That saying about change being the only constant in life never felt truer than during pandemic times. Just as we changed our behavior to help guard against the spread of Covid-19, we can take steps to protect our financial lives from future turmoil.
The biggest payoff from shoring up your finances can be peace of mind, but the benefits of preparation turn tangible fast if you face a crisis — without needing to borrow at a high interest rate or sell investments at a loss.
Sometimes, just thinking about tackling your accounts can seem overwhelming, but there are fairly simple principles to keep in mind. So here are seven ways to improve your financial standing. Once you’ve got these covered, you can explore investment opportunities like those offered in “Where to Invest $10,000 Right Now.”
#1. Save First
Unlike most, a successful investor knows the importance of saving first.
Instead of following
Income – expenses = savings,
the successful investor follows the equation of
Income – savings= expenses.
This means beginning with Saving First.
Set aside the amount you want to save first and then spend the remaining on expenses. Decide how much you want to save in advance, and then plan your expenses accordingly.
#2. Invest Automatically
Life can easily get in the best of your good intentions of making investments. Thus, the second good habit is to automate investments. The best way to ensure investments happen automatically is to go through the Mutual Fund SIP route by setting an ECS for auto-debit from your savings bank account for a fixed amount, on a fixed date every month.
#3. Live Below Your Means
If successful investors would have spent every Rupee they earned, they wouldn’t have the money to set aside for financial goals.
To be a successful investor, you must spend less than you earn on an on-going basis. Spending too much, will more than likely make one accumulate debt, instead of wealth.
Smart investors have specific financial goals and invest intentionally. With specific goals, coming up with an investing strategy becomes easy, and effective.
#4. Invest Regularly
Successful investors know how to invest regularly. The best approach is via Systematic investment plan (SIP), wherein you can invest a fixed sum regularly regardless of the NAV or market conditions. In fact, SIP enforces the discipline to invest each month, hence ensuring that you invest regularly and not try to time the market. Little by little, you will be able to generate wealth, over time.
#5. Emergency Fund
Like unexpected guests, emergencies to can come unannounced. It could something as trivial as a washing machine refusing to work, to something as serious as a sickness. Successful investors are always financially prepared for emergencies. They avoid debt for such situations. Keep six months of monthly expenses in a Liquid mutual fund, to get better than savings back returns and ensure that your emergency fund remains separate.
#6.Invest in portfolio for each financial goal
Smart investors have specific financial goals and invest intentionally. With specific goals, coming up with an investing strategy becomes easy, and effective. Take for instance, a smart investor knows that buying a house after 8 years, as a financial goal will need a different strategy, as compared to coming up with college education fee for his son in a couple of years. While the former will be in equity focused MFs, the latter will be in debt focused instruments and MFs.
#7 .Do not get swayed by extreme news to let emotions rule:
Hyper-successful investor Warren Buffett said many a times, “Be fearful when others are greedy, and greedy when others are fearful”. Fears of slow-down and recession make many investors let emotions swap their investment strategy.
Successful investors never let news get the better of their emotions. They know that times like these are perhaps the best times to remain invested patiently for the long term, and to tide over the lull. They know historically, growth slowdowns reverse and corporate growth picks up.
Follow these habits to attain the same investment success many others have to create their wealth.