"The best time to manage your finances was last year. The second best time is now."
Of course, the quotes above is an improvisation of a proverb, but we hope you get the point. It is a new year, and the one resolution that you have to make this year, more so after an eventful 2020, is to manage your finances the best way possible.
We are here to help you understand, and hopefully, practice five easy ways to ensure a good financial health.
1. Creating a monthly budget
This is the best first step towards managing your money effectively. Creating a budget and following it through can give you a clear idea on how much money you are getting in hand every month after taking care of the fixed and variable expenses such as - house rent, food, health care, and the EMIs you may have for a car, insurance policy etc.
While a budget plan would vary from person to person depending on their age, income and fixed expenses, for young professionals, a 50/30/20 plan could work well. With this approach, you can have 50 per cent of your income for needs, 30 for wants, and 20 for savings and debt repayment. This way, you won't be making any major compromises to your lifestyle, and at the same time, you would be saving for your financial goals and paying off your debts.
Make sure you automate your savings (a recurring deposit, for instance), track the progress, and revisit your budget as and when needed. You can either use the good old pen-and-paper approach to budget your finances or you can pick from the many tools available online.
2. Knowing your credit score
Little information or ignorance is dangerous. It is of utmost importance for you to know your credit score in order to be able to plan and manage your finances efficiently and effectively. A good credit score is a sign of good financial health and a good CIBIL Score can help you get a loan at a relatively better rate of interest, when you need it the most.
Credit score, in simple terms, is an evaluation of your credit history, that is, your reliability as a borrower, and this would decide your eligibility for a loan in the present and future. Not only that, many countries -- including the US and several European countries -- consider one's credit score for a host of other services like renting a house and even setting terms of insurance coverage. In times to come, this may become the new normal in India as well. A good credit score means you manage your finances well.
You can check your CIBIL Score for free on Finserv MARKETS. (Credit Score: Check CIBIL Score/Credit Score for Free at Finserv MARKETS) What Finserv MARKETS is offering is much more than just your CIBIL Score. With the Financial Health Check Report (FHCR), which is a personalised report that includes your financial performance across various parameters, you get a detailed analysis in a single report.
3. Clear your debt
Needless to say, if you are in a lot of debt, you are not financially healthy. Be it a sum borrowed from family or friends or that credit card bill you need to settle and have been rolling over, debt in your books can cause a lot of stress. The former situation, in time, tends to affect personal relationships, and the latter will drain you financially. If you're someone who borrowed money from a money-lender, you'd know how high the interest rates are.
If you are grappling with debt repayment, you may want to consider the debt consolidation approach, where you take a single personal loan to pay off all your other, more expensive loans. You can pay off your debts and clear your credit card bills in one go using the money from the personal loan and then repay the single loan in affordable EMIs.
You can choose to apply for a Bajaj Finserv Personal Loan on Finserv MARKETS where, for instance, you can receive a loan upto Rs 25 lakh with minimum documentation, attractive interest rates and no hidden charges. You will also receive personalised loan offers along with flexible tenors ranging up to 60 months when you choose Finserv MARKETS as your loan partner. The best part? You will get the money in your bank account within 24 hours of your loan getting approved. You can get started with the Finserv MARKETS personal loan EMI calculator.
4. Opening fixed deposits
One of the safest and easiest ways of investments, fixed deposits (FDs) are also the most preferred form of investment for those who want to avoid taking risks with their hard-earned money. Interest rates on FDs are fixed for the tenure of the deposit and are unaffected by other market fluctuations.
You can now choose to invest in Bajaj Finance FDs using the Finserv MARKETS platform in an easy and hassle-free manner. Bajaj Finance FDs offer an interest rate of up to 7.00%. For senior citizens, the interest rates are up to 7.25% i.e. 0.25% higher than the normal prevailing interest rate. Additionally, online investors on Finserv MARKETS get an extra 0.1% on their FDs. This is not applicable for senior citizens.
FD investments are a great way to achieve both long-term and short-term financial goals since you can open multiple FDs with different tenures.
5. Investing in ULIPs
A Unit Linked Insurance Plan (ULIP) gives the investor life insurance and investment benefits under a single financial product. Life insurance companies offer ULIPs and you can choose one as per your risk appetite. However, before investing in ULIPs, you need to learn some basics about it and the terms and conditions of the policy you are opting for.
If you are someone with a low-to-medium risk appetite, ULIPs are definitely for you. ULIPs invest in various funds, including equity funds and debt funds. With ULIPs, you are looking for a long-term investment, a built-in life cover with your investment as well as tax savings. What you need to keep in mind, however, is that ULIPs, despite the taxation benefits, have a five year lock-in period.
Moreover, some ULIPs also offer you a choice to invest either in an equity fund, or a debt fund or a combination of both, basis your own risk appetite. If you have a higher risk-taking ability, you can choose to invest your investible part of premiums in equity-oriented funds. If you have a low risk-taking ability, you can choose to invest in debt funds in the ULIP policy. Additionally, also look for the switch feature offered by some insurance companies that allows you to move your funds from debt funds to equity funds or vice versa without any charges.
We hope you would put these five ways to good use to manage your finances better in 2021! Have a financially-healthy year ahead!