A Healthy Financial Diet

We are all aware that in order to stay physically healthy, we need to have a healthy diet. The same holds good for our finances too.  If you are the breadwinner of the family, it is time you take this more seriously and plan your finances, in a more appropriate fashion. Let me share just 7 tips,  that would do you a world of good when it comes to managing your finances.

Make saving yours first spending: We are all excited about the monthly pay check or the monthly earnings we take home from our business or profession, but let your excitement not lead to spending it all, impulsively. Make sure that, you apportion atleast 20% of the amount as savings, before you can spend on your monthly requirements. Try to fit your lifestyle to match that budget.

Go for a systematic investment plan: Never under estimate the power of compounding. Power of compounding is said to be the 8^th wonder of the world, because you cannot imagine the amount of net worth you can create by investing small amounts of money over a long period of time. There are many options such as Recurring Deposit, Mutual Funds where you can invest a fixed amount of money on a regular basis, over a long period of time. So, get into the habit of investing regularly.

Don’t mix up insurance with investment:  Insurance agents tend to confuse you with insurance policy that also gives you a term cover of death benefits to family. Make sure you separate the insurance part from the investment part, so that you can invest more wisely in better return yielding investments. Take a pure term cover for a value which you think would be needed for your family, in your absence. So, how much insurance cover do you need. A  simple thumb rule is 10 to 12 times your annual income, irrespective of your age.

Diversify your risks: There is a golden rule – “Don’t put all the eggs in the same basket”. This applies to investments too. All of us are inclined to a particular type of investment, because we feel  that is most easy or comfortable to us. But, you need to balance risk and returns. Investment in low return financial instruments is a risk too, because it may not be able to take care of the inflation needs. So invest in a mix of Bank Deposits, Shares, Mutual Funds, Bonds, Gold or Real Estate.

Take a Health Insurance: Health risks are inevitable and the cost of quality medical treatment is becoming more and more expensive. So make sure you have adequate health insurance, not only for yourself but all your family members. Make sure there is accidental cover also included, in this policy. This will help you to get uncompromised healthcare in times of emergency.

Take care of yourself, before you take care of the Taxman:  No! I am not saying to evade taxes, but to take advantage of tax exceptions schemes for your benefit. For example, there are investments which are tax exempted, such as ELSS, ULIP, Capital Gains Bond, Insurance, PF and many more. Also you can claim deduction on interest paid on home loan. Donations to Charitable Organisation are also exempt from Tax.

Do Charity: The happiness of our hard earned money can be found, only when we share it with people who are less fortunate and need our help. So no matter how small the amount is, always have a heart for charity. Do it generously without any expectations. Believe in Karma – “God helps those who helps others.”

 

 D. Senthil Kannan,

Managing Trustee, PALMS, Tuticorin.

Author of "Transformational Thoughts" - A Journey of learning 

Email: senthilkannand@gmail.com