8 Financial Prudent
8 Financial Prudent
Financial prudence basically means planning well in advance and investing in areas where you can expect high returns. It also means having complete knowledge about the money you have and how you can make it grow best. Below is a list of 8 financially prudent habits that should be adopted to ensure financial stability
1. Create a monthly budget:
Live within your means by creating a budget in the beginning of every month.
Stick to this budget and avoid overspending on unnecessary items. From whatever
amount you take home each month, save at least one-third of your monthly take
home salary. To ensure that you do not overspend, practice self-control and
ponder if you really need to buy that expensive phone or the latest party
dresses.
2. Make buying decisions on the VALUE you get: If you are planning to buy a
house, or a car or a motorcycle, your decision should be based on the value you
get for the same over its entire life cycle. It is ideal to plan the amount you
are comfortable spending on the purchase, and then look for options that fit
into your budget. When making a buying decision, do take into account the
residual value that you will get when you sell the house or vehicle. Opt for an
asset which gives a higher residual value. This allows you to enjoy the asset
and get a healthy return when you decide to dispose it.
3. Automated monthly transfer to a dedicated savings/ contingency account: This
is the real trick behind saving. Set a particular amount aside and opt for
automated transfer that will help you save for your big buy or for your next
holiday or simply for retirement. Whenever you begin to earn, this is the first
step towards forced saving. A contingency account helps you when there is an
emergency or a sudden need for money. This way, you will not have to ask your
family or friends for help.
4. Avoiding impulse purchases: Don’t indulge in an impulsive buy, or try to
curb extravagant habits as much as possible. Compare products from different
shops and see what they have to offer. Also, don’t think that buying in bulk is
buying cheaper. You might be lured with the various offers by different
supermarkets that tend to motivate you towards bulk buying. Impulse purchases
will leave you regretting in a couple of days when you see better offers and
the same product available at a cheaper rate.
5. Not missing monthly credit card or EMI payments: If you are using a credit
card for your purchases, one of the most important tasks is to not miss out on
the monthly credit card payments. In case of credit card or EMI payments, it is
important to remain punctual and maintain a positive credit score. To be
financially prudent is to be aware about the payments you are expected to make
during the coming month and to do it on time.
6. Planning for the long term: Financial planning means planning for the long
term. Be it for a month, year or for your long-term goals. Set aside certain
financial goals for the long term and plan for the same. Maintain a budget and
set aside a particular amount to achieve the financial goal. Planning for long
term should begin now. You will have to work towards your goals and save and
spend accordingly.
7. Take advantage of festive offers/ seasonal discounts: When purchasing daily
necessities or for big buys, the ideal thing is to wait for festive offers and
make the most of them. Festival offers usually help you purchase at a cheaper
rate. For instance, Diwali festival offers feature huge discounts on every
product. You can make the most of your purchase and save from the budgeted
amount as well. Scout through different shops or online shopping websites to
find the best deals and offers available for your purchase. It is ideal to wait
for an offer than to make an impulsive purchase.
8. Undertake periodic maintenance to avoid higher bills a later stage: What you
neglect now, will ask for your attention at a later stage. Financially prudent
individuals never neglect periodic maintenance requirements as and when they
arise. If you neglect now, it will pile up and hit you harder at a later stage.
Periodic maintenance should be taken care of on time. This will save you from a
large amount of spending in a couple of years.
(Source: Hero Fin Corp)