New York : Working out financial details, for the majority of people, is not as easy as it sounds.
However, a financial plan helps in protecting your hard-earned money and spending it as wisely as possible.
Regardless of when you begin, the basics of a sound financial planning remain the same.
Listed alongside are some of the basic, but very important tips to making a start.
Ben Franklin said, "A penny saved is a penny earned." Before you decide to trash something, find out if it has value. Sell it on E-bay, sell it on consignment, sell it at a garage sale. You can always throw it away later if it doesn't sell. Using a shopping list can eliminate return trips for forgotten items and also help you resist impulse buying.
Budget and stick to it. Budgets can help in financial planning because they make sure your money is being used the way you want it to be. Although budgets are a necessary evil, they are only a practical way to get a grip on your spending. Neither make your budget too lean that you are left with nothing in your bank account at the end of month, nor make it too tight that staying within it drives you nuts. Framing a budget is mainly a four-step process - Identify your current spending, evaluate them, set goals for financial objectives, track spending to make sure it sticks within your budget's guidelines.
There is never a wrong time to start investing. Don't make your money sit idle when you are working hard to earn it. Let your money also work for you. It's relatively painless and the rewards are plentiful. Investing money involves putting money into some form of "security". Stocks, bonds, mutual funds, and certificates of deposit are all types of securities. Most people prefer government bonds, which are very stable and not too risky. On the other hand, many people are lured by the high profit of stocks and mutual funds. But stocks come with high risks, too. Define your risk-taking ability and invest accordingly, but do invest.
Everyone needs to save for a rainy day. Always keep some money aside for emergencies like health problems, accidents, house repairs, a stalled car, etc. The money should be easily accessible like as in bank saving account, cash at hand, a locker, etc. The emergency amount can be any where between three to six months-worth of living expenses. You don't need to build it up all at once — start putting away a small amount each month.
Once you know what money you have now and what income you can expect to get, it's time to find out where your money goes. Take a month and track your spending down to the penny. Make your first purchase a small notebook and pen and always jot down any expense occurred. Analyze the list over a period of time. You will be astonished to find that much expenditure done were totally unnecessary or could be avoided/postponed. No matter how small it is, money going out of hands should be tracked.
If you get a hefty refund every year, you are having too much withheld from you pay check and are giving the government an interest free loan. Understand tax and its various brackets. Not the every dollar you make is taxed same way. Your first dollar of taxable income will be taxed at a lower rate then your last dollar. Avoid late payments because it brings interest on unpaid tax from due date along with late payment penalty.
Having insurance cost but not having costs more. It is recommended to have both health and life insurance. Whether its your employer provided or individual, insurance is must. Group insurance coverage provided by employers are always better as they are subsidized by the employer. In the event of job loss, state and federal regulations protect you from losing your health coverage. Although they offer little protection from high premium costs, jobless workers may get help paying for these premiums as part of the economic stimulus bill.
Retirement seems like a long way off but the earlier you start saving for a long-term financial goal, the more options you have. Expert estimate that one needs 70 per cent of pre retirement income. Understand your retirement needs, ask for social security benefits and take charge of your retirement financial plan. Most people prefer some kind of retirement plan such as Americans opting for 401 (k) in the US as it is one of the easiest and best way. Immediate tax relief and usually a matching contribution from your company are two important benefits of this plan.
Always be careful about sharing personal information and don't give out details more than required. You have right to reason if someone ask you such information. Sign up for credit alerts to avoid identity theft as it helps to protect your hard earned money. If you are doing online transaction, make sure that the website is legitimate and always choose e-commerce secured transaction like the one offered by paypal etc. They keep you safe by hiding your details.
These personal tips will help you to gain control on your money. Always remember, the more you know, the more you are able to achieve your financial goals.
