Financial awareness, ethics and responsibility are generally overlooked during the formative years of education. To now compensate for this and progress further on your own financial awareness, we refer to three important steps. Better understand income, expenses, and invest goes hand in hand with good financial decisions.
First of all, it is always safe to take stock of your current situation. Look at all of your income from the business you work in, as well as other sources. Check if your job is secure, if you want to change direction or choose another career.
Second, the physical and social restrictions induced by the pandemic have catalyzed various economic repercussions on a global scale. This could have resulted in a substantial reduction in a consumer’s prowess. The arrival of vaccines is sowing the ideas of revenge spending and revenge tourism in people’s minds. How fast can they go out and do something, buy something, travel anywhere!
But in such a climate, while it is essential for people to have fun and splurge, we recommend being on guard and prudently maintaining spending. After all, your savings are nothing more than your potential blueprint for further investment and expansion.
Third, there is a good chance that you are not overspending and general expenses have been low over the past year, possibly for a variety of reasons, such as living with family; not to eat at a restaurant; do not spend on shopping, movies, restaurants, etc. It’s a good idea now to figure out what to do with the money you’ve inadvertently saved.
We see that the stock market is doing extraordinarily well. If you are a prudent risk taker in investing, there are other asset classes that might interest you, such as real estate, which could potentially do well.
If you are a big fan of risk but have stayed on the sidelines, you can choose to learn something about investing in the stock market and make your money grow there, after keeping some aside as a nest egg. .
Here are some additional best practices for financial management and risk neutralization in the new normal:
This is the most basic and important aspect of financial hygiene. Planning a budget can seem like an extra and tedious step to some. But listing all the expenses can help you understand your spending habits and budget for, say, the next month, more specific to your lifestyle and needs. This has a huge impact on your overall financial health.
A planned budget can help you determine what you can buy and how much you can save. You can also understand the flow of your spending and set realistic spending and purchasing goals. It is the first step towards a planned and secure financial future.
Once you’ve budgeted, you can track your spending and cut back on what you can and want to. What most people don’t realize is that most expenses can be drastically reduced even by making a few small lifestyle changes.
We inadvertently end up spending on things that are less important and which can be reduced or avoided altogether. While it takes a little discipline, it goes a long way.
Pay off debts
If you have accumulating credit card bills and debt, you need to take the necessary steps to pay them off as soon as possible. Accumulating debt or not paying off on time can take a toll on your credit score.
Paying the bare minimum to the credit card company each month is fine if you are in a severe financial crisis in a particular month, but be aware that it doesn’t work in the long run. Because that’s what the credit card company wants you to do, because then they can charge you very high interest rates on money that hasn’t yet been paid.
A planned budget can help you get rid of your cumulative debt. A good idea is to reduce your credit card debt by using all the funds you have available. A low credit score will also affect your loan potential; if you are in debt, the chances of getting a loan are very low.
Use Debt Relief Programs With Caution
If your credit card debt has already gotten out of hand, you may want to consider using debt relief programs, which include debt settlement companies and consumer credit counseling services. These services help you by negotiating the terms of debt settlement so that you don’t have to pay as much as you owe.
They also help you plan for debt management and provide budget advice to manage your finances. This implies that you choose not to pay your creditors, which is effectively hurting your credit scores. You are advised to use these programs safely to ensure that your credit score stays good.
Monitor your credit score
If your credit rating is low, you are not eligible for low interest rate loans. Keeping your credit rating high is essential for good financial hygiene. Hence, you need to monitor all of your credit cards and maintain a high score by paying installments on time and reducing unnecessary spending. You can also check your credit score for free using one of the applications available online today from different credit bureaus; this will help you monitor your credit score.
Financial scams have become common these days and even educated people fall victim to them. Please don’t blame yourself because most people don’t know all the terms and conditions that fall under financial security. The best way to avoid them is to find out who is regulated by government agencies and who has all the licenses in place.
Customers need to be able to differentiate between regulated lenders and people who may be fraudsters. The Reserve Bank of India has published the list of companies regulated to lend. With some fintech players who may not have registered as a non-bank finance company offering financial services, please read all terms and conditions carefully before using their platforms.
A proper Know Your Customer (KYC) process proof of income is a must for all regulated lenders and therefore ensuring this is done is a safe point on your checklist as a consumer.
Financial hygiene is essential for survival. Most people don’t realize that basic financial practices are the key to a secure future. Your savings will help you in times of crisis. Therefore, it is important to understand that no income is available, all of your money is hard earned and you need to take good care of it. Only capital saved can be used for expansion and investment. Managing your spending and spending wisely can help you build a better, more sustainable future.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)