Tips to Weather the Storm in Your Finances
As per the weather reports, the monsoons have hit the southeast parts of India and have brought respite from the scorching summer heat. Parts of Telangana, Tamil Nadu, Kerala, Karnataka, Orissa, and West Bengal have been receiving heavy rainfall for the last few days. However, like every year, monsoons also bring the risk of storms, floods, hurricanes, and cyclones.
Although nobody wants the disaster to strike, it’s a harsh reality that no one can prevent it as well. However, when it does, it can cause harm not only to your physical and mental health but also to your financial health. So, you need to be adequately prepared to weather the storm in your finances if the unforeseen happens.
Let’s discuss some personal finances ideas and budgeting tips that can help you manage your finances and prepare for an emergency in a better manner.
1. Do not forget to invest in adequate insurance plans
During the monsoon season, you always keep an umbrella with you whenever you go out of your house. The purpose of doing so is to have protection against unexpected rain.
Similarly, you need to invest in adequate insurance plans to safeguard your finances against emergencies and mishaps. In order to protect yourself from various kinds of contingencies, you can obtain various types of insurance plans. These plans don’t cost you much in terms of premiums when you compare their benefits.
For instance, you can buy health insurance to financially protect yourself and your family members from medical bills. Similarly, you should procure comprehensive motor insurance plans to safeguard your finances in case your car or two-wheeler incurs damages due to mishaps like a storm, lightning, flood, etc. You can buy a term plan to safeguard your family from financial loss due to death or disability.
2. Create a monthly budget and stick to it
This is a very crucial tip to manage your finances. It is important to prepare your monthly budget and strictly stick to it. This will allow you to plan your incoming and outgoing sources of finances, and act accordingly.
While preparing your budget, consider all your expenses and income sources. For example, your loan EMIs, utility bills, insurance premiums, school fees, grocery costs, and other monthly obligations. You should also consider the investments that you want to make.
However, ensure that you prepare your budget strictly as per your financial health and merely creating a budget won’t be of any help until you follow it rigorously.
3. Create an emergency fund
You must have heard the proverb, “When it rains, it pours”. And when it pours, you need to hold your guard up to avoid any significant damage. For example, you need to keep the trampoline sheet ready for the day when it will pour in the monsoon. However, what if you don’t have a trampoline at your house?
Similarly, you need to be financially ready for the rainy day. You should create an emergency fund or corpus so that you don’t have to fall on your savings in the case of a contingency. To create an emergency corpus, you can invest in a suitable mutual fund scheme via a Systematic Investment Plan (SIP) or a recurring deposit account.
However, when you’re investing in an instrument for creating an emergency corpus, ensure that the instrument is highly liquid.
4. Invest regularly
Another crucial tip to manage your finances is to invest regularly. Make it a habit to invest with proper discipline. When you invest regularly, you save a significant amount for your future. You can also reap the rewards of compounding by investing regularly in a specific instrument.
The best way to ensure disciplined investing is to start a SIP in a mutual fund scheme. You can also invest in stocks and bonds if you have adequate knowledge of the market. However, it is very crucial to create a well-diversified investment portfolio with a correct mix of equity and fixed-income investments.
5. Spend wisely and save more
You can take this point as an extension of the fourth point. When you start spending wisely, you automatically save more and invest more. What we want to tell you here is you should try to curb your unnecessary expenses and instead invest that money for your future.
Remember that you cannot control necessary expenses, such as grocery costs, utility bills, school fees, etc., but you can always control your unnecessary spending, such as buying clothes when you don’t need them, dining at restaurants, beautifying your house, watching a movie, etc.
Remember that failing to plan is planning to fail. With these tips, you can manage your finances and plan for an emergency in a better way.
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