Financial planning: Do’s and don'ts of managing your finances

Financial planning is a methodical approach that supports people or organisations in achieving their objectives and successfully minimising crises. It makes it easier to maintain track of one's money by tracking income, expenses, savings, and investments.

It takes a comprehensive strategy to manage your finances both now and in the future. It serves as a guide, assisting in the achievement of objectives and maintaining readiness for monetary emergencies.

Many people believe they are not making any progress on their financial objectives. There is a simple solution for that. Plan your finances and follow them. Here are some do’s and don'ts to rehearse in mind:

Financial Do’s:

1. Set money goals: Making a plan is difficult if you don't know what you're saving for. From short-term ambitions like planning a family vacation to long-term aspirations like when and where you want to retire, be as detailed as you can with your goals.

2. Manage risk with insurance: There are several types of insurance one needs to cover. To begin with, first, check your coverage to ensure you aren't paying too much for your auto and house insurance. After that, assess your health insurance plan to see if it still meets your family's financial and medical needs. Term life insurance is essential in planning a secure future. Those who support a family with their wages must also get life insurance. 

3. Tax planning: Planning your taxes can help you minimise your tax liability and save money that would otherwise be lost to hefty taxes. The many potential deductibles and tax-saving strategies must be understood.

(Also Read: Bank holidays: Banks to remain closed for 10 days in February 2023, check full list)

Financial Don’ts:
1. Falling victim to debt trap: Uphold a way of living that enables you to live within your means. It is challenging and occasionally impossible to escape a debt trap. Impulsively or unnecessarily taking out loans might lead to substantially higher costs in terms of the interest rate imposed on the loan. Your credit score is directly impacted by debt as well. By promptly paying all of their debts, one should always keep their credit score high.

2. Not updating your financial strategy: Plans for your finances should occasionally be modified. Your financial plan should evolve as your life goals do. Keep track of your financial objectives and make necessary adjustments to the strategy.

3. Don’t prioritise ‘wants’ instead of ‘needs’: Your ability to devote resources to each will be aided by giving your necessities a balanced higher priority than your wants. Numerous psychological techniques and suggestions can be used to curb impulsive spending. For instance, according to the 30-day rule of financial planning, you should wait 30 days before making a purchase when the need strikes. If the impulse doesn't go away, it becomes a need rather than a want.