6 Tips to Attain Financial Peace in Your Life
Your vision for your future may be to take that luxury world vacation you've been dreaming of. Or perhaps, your dream is to ensure your kids get the best higher education abroad. Or you may even dream of retiring comfortably with a large corpus and sufficient cash to spend. To attain financial peace requires financial planning. On this International Day of Peace, let's find out how to achieve financial stability with the following time-tested and proven tips.
Tips & Tricks for Financial Stability
1. Budget with discipline
It can be easy to buy new things at any time of the day in today's world. But this convenience can become a cumbersome issue if you are not disciplined about your money. If you overextend yourself and your finances, you could end up spending more than you should. It is essential to establish a budget and adhere to it with discipline to prevent the money drain. Establish your needs and wants and set down financial goals to channelize your money into investments rather than purchases. Remember to stay on course with your budget and think long and hard about any consumer purchase before hitting the buy button.
2. Pay off consumer debt through the debt snowball method
Commit to start paying off your debts today. Use one of the two debt payment arrangements: the debt snowball method or the debt avalanche method, whatever suits your budget. As debt reduction strategies, these debt repayment methods can help you get out of debt for good.
The debt snowball method:
- Arrange your debts from the smallest to the largest.
- Begin making minimum payments on all debts, except the smallest.
- Pay as much as you can afford on the lowest debt.
- Complete the debt and move on to the next smallest debt until you repay all debt in full.
The debt avalanche method: This method involves making a minimum payment on every debt. Use additional funds to pay off the debt that has the highest interest rate. Eliminate the biggest debt and move on to the next biggest debt until you repay all your debts in full.
3. Automate your investments
An excellent way to boost financial discipline and achieve all your milestones is to automate your investments. Starting a Systematic Investment Plan [SIP] for each of your financial goals can help you invest in what matters the most. Doing so can prevent you from spending on things you don't need, as the money will automatically get channelized into your SIP fund.
4. Set aside 6 to 9 months of expenses for an emergency fund
Typically, the size of your emergency fund will depend on your lifestyle, monthly income, expenses and number of dependents. However, given today's uncertain scenario, it can be a good idea to put away at least 6 to 9 months' worth of expenses in an emergency fund. Open a separate saving or investment account in a debt or liquid fund that will contain money needed to cover or offset unforeseen situations in the future. Begin by putting a small amount away every week or month to build up your goal. Keep adjusting the amount based on your monthly obligations, family requirements, job stability, budget and other factors.
5. Invest at least 15% of your income into a retirement plan
According to financial experts and research, setting aside roughly 15% of your annual income towards a retirement fund is a good start. At the same time, your personal retirement corpus may depend on unique and individual factors. They are:
- When you plan to retire
- When you began saving
- How much you've already saved
- Your retirement lifestyle.
Once you've responded to the above questions, you can begin by saving at least 15% and move on to a higher percentage as your income rises. If you wish to live your retirement dream, you may want to save enough now to not worry about how you make ends meet during retirement. Make your retirement a priority today by starting to save money towards it.
6. Stop spending on what you do not have
Track your spending to stay accountable for money management. It is natural to get overwhelmed by advertising, sales, discounts and other marketing campaigns. But spending today without thinking about tomorrow can be detrimental to your financial security. A good rule of thumb to comply is to spend less than you earn. So no matter how little you have, set aside a small portion of it towards savings and investments without putting it on needless purchases. An effective way of controlling your expenses and avoiding unnecessary purchases is to plan your costs in advance. If you are faced with a spur-of-the-moment purchase, try comparing the value of your 'want' with the number of hours you'd have to put into earning money to buy it.
If you're looking for a financially stress-free life, it's time to address your money today. Use the tips mentioned above to look for customized routines in minimizing money stress and achieving financial stability. Find out the financial stressors in your life and address each one of them with simple solutions such as:
- Getting out of debt
- Paying your bills on time
- Automating your payments and investments
- Developing a financial security net
- Reviewing your finances periodically.
Perceive financial peace as your ultimate financial goal. Work with an experienced financial advisor or expert to understand how to alleviate your finances and become successful with the help of good investment habits.
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