5 Tips for Ensuring a Financially Secure Future
With the lack of social security, increased life expectancy, and the prevalence of nuclear families, more people are saving for their future. In fact, India had the highest score of 7.8 in the 2019 Aegon Retirement Readiness Index (ARRI), which shows a medium level of retirement preparedness. A large number of employed-youth is now aware of the importance of financial preparedness. The reasons are many, right from a prevalent economic slowdown to a rise in access to online financial products and services.
In order to have a financially secure future, it is important that you dothe right planning. Here are 5 tips to keep in mind.
- Plan Your Spending
Putting a certain part of your income towards a savings account at the start of the month goes a long way in being financially secure. Generally, putting 20% of your income towards savings is considered a good idea. It is also important that you are a bit frugal with spending habits. In case you have habits, such as eating out each week or going shopping regularly, you can cut down the number of times you involve yourself in such activities. In case you spend all your income in supporting your expensive lifestyle, you would be left with nothing in case of emergencies.
- Educate Yourself
For making better financial decisions, getting guidance from experts is a great idea. Consider knowing about different financial markets, products and services. Learn how well they suit your risk profile and lifestyle. For instance, an equity mutual fund is considered high-return-high risk, but debt funds are low-risk products in comparison.
By being financially literate, you would be able to better manage your finances, which is often considered to be pivotal for the creation of wealth.
- Focus on Investments
A savings bank account is a good option when it comes to financial planning. But the returns on them are not that high. Even the best savings account gives you around 7% interest. Consider alternatives like mutual funds, which can offer you the chance to earn higher returns. However, mutual funds are highly subjected to market conditions.
There are different types of mutual funds, such as debt funds and equity funds. In case, you are wondering how mutual funds work?
The funds pool your money along with other investors into equities, bonds and other assets. This could result in long-term wealth growth and diversification. These funds are handled by professional fund managers. Apart from that, you also get tax benefits in certain mutual funds.
- Maintain Your Credit Score
Your credit score is basically a report of how much debt you have taken, and how timely or delayed you were in the repayment. A good payment history can lead to a higher credit score. Maintaining a credit score can prove to be more important than you might imagine. This can be extremely helpful for us if you want to get a loan in the future. In fact, 80% of the loans are provided to people with a CIBIL credit score above 750.
- Risk Cover
Having a risk cover, such as health insurance and life insurance, is important. Health insurance protects your savings from being depleted in case of a sudden critical illness. A life insurance would provide a steady income in case of the demise of the breadwinner.
By taking advantage of the different types of mutual funds and the right planning, ensuring financial security can become much easier.