MONEY MANAGEMENT

 

money management

Regardless of how much (or little) you know about investments, stock markets, credit cards, and insurance, your financial planning is most likely to fail if you don't have a firm grasp of your money. Hence, having a solid understanding of your finances, or your financial situation, and being able to manage them intelligently, is the most crucial stage in financial planning.

So, what is your financial situation?

1) Earnings and Expenses: Your expenses matter more than earnings when it comes to determining how much money you have on hand after meeting your needs and wants. You must create a 'balance' between your spending and earning patterns if you want to be in a better financial state. Creating a ‘balance’ between your earning and spending patterns will create a benchmark for planning your finances.

Normally, a healthy bank balance at the end of the month indicates a trend towards a good financial position, and a zero or negative bank balance at the end of most months corresponds to a weak financial trend.

2) Assets and Liabilities: Your financial status now and in the future will determine how many valuable assets you possess. For example, assets like investments—in gold or silver, deposits, stocks, mutual funds, art or antiques, land, etc.- will add to your income (either now or in the future) or minimize expenses. Hence, assets play a crucial role in strengthening your financial position. On the other hand, liabilities weaken your financial position. Debt is something that you owe as a liability, which also impacts negatively on your assets, just like an old vehicle that needs a lot of fuel and repairs for the work it is doing.

There are four key areas of your financial situation are:

1. Income

2. Expenses

 3. Assets, and

4. Liabilities.

Conclusion:  The right mix of these four key areas be used for money management for a better financial future?

1. Keep a Record: Keep a meticulous record of every penny coming in and going out in your diary, excel, or any place of your choice.

2. Monthly Budget: Get into the habit of making a budget to put your money to optimum use. A budget will help you reduce liabilities, spend wisely, save, and invest.

3. Regular Savings: for future goals, to be able to face financial emergencies, and build assets.

Hence, regardless of your income, your ability to handle the four major areas will determine how strong, secure, and stable your financial situation is.

Location: India

Comments

Post a Comment

Popular posts from this blog

ARE YOU WORRIED ABOUT PRE-EXISTING DISEASES WHILE BUYING HEALTH INSURANCE?

Image
  Introduction Ailments that the insured had prior to purchasing health insurance are known as pre-existing conditions. According to IRDAI, a condition is considered pre-existing if the insured person received a diagnosis of it up to 48 months before obtaining the insurance. All chronic disorders, such as diabetes, asthma, high blood pressure, thyroid disease, and more, are regarded as pre-existing ailments. Pre-existing diseases in a health insurance plan: There is a pre-existing condition clause in every health insurance policy. For those who have pre-existing diseases, buying health insurance may be difficult. Prior to learning about the limitations on coverage for pre-existing conditions, determine what a pre-existing health condition actually implies. Pre-existing diseases waiting: In the context of health insurance, the waiting period refers to the period of time before which the insured person is not eligible to receive benefits under the policy for the listed diseases
Read more

BALANCED ADVANTAGE FUNDS

Image
Balanced advantage funds are a type of hybrid fund that invests in both, equities and debt instruments. There is no set fixed threshold for exposure to a particular asset class. These funds can also modify their asset allocation as per the market conditions. When the equity market is trading at an all-time high, fund managers may increase the exposure to equities, while reducing it in falling stock markets. Unlike other funds, Balanced Advantage funds not only offer a mix of growth and fixed-income instruments but can also switch between asset classes dynamically. Balanced Advantage Funds asset allocation is determined by the dynamic asset allocation methodology. How do they work? Balanced advantage funds have a unique rebalance strategy where they can drastically reduce or increase the asset allocation towards equities or debt. Additionally, if the fund manager anticipates a rise in valuations and key indices, they might increase their equity exposure. But when they anticipate a m
Read more