corpus due to the power of compounding. If we start late, we will need much higher investments to reach our goals.
2) Do Not Be Lured By Dubious Schemes :
We should always invest as per our need and should not be attracted by schemes which provide astronomical rates of interest. We should also check whether the scheme is approved by the Regulators. We should understand that our money will be at extreme risk in the schemes , which do not have proper rating.
3) Increase Your Savings As Your Income Rises :
We should always increase our savings as our income rises. Due to the ill effect of inflation , the real value of our investments are decreasing. Hence we should increase our savings in proportion to the increase of our income.
4) DO Not Delay Health Insurance :
We should never delay in taking our health insurance cover as a medical emergency may arise at any time . Hence we should always be prepared with adequate medical insurance to overcome any unforeseen circumstances.
5) Take Adequate Life Insurance Cover :
It is not sufficient only to purchase a life insurance policy. We must ensure that our life insurance coverage is at par with our standard of living and earning potential. In case any unfortunate situation arises, our family should be able to maintain the same standard of living and not suffer from any financial crisis.
6) Always Set Up An Emergency Fund :
An emergency or difficult situation may arise without any notice. A person may lose his job or a sudden medical emergency may arise. Experts suggest that minimum 3 months of expenses should be kept in an emergency fund. The emergency fund can be kept in a liquid mutual fund scheme.
7) Do Not Avoid Taking Risk Completely :
Although it has been proved many times that equities can give better returns in the long term , many small investors continue to prefer fixed income instruments. It needs to be understood that after adjustment of inflation, the real return from bank deposits and small savings schemes becomes quite low. We should always have some equity exposure to grow our funds.
8) Do Not Spend Beyond Capacity :
Some of us make the mistake of spending excessively beyond their capacity. Sometimes people even spend more than their income , through credit cards and other means , which later become a burden. We should always be careful not to fall in an over spending trap.
9) Link Investment To Goals :
Experts say that segregation of investments for specific goals encourages the investors to save more and also prevent him from dipping into the corpus prematurely. Hence it is always advisable to calculate the quantum of investment required to satisfy our goals which will help us to build the required corpus. Here it is advisable to invest in long term instruments.
10) Review Your Investments At Regular Intervals :
We should regularly review the performance of our investments and if necessary shift to other products , if we find that any of the investments done by us are underperforming. If the market condition so necessitates , we can also rebalance our portfolio . We can take the help of a qualified financial planner, to make the right choice as per our need.