The word ‘enjoyment’ might bring up different pictures for different individuals. It differs from people’s age, income, size of family, personal preference, and a lot of other factors.
However, one may not able to lead a stress-free life without ensuring financial independence for the current and future life. There are a few choices one must make and practices one must follow, in order to ensure that a financially secured life is enjoyed.
The following are advisable measures to lead life in a hassle-free manner.
1. Budget the expenses
We are quite aware that ‘A Penny Saved Is A Penny Earned’. This habit of savings must begin from self i.e., at home. The expenses must be budgeted at the beginning of every month. It could include the fixed expenses which occur every month and other expenses that are not foreseen. This helps us to realize the avenues through which the money is spent, and helps us avoid impulse expenses. Budgeting also helps one to properly figure out the financial objective.
2. Start Saving Early
Thinking about savings at a younger age is not very common. This mindset has to change. The earlier an individual begins saving or investing, the longer the time horizon he or she gets to achieve the financial goal. Also, we must remember that the power of compounding is higher in the later years, and we could even end up with double the money by starting 5 years earlier.
3. Plan for Retirement
There are a lot of schemes made available by the government to encourage individuals to save for retirement life. One can create a corpus by choosing to avail the Public Provident Fund, Employee PF, Senior Citizen Savings Scheme and National Pension Scheme benefits. These schemes provide better rates than Fixed Deposits.
4. Do Tax Planning
Planning the taxes is a must-learn for everyone. There is a list of investments and expenses (under the Income Tax Act, 1961) that can be deducted from the taxable income.
5. Asset Allocation
The risk appetite may vary from person to person. At the same time, one might be open to risks at a younger age. Hence, individuals could opt for high-risk investments (like equity) at an early stage of career, so that one can earn higher returns over the long run. Over time, the risk exposure must be reduced. Also, this helps diversification.
6. Invest Systematically
If an investor is opting for mutual funds, it is advisable to choose a Systematic Investment Plan (SIP) rather than a lump-sum. Such systematic investments provide liquidity and other benefits.
7. Get Medical Insurance
At the early stages of life, one doesn’t pay much attention to medical insurance. However, getting covered under medical and health insurance helps us mitigate sudden shocks like a serious illness.
8. Stay out of Debt
Unless we have cleared all our debts, we are not financially independent. Hence, we must categorize our outstanding payments and expenses and clear them over different time horizons.