Keep Up With Your Financial Resolutions In 4 Ways
Every new year, we get ready to make resolutions. Suddenly, days turn into weeks, and weeks turn into months; however, those new year resolutions stay uninitiated. If your resolutions had anything to do with finances, then you have come to the right place.
If you are planning to protect your family against life’s eventualities, then you need to have an investment plan in place that will help them stay financially secure if something happens to you. However, to achieve your financial goals, it is important to review your financial plan from time to time.
Even the best investment plan in India can become redundant after a while. Therefore, you need to check the effectiveness of your investment plan from time to time to ensure it is not being adversely affected by the market factor.
So, if you are wondering what is investment and why it is important, you need to first understand the importance of assessing your financial plan at regular intervals.
Practicality Of Financial Goals
There will be a time in your life after many years of making your financial goals when you may have to revisit them and make changes. Since there are multiple factors that affect your life, certain financial goals may become impractical with time.
For example, you may have planned to buy a new home by the age of 45 or saved about Rs. 10,00,000 for your child’s marriage/education. However, due to the rise/fall in inflation and other such uncontrollable economic factors, you will have to change the goal from Rs.10,00,000 to Rs. 12,00,000.
At the same time, you may have to reconsider buying a new house at the age of 50, instead of 45. The only way to reach these conclusions is by reviewing your financial portfolio and assessing your investment plan from time to time.
When your income changes, it can have a huge impact on your finances. A rise in your income would mean that you can now get a robust investment plan as well as enjoy an increase in returns from investments
Therefore, you must review your plan to see where you can invest the additional income to get maximum returns.
Your appetite for risk will change with time, which may impact your financial plan. A young person has fewer responsibilities, making them more likely to make riskier investments.
At the same time, people close to their retirement become risk-averse and avoid investing in anything that can jeopardise their savings. Studying your investment plan will help you choose the right instruments based on your risk tolerance.
Expenses And Emergencies
A medical emergency can arise at any time, and it is also the quickest way to lose your savings to expensive treatments. Even if you have made provisions for these emergencies in your investment plan, the rising medical costs would mean that it may not be enough.
Therefore, you need to assess your financial plan regularly to ensure you have enough to cover the expenses and emergencies.
Number Of Dependents
Dependent family members are another reason why you should review your investment plan. When your kids are still young and going to school, they will need you to pay for their expenses.
But when they grow up and find jobs, you can review your investment plan and reallocate your finances to better financial instruments to help you in the retirement stage of your life.
4 Tips To Review Your Financial Health
Here are some steps you can take to ensure that your financial health is in top order.
Make A Budget
If you have been living pay check-to-pay check until now, it is time to start making a budget to help you control your cashflows. A budget will simply show you how much money you earn and how you are spending those funds.
Besides, it may help you realise how to act responsibly with limited resources and how to manage all the necessary expenses, including an investment plan.
You must consider developing an investment portfolio to start creating wealth. A portfolio will involve allocating your investments amongst asset classes – debt, equity, and cash.
The best investment plan in India is the one that has a veritable mix of all these asset classes that gives you protection and wealth creation opportunities. Once you have created a portfolio, you need to balance it from time to time to account for inflation and market fluctuations.
This is the most important aspect of an investment plan – saving up for retirement. You would require a security net for your heydays to spend your life with dignity. Therefore, you need to have your own funds to tackle these issues.
It would help if you started planning for your retirement today, as it is always better to start investing as early in life as possible. In fact, a robust retirement plan is a sign of good financial health. In fact, by starting young, you will be able to leverage the power of compounding and make some serious wealth gains over a period of time.
Poor management of debt can negatively influence your life goals, such as delay in retirement planning. However, by managing your debt effectively, you will be able to save money in interests and late fees that can be used to wealth-creating investment instruments.
According to financial experts reviewing your finances and investment plan is the key to good financial health. Doing so will help you invest in suitable financial products to meet your life goals at various stages of life.