Having a written financial plan not only helps you understand how you manage your cashflows, but also helps you build your net worth, invest in financial goals, and manage risk with insurance.
Even though millennials are more aware of things in general, when it comes to money, it is often seen that they face difficulties in managing their own finances. Experts say this is due to a lack of knowledge of financial planning.
Unfortunately, there is no formal education on how to manage your finances while facing the real world for the first time. Being aware of basic financial habits like saving, investing, spending, etc. can help one in building a sustainable lifestyle.
Here is a basic guideline, which you can follow to get your finances on track:
Create a budget – Firstly, start with creating a budget. Usually, the excitement of getting the first few pay-checks leads most to go on an impulsive spending spree. However, it is better to create a budget first and set your priorities straight.
Having a budget will reflect your spending habits and aspirations, and sticking to it can significantly help you in managing your cash flow, knowing where you are putting your money and making provisions for other goals. A budget helps you keep track of all the recurring along with infrequent expenses.
Saving – When it comes to saving, the more you spend the less you save. Hence, to save more, you need to spend less, which does not mean you have to live your life as a miser. But in a planned way you can enjoy your life to the fullest, and also save for your bigger goals.
For instance, for a bigger goal like retirement, you need to save more, spend in a controlled way and manage your finances well.
Contingency Fund – At every stage of work-life, setting up an emergency/contingency fund becomes important. This emergency fund helps you with your fixed expenses in case of an emergency, such as in a situation when you have a temporary loss of income due.
Having an emergency fund helps you to take care of your small emergencies, without affecting your other major investments.
Financial Plan – Having a written financial plan not only helps you understand how you manage your cashflows, but also helps you build your net worth, invest in financial goals, and manage risk with insurance.
In other words, financial planning is like creating a blueprint for your finances. Hence, the sooner you have it, the better you can save, as creating wealth is not only about the returns you earn from your investments, but also the time you give to it to grow.