“By failing to prepare, you are preparing to fail.”- Benjamin Franklin
It’s better to be prepared than to have an opportunity and not be prepared. Success loves preparation, are you prepared?
We all are working hard, spend our energy, money, and time to accumulate wealth. Everyone has a dream to become a billionaire, rich, and successful in their life. But only a few will succeed in it. It is because of mindset and the management of our money.
Many people are able to manage their company accounts and finances but failed to manage their personal finances. Personal financial management will be the first and foremost thing we have to concentrate on our life. We all work 8 to 10 hours a day for getting money. If we are not able to enjoy that money, if are not able to get freedom, if are not able to spend time with our family, if we are not able to retire peacefully, then what is the use of that wealth or money in our life?
Wealth management is an important thing. We have to look at what are the important things we have to keep in our mind while doing our wealth management so that we can peacefully die without creating a mess and enjoying our life to the fullest.
1 Be optimistic and have a positive mindset
First and foremost, thing for anyone in our life we should be optimistic and should have a positive mind towards our money so that, we can work with passion every day to achieve our financial goals.
2 Set your financial goals
Once our financial goals are set, it’s easy to work towards them. Every day we should imagine that goal so that we already achieved it. We have to plan according to our goals, and set aside a fixed amount of money towards that, and invest in such instruments so that will grow exponentially through compounding power. Finding real net-worth is very important to achieve our financial goals.
3 Find out your real net worth
Our net worth will help us to track our financial goals. First, if we have to understand our real net worth. It will set a base and show us a path. How far we have to go in our financial goals, at which speed we have to work to achieve our goals and in which financial instruments we have to select to achieve our goals.
4 Educate yourself also take expert advice in money management
Education is very important in our life. Even though our personal accountants, CAs are managing our money we have to know each and everything about our investment, how it helps us to achieve our financial goals, etc. It’s our hard-earned money; we should take the charge and courage to manage our money in any circumstances. We cannot blame others or circumstances for not getting returns, for losing our money because even though we took advice from others we took the decision, we signed the papers. Once we understood the financial instruments we have to set up systems to track that. Then it will become our daily routine and it’s an easy and interesting job and work to manage our wealth.
5 Be boss for your money
I have seen many people plan and execute a strategy to grow their entire companies’ money flow, try to get exponential growth, giving 10 to 12 hours per day, even more, some time. But the sad part is to but not able to do their personal finances, not even allocating 2 hours in a month. You are the boss of your money; you should be responsible for your personal finance. So, take authority and responsibility to direct your money where it to go, how to use it, and how you should achieve your financial goals.
6 Secure your family on time
When Noha built an Ark it was not raining, it shows that we have to prepare in advance for any uncertainties.
How much ever we earn, it’s not possible to save at a time and grow as and when we expect so that we can fulfill our family needs and desires. Death, disease, Disability and Disasters are the four biggest risks in our life. No one has control over it. So, we should prepare for that in advance. We should transfer our risk to insurance companies and be peaceful and tension-free always.
The following insurances are very important and should be in priority
a. Term Insurance: It should be at least 20 times your income.
b.Health Insurance: Minimum of 10 lacs as per your city of residence and the hospitalization costs in that area.
c.Accidental Insurance: It helps to cover not only accidental death but also during accidental partial and permanent disability. It comes to your rescue when you lose your job due to accidents and when your expenses are increasing and income is nil.
d.Vehicle Insurance: It gives protection during vehicle accidents for own damage and third-party liability also.
e.Home Insurance: It gives protection to our dream house/assets due to any fire/natural calamities and any other accidents
7 Be wise in your Debt management
Debts are good only if they fetch more income than what we are paying in interest. So, we have to select the loans to among our debts wisely and plan so that we should be debt-free as early as possible. Debt management can be done in the following ways.
a.Increasing your income by adding secondary sources of income.
b.Invest in financial instruments which are we are giving more income than the interest you are paying.
c.Increase your savings.
d.Decrease your debts by paying early.
e.Reduce your EMIs as early as possible.
