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6 Essential Personal Finance Tips to Ensure a Financially Secure Future

February 13, 2020 11:33 AM

One thing almost everyone desires is to be financially stable. It isn’t about being rich but about building enough wealth to live the way you want. Financial stability gives you the freedom to live comfortably without having to worry about financial emergencies. This is why financial planning is crucial. 

 6 Ways to Achieve Financial Stability 

 Make Budgeting a Habit

 Don’t roll your eyes as soon as you hear the word budgeting. It is one of the most crucial money management tips you need to know about. 

 Budgeting is all about knowing how much money you have, how to spend it wisely, and how much to save. When you have a budget, you gain control over money instead of the other way around. By budgeting, you know where your money is going. 

Make a budget and stick to it. It ensures that you only spend within your means and save as much as possible. 

  1. 2.                  Build a Good Credit History

 Do not fear credit cards. If you use credit cards wisely, they will work in your favour. Considercredit card use for certain purchases and repay them on time. This will improve your credit score and build a good credit history.

 If you need any kind of financing in the future, like a loan or lease, the lenders will consider your credit score and history. Getting financial help from them becomes a lot easier with a good credit history. 

 3.                  Build an Emergency Fund

 Another critical money management tip is to build an emergency fund for a rainy day. It protects you from unexpected expenses. You should build an emergency fund of at least 6 months’ worth of expenses. 

 An emergency fund allows you to leave your retirement savings and investments alone if you find yourself in a tough financial spot. For example, in case of a job loss or hefty medical bill,  you won’t have to rely on loans or dip into your savings. 

 4.                  Research Before Making a Major Purchase

 Are you planning a major purchase like a television, car or home? Do not make a hasty purchase on the spot. Take a step back and research before you spend on something big. Do some number-crunching to make sure it is something you can afford. 

 When you take the time to sleep on a major financial decision, you get the time to consider the alternatives. 

 Whether it is a new car or an investment, shop around for good deals and check if you can afford the payments that come with it. 

 5.                  Reduce Debt

 Until you have debt, you cannot really achieve financial independence. When you budget, allocate some money to regularly pay off your debts. 

 Reducing and eliminating your debt requires a lot of financial discipline but it is doable. If you are in a lot of debt, you need to cut back your expenses drastically and pay off debts quickly

 Once you clear off all the debts, set up systems that will help in preventing you from going into debt again. 

 6.                  Start Saving for Retirement

 Don’t wait till you turn 40 to start saving for retirement. Start as early in your career as you can. This way, compound interest will build up significant wealth by the time you retire. 

 It is recommended that you put 15 percent of your gross income into retirement each year. Talk to a financial planner to figure out the amount you would need to save to retire comfortably. 

 These 6 personal finance tips will help you build wealth and achieve financial stability. Investing in yourself is the most important investment that you can make to gain financial freedom. So, take the time to plan smartly to have a financially secure future. 

Author Bio: Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life's mission to help and educate people on various financial topics, so email him your questions at shiv@moneytap.com.

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