Financial Stability is nothing but being able to lead a life without any stress. Imagine a life where you have enough money saved or invested and you don’t have to worry about your expenses for the rest of your life. You may think that this is possible only in case a person is earning lots of money, which is completely a misconception. So before going into the article in case you want to know about me click here. Lets start.
Every day requirement is different for each Person. Few people lead a very low standard of living and they do not really need much money for there day to day life. While Others who have a high standard of living require much for there everyday expenses. Both kinds of people require a balance between there Expenses and Income. In order to be prepared during any kind of emergency situation which arise in there life unexpectedly. To Overcome such unexpected scenarios all that we have to do is follow 4 easy steps to Financial stability , mentioned further in this article.
Step 1 - Building Emergency Fund
What do i mean by building emergency fund ? This fund will be used only when there is an severe need of it. The need can be related to sudden unexpected medical expenses or economic crisis or lost a job Etc.,The usage of these funds completely rely on each individual. These are the funds which you can keep aside in either Liquid Fixed Deposit or Liquid Funds which you can withdraw any time without much efforts. Please note that these funds should not be parked into any risky assets it should be completely safe and secure. These funds you must withdraw only in case of emergency, where you dont have any other option. But then the question arise how much should i keep aside for this emergency fund ? This will take us to Step -2 of this article.
Step 2 - Tracking Your Expenses
Many people don’t keep track of there expenses, this is were the major problem lies. We always tend to believe that we are well aware of spending and where exactly the outflow of the money is. Trust me when you start noting it down all your expenses, you will be shocked to see that you have spend most of your earnings in unnecessary fields – Like coffee , restaurants, too much shopping or partying with friends etc,. Am not against all this but you must have certain fixed amount for your enjoyment, for the relaxations but you must not cross the limit. So let’s get to the point , when you start tracking your expenses you will realize your spending nature. when you have the data of your spending’s , pick out those unnecessary expense. After that you will know what are the fixed and unavoidable expense. so here comes the answer for How much should be put into Emergency Fund ? It’s simple 12 months of your fixed and unavoidable Expense. To achieve Financial stability you have to shrink your expense and start expanding your savings or investment sections. Now lets move on to 3rd step of this article.
Step 3 - Protect Your Savings and Investment.
Trust me even by getting admitted in hospital for a week can drain your major portion of savings. On our day to day life we compromise a lot on our health. This compromise can be because of our work life or poor eating habits or lack of Exercising. Because of this we are at major risk of getting into any health issues. First thing is improve your health by adopting some healthy habits. Even after all precautions also we never know when an medical emergency arrives. Get a health insurance for you and your family and this is a great investment which will be protecting your all other savings and investments. Health Insurance is going to be the major balance point in finding your financial stability.
Step 4 - Consistency
Consistency is the key to find success in any kind of field. This is applicable in planning your personal finance too. You have to be consistent with your savings and investment strategy, You have to be consistent in tracking your expenses. Make sure to save before you spend, every month allocate certain amount into particular investments or savings. Make a proper plan while investing into any kind of assets. Take all the precautions and do all the research before getting into any investments decisions. Thank you for reading till here hope you liked the content. In next coming articles we will discuss further about various Investment option available in India. Don’t Forget to Comment down your feedbacks.