8 Let your money work for you-Invest wisely
Investments will play crucial steps in our money management. Days are gone where we were getting higher returns along with the security. Many scams, fraud, and inflation rates will make people become greedy and invest in such a financial instrument where many people will lose their hard-earned money. So, we should select such financial instrument wisely so that will fetch compounding interest to our money. Following points, we have to remember
a.First keep 6 months of your expenses as an emergency fund either in a savings account or debt funds, liquid funds where you can get liquidity anytime.
b.Set up a monthly budget and priorities according to your financial goals
c.Invest regularly in a systematic way.
d.Know deeply about each financial product.
e.invest in financial products that are regulated by government bodies
f.Don’t be greedy and invest in the wrong instruments
g.Invest in such instruments which you can understand properly.
h.Don’t put all eggs in one basket- means select different investment options as per your risk appetite.
i.Rebalance your investment portfolio as and when required.
j.Reassess your risk tolerance as per your age and other circumstances
9 F.I R. E- Financially Independent Retire Early
You have to plan your retirement in such a way that you have to retire early with financial independence. You have to accumulate the required corpus amount to take care of your next 35 to 30 years. You have to plan and think about your spouse, both of your health, increasing medical costs, inflation, and fulfilling your desires like experiencing the world, tours, etc.
After your retirement, you cannot really think about your expenses. It is a foolish way. You have to plan ahead when you are young; say when you start your career when you are single. Then saving money investing systematically become a habit and help you to grow your money in a compounding manner.
Don’t depend on your children; Don’t save for your grandchildren without spending on your necessities and for your enjoyment. Educate your children so that they should take care of their family with their money and not your money. You should not be dependent on them, and also you should not be a burden for them. Be that F.I R E ignites you always to retire peacefully.
10 Plan your Tax savings on time
Every land, every country has its own plans, its own rules. So we have to obey those rules and regulations. We have to pay taxes to live peacefully by getting the required amenities and developments in our land. The government is giving provisions to save our taxes by encouraging citizens through some exemptions. It’s in our have how we plan to think and get that opportunity to save our tax money. You have to take care of these things while planning your taxes.
a.Don’t avoid taxes.
b.Pay taxes before the due date to avoid the interest, late fee, and penalty.
c.Plan to use maximum exemptions while investing your money.
d. Find out all the sections like 80C, 80D, 80E, 80G, etc. where you can utilize the benefit to save your taxes
e. Take advice from your financial advisors or Charted accountants so that you save more, and get more from your savings.
11 Passive sources of income
In today’s world, as inflation is rising every year by 7 to 8%, it's very difficult to survive in one source of income. Plan your earning in such a way that you will earn from a different secondary source of income or passive income sources. It may be related to your passion, digital courses, royalty, commission, rent, etc. You have to find ways of different sources of income because we cannot rely on one source of income every time.
Situations like Covid -19, market crash, etc. can hit us anytime without giving any hint. In such situations many may lose their job, interest rates may fall down, inflation may increase, the investment may not give good returns, and some emergencies may come. So, we have to prepare to survive in any conditions.
Plan to build your passive sources of income now.
12 Be clever in your succession planning
There are many people, earn and save their hard-earned money for their future. But when the time comes to enjoy life still, they keep it for their children and grandchildren so that they will look after them. Taking pain to save and left a legacy for the future.
Many incidents are their children will settle in abroad and they don’t have time to speak to their parents and take care of them. But when it comes to taking their property they will come and fight. Some incidents are there if anyone partner left then their situation becomes horrible. They have to listen as they command and demand. So, we have to avoid such situations in our life, we have to do the succession planning, with the proper guidance of lawyer and then most important thing, we have to enjoy our money when we are alive. Whatever left after ours, it has to go to our children.
Even we have to do our succession planning for the following reasons.
a.Help to fulfill family goals and objectives
b.Help to allocate assets and wealth for passing down to future generations.
c.Help family members to understand parents and respect them.
d.Avoid unnecessary conflicts after the death of the bread earner.
e.Even at the time of family businesses it helps to create a leadership role to continue their business
Succession planning has to be included in your financial planning. As we don’t know the future, it will help us to keep alive our dreams and goals.
These 12 effective ways help us to manage our wealth effectively. It should not be a one-time job. It has to be reviewed every 6 months. Many things will change in our life. Some we do knowingly some will happen unknowingly. Like career shift, increase or decrease in the income, change in family size, inflation, interest rates will change, there will be some changes in the rules and regulation of our government bodies. So periodic review is very important to manage our wealth effectively.