Most of us step into a new year with brand new goals, resolutions, and targets we set for ourselves. The majority of the people want to start eating healthy, get fit, and maybe find ways to save more money. In fact, a significant chunk of the population sets goals to invest more, control haphazard spending habits and put a check on unnecessary expenses. However, not everyone is able to stick to these habits. The ones who manage to pull through are the ones who have evolved their attitude towards money. Investment behavioural patterns of such people are inspiring and worth following. Note that we aren’t talking about aping strategies because that will depend upon your individual risk profile!
For all you achievers who want to know the best moves of how to improve financial health, these financial resolutions will help you to start and end the year healthier and wealthier:
One of the first answers to the question on how to improve financial health is related to money management and planning. It does not matter if you are earning the big bucks, your goal should just be to keep track of your spending every month and to make the most of every rupee you earn.
By creating a monthly and an annual budget, you can have your financial priorities in place. This way, you can spend responsibly and shop guilt-free. This can be done while making sure you have an investment corpus and multiplying your wealth.
One of the most important things to remember here is to create a budget you can realistically adhere to. Building a budget does not have to feel like a punishment where you restrict and deprive yourself of the things you want. The monthly ‘budget’ should not burden you.
When in doubt, you can also contact a financial advisor or planner who can streamline your financial priorities, help you identify your financial goals, and keep you from indulging.
TejiMandi is a SEB I registered investment advisor and a subsidiary of Motilal Oswal that can help you draft a rough budget, and even help you with potential investment options that you can choose from. Contact us to know more.
2. Create an emergency fund
Another masterclass in how to improve financial health is about creating a solid reserve of cash to fall back upon. Usually, financial experts suggest having at least three to six months of expenses as emergency funds in your bank account. You should preferably have an amount that will cover your medical bills or will suffice for other unforeseen emergencies. These are set apart as liquid funds that will provide cover for the rainy days.
Not only will you have an excellent financial platform to resort to but you can also have easy withdrawals reserved for a tough period. All this will be possible without creating high interest on your credit card or having the need to apply for a personal loan.
Try saving at least 20% of your monthly income to build an emergency fund for yourself. Developing this habit at a young age will also create a solid financial foundation for your retirement.
3. Invest wisely
The next step after creating an emergency fund is to smartly invest your money in investment schemes. These include Public Provident Fund (PPF) and other market instruments such as bonds, exchange-traded funds (EFTs), etc. These will build wealth for you in the long term.
While the SIP option remains largely popular for investing, you can also automate a monthly or bi-monthly transfer from your current account into an investment account. This way you won’t have to struggle to build healthy financial habits on your own, your accounts will do that for you!
Stock investing is also a great way to build your wealth. Income from your shareholdings in the form of dividends can be a great source of passive income. Moreover, you can benefit from the value appreciation of your holdings in the long term. You can reap large benefits in the future just by setting aside a small amount of money today.
However, investing in the stock market can be cumbersome. It involves analyzing various quantitative and qualitative metrics, measuring returns and your risk appetite in mind, and keeping a tab on the market regularly. To free yourself from these worries, you can reach out to the experts at TejiMandi, who are trusted by over 1000 investors. We help you plan your stock investments, right from deciding how much money to invest and what all you must include in your portfolio.
If you are in your 20s or 30s, you may have a higher risk appetite that you can leverage for higher yields. People in their 40s or 50s can afford to take fewer market risks. Starting early is another trick to making it big- when you start investing early, you get the benefit of compounding since you have a lot more years to let your money stay invested.
Finally, if you really want to master the art of how to improve financial health in 2022, avoid making investments without a goal. When you make an investment make sure you know what you are getting into i.e. investment returns, your monthly contributions, investment tenure, and liquidity and risks.
4. Avoid bad debt
As obvious as this may sound, if you want to know the key to how to improve financial health, you should dodge any kind of debt, especially bad debts and loans. By ‘bad debts’ we mean unnecessary personal loans and credit card debts, interest on consumer credit etc. These are especially notorious for eating up your savings.
Avoiding bad debts definitely improves your overall financial health. However, not all debts are bad, some also help you achieve your ambitions. Make sure you prioritize paying the balances of debts in full every month. This way you keep a good credit score, build wealth and don’t waste it on paying interests.
When you take debt and pay interest on things you cannot afford but want, you stand on losing money quickly. It is a slippery slope that must be avoided at all costs. Taking a loan to buy the latest iPhone sounds tempting, but it can lead to a curious case of mismanaged finances very fast if the debt for shopping becomes a trend.
5. Read, learn, and grow!
The fact that you are reading this article in itself is a good sign. It shows your thirst to know how to improve financial health. The wealthiest people in the world are often also the most curious and smartest.
Bill Gates, for instance, once said that he reads about 50 books a year. This habit of constantly updating yourself with new skills and knowledge adds to personal growth. In fact, more and more books tracing the financial journeys of famous entrepreneurs and business moguls are gaining much-deserved popularity.
Reading will also improve your confidence, increase your hunger for knowledge, and encourage you to take on new challenges. You never know, some of these newly acquired skills may also be monetizable, allowing you to build multiple income streams. Within no time you will be earning greater rewards!
If you adhere to these useful tips, you have won half the battle. Remember, you are capable of change! Also remember, there is so much more to personal finance, and sticking to these 5 points this year is a great starting point. So, go ahead—invest smart, invest now, invest in yourself!
A huge part of becoming conscious about personal finance is starting investing as early as you can. At TejiMandi, we help you achieve financial freedom with our one-of-a-kind investment plans curated by the brightest minds in the market. Get in touch with us for more information!