Intelligent Tips For Good Financial Planning
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The pandemic caused by Covid-19 in 2020 has had far reaching effects on our lives. It has forced us to maintain social distance and refrain from interacting with one another, pushed us into living under phenomenal ‘lockdowns’ and in some cases has put a complete stop to economic activities around the globe. No wonder our finances and economies have been hard hit by the onslaught of the novel coronavirus, sky high medical expenses involved in the treatment of Covid-19 was just an appendage to it. As we gradually move into this New Year, we need to be prepared on all fronts to recover from these effects and financial planning and security is undoubtedly one of the primary areas that we need to focus upon.
Tips for Good Financial Planning
In this article we are going to mention a few tips that will help you to plan your finances in 2021 and move towards a fiscally secure future. The following are a list of points that you can take heed of to recover from your financial setbacks -
1. Maintain A Budget
It is not unknown that Covid-19 has forced people to live on a limited budget. Many people lost their jobs and suffered salary cuts for which they had no option but to utilise their long term investments and personal savings to fulfil their requirements. The pandemic is yet to be over and it would not be a wise decision to use up all your savings and investments in any particular instance. Instead, you should fix a monthly budget, compartmentalize your expenditure and focus on maintaining sufficient liquid assets that will contribute to an improved cash flow.
2. Review Investment Portfolio
The financial melt down due to Covd -19 will take some time to recover and you should use this period as an opportunity for stabilizing and building upon your existing investment plans. For example, reviving your earlier investment plans which might have lapsed in 2020, would be a good start. You can also think about investing additional funds or switching them between different fund options in either equity or debt market instruments to match your financial goals this year. However, it would be foolish to push through or make long term investment commitments right at the moment. It is crucial that you stabilize your existing and current investments before moving ahead with a new plan.
3. Prioritise Insurance Requirements
Given the fact that the pandemic is still looming over us, it is important to assess the amount of insurance that you will require for yourself and your dependents. Covid-19 has significantly increased our expenses and it would be very challenging to handle those without any additional financial help. Therefore, no matter how young you are, you must look towards buying a health insurance policy that comes with comprehensive coverage and benefits and effectively supports your medical and monetary needs. If you want a strong and complete protection for your loved ones, you should also make sure that the sum assured of your insurance policy is at least 10 times your current annual income. Prioritising our insurance requirements has never been so pertinent before, especially when our vulnerabilities have been exposed so brutally by a virus.
4. Strategise Debt Repayment
Many people had to borrow loans in 2020 to ensure their regular spending capacity. As a result, loans might have accumulated over EMI repayments with interests or a moratorium. Given these, an intelligent move would involve a consideration and repayment of your debts so that you can quickly recover from the fund losses of last year. A strategic plan will aid you to build on your borrowing capacity which you can later utilise for critical financial requirements. In context, you should pay off the higher debt amounts earlier than lower ones. You are also advised to make prepayments of big loans such as a home loan so that you can be completely debt free as early as possible.
5. Build Up Credit Score
If you are planning to expand your investment opportunities, it is very important to build up on your credit scores. A new year is a great beginning for breaking old habits and you can financially reboot yourself with timely and complete repayment of your previous loans and credit card bills. At the same time, you should be wary of not applying for multiple loans or credit cards consecutively and limit your expenditure to improve your credit score. While most banks have interest rates that correspond with the credit score of the borrower, a low credit score means a higher rate of interest on your loans. Hence, it is necessary for you to take heed of these points and strengthen your credit score while the year is still fresh.
In conclusion, it can be said meticulous financial planning can actually help you to recover your losses caused due to Covid-19 last year. These tips will hopefully come to your use in determining your short and long term financial goals this year. The popular saying ‘New Year, New Me’ is not just restricted to personal growth, but can also be utilised as a financial mantra in making adjustments towards a more fiscally robust new year.
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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
