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These 10 tips for financial success will help you grow your net worth and turn various life goals into reality. Get started today.
We are often programmed to believe that the route to financial success is a highly complex process. Some consumers even believe that you need to live a frugal life to achieve financial success. Nothing is further from the truth. You don't need a qualified wealth management financial advisor to practice successful financial management.
In my opinion, the keys to financial success are following a few financial planning ground rules and building the discipline to stick to them. Here are my 10 tips for financial success that anyone can follow, no matter how much you earn.
1. Have a Monthly/Annual Budget
This step lays the foundation for successful money management. Allocate funds for fixed, variable, and miscellaneous monthly expenses every month rather than go on a random financial spending spree. Gradually progress to creating an annual budget.
Key benefit: You can plan big-ticket expenses without taking loans to pay for them. You can also downsize or scale up budget allocations based on genuine needs.
2. Record How Much You Spend/Earn
This step is all about tracking your daily expenditure and earnings. Earnings can include salary, interest earned or money received as gifts. Use an app or a spreadsheet to make daily updates. Never miss out on writing down an expenditure, even if it is a very small amount!
Key benefit: You know exactly where your money is going. Over time, you will understand how your spending patterns impact your physical and mental health, relationships, and other areas of your life.
3. Pay Off All Debt
Another sign of financial success is to live a debt-free life. If you have credit card debt or owe money on a personal loan, make a plan to pay them back as soon as possible.
Key benefit: The interest on credit card/ personal loan debt keeps adding up, and before you know it, the interest may be higher than the principal amount. Prioritise these payments and become debt-free.
4. Increase the Gap
As you keep tracking your money, you will discover the gap between how much you earn and how much to spend. To be financially successful, you must increase the gap by spending less and earning more via side gigs, a better-paying job, and passive income.
Key benefit: As the gap increases, you will have more money left over, which can go towards savings, building an emergency fund, and accelerating your investments.
5. Build an Emergency Fund
This is one of the most important aspects of successful financial planning. An emergency fund is a corpus of three to 12 months of living expenses stored in an accessible bank account or financial asset that you can quickly liquidate.
Since you've started maintaining a monthly budget, knowing how much you need to stash away is pretty easy.
Key benefit: Life is unpredictable, and there's always the potential for a crisis around the corner by way of hospitalisation or job loss. An emergency fund keeps you and your family afloat in the tough times until things stabilise. Without it, you will need to take a loan or liquidate your investments.
6. Invest Every Month
Financial investment research indicates that those who cultivate a monthly investment habit are more likely to grow their corpus faster than those who try to time the market and invest a few times a year.
Key benefit: Investing every month activates the monthly compounding effect. This approach also reduces the burden of investing in a larger lump sum once or twice a year. A small amount invested each month collectively goes a long way in increasing your net worth.
7. Diversify Your Portfolio
The key to successful wealth management is to ensure that your investment portfolio comprises a mix of equity investments, mutual funds, fixed-income options such as bonds and fixed deposits, and digital gold.
Key benefit: A mix of investment options ensures that you balance the investment risks with guaranteed, stable returns. Hence there is no scope for extreme losses even when the market takes a downturn.
8. Get Medical Insurance
It is advisable to take a health insurance policy for yourself and your family outside of what your company offers. It must cover hospitalisation and other benefits such as therapy and checkups.
Key benefit: The cost of hospitalisation has grown extensively due to inflation. Even if your company offers you a comprehensive health care policy, it usually becomes defunct within a year in case of job loss. Buying personal insurance must be on the roadmap to financial success.
9. Claim Tax Benefits
Many investment instruments are covered under the 80 C of the Income Tax Act of 1961. When creating a successful financial plan, be sure to make investments accordingly. Secondly, invest in financial products that are taxed as capital gains instead of as per your income tax brackets.
Key benefit: These two steps enable consumers to save on taxes, thus accelerating their financial success journey.
10. Align Financial Saving Strategies With Life Goals
Remember, real financial success also comes from leveraging wealth to achieve your life goals. Hence, always align wealth creation journeys with your aspirations, such as building a retirement corpus, taking a world tour, paying for your children's education, or launching a business.
Key benefit: You not only spend time creating wealth but also have the opportunity to enjoy the benefits of your financial success. Financially successful people don't merely hoard their wealth but leverage it to turn their aspirations into reality.
Financial planning is one of the foundations around which you can achieve financial success. By actively practising these 10 Steps To Financial Success, you can even achieve financial success in your 20s. However, if you are already in your 30s and 40s and have not yet taken that step, it is never too late to start.
No matter where you are in your financial success journey, your everyday effort every day will translate into long-term success, over some time. The most crucial step is to get started and put away a small amount, even as little as INR 10, per month.
Download the ChangeJar App for more information on effective investment plans. Start by investing just INR 10 and grow your portfolio with investments in digital gold.