Can you ever imagine how much it will be helpful for you if you could make extra space in your monthly budget? Having extra money can be beneficial to plan a vacation, and also to save for an emergency fund. Most importantly, you can be debt free way sooner than you can expect.
No worries, here I am going to tell you about 5 important things that may cost you thousands if you do not consider them in your personal financial planning.
You just need to learn how to save more money on daily and monthly expenses. Additionally, how do you set aside funds for your future?
Here are the 5 things that may fail your personal financial planning if you ignore them totally.
1. Always look for the best deal before spending
In our busy lifestyle, we can find very little time to buy things we require without waiting for the best time or best deal. Sometimes it’s ok to buy in a hurry, but it may cost you a lot while you buy an expensive item. If you usually buy online, there also you need to wait for the best shopping deals or find the best prices offered by sellers.
So, it makes sense to wait for great deals and spend accordingly.
If you buy directly from retail stores, make sure you are looking for the best deals and discount offers. Normally, these stores offer good deals on weekdays, as most people buy on weekends. Always compare prices before you buy. Try to buy things in bulk so that you can save on bulk discounts and also save time.
If you prefer to buy online, it will be much easier to compare prices. Normally you may get cheaper prices in online stores compared to the retail stores in your neighborhood. Apart from that, you have multiple options to make payments via online portals, and if you cancel the order, the refund process is also easier than usual. So, look for the best deal by comparing the product you need, in different online stores, and from different brands. This will help you to get the maximum discount available on the same item.
2. Pay off your debts as soon as possible
Paying off debt is the best way to manage your finances and make space in your monthly budget. Whether it is a secured or unsecured debt, every debt payment will also drag some interest amount from your monthly budget. If you pay off your debts asap, it will save you thousands from interest payments.
Some unsecured debts such as credit card bills or payday loans are way more costly than other debts. So, you should try to pay off your unsecured debts first.
Choosing not to pay high-interest debts may cost you in two ways:
- (i) You pay thousands of dollars in interest.
- (ii)You lose thousands more, which you may earn by investing that money.
You may choose different debt pay-off options such as debt settlement or debt consolidation. By settling your debts you may save a lot, but your credit score may be compromised. If you choose to consolidate your debts, then you may take out a low-interest loan and pay off all the high-interest debts.
3. Refinance your high-interest loans
You may call it similar to taking out a debt consolidation loan. If you have a high-interest loan, you should contact your lender and negotiate to reduce your interest rate.
If you have a strong credit profile, the lender may easily accept your offer and happily work with you. If your lender does not cooperate with you, then you may shop for better loan offers and refinance your current loan with a different lender.
By refinancing your existing loan you may :
- (i) Reduce interest rates and save more on interest payments
- (ii) Get an easy repayment term with a lower installment
Wise personal financial planning is all about making the right choices at the right time. If you are getting a lucrative offer from different lenders, then you should work with them to get the benefits. This way you can save thousands of dollars from your paycheck and interest payments.
4. Create an emergency fund
Emergency funds will help you during a financial crisis when you require a lot of money all of a sudden. If you have a solid emergency fund, you don’t have to depend on credit cards or apply for high-interest loans. It is a must to have an emergency fund if you have huge debts on your shoulder.
You should set the right amount for your emergency fund considering your financial situation. As per many professionals, a good rule of thumb is to have funds worth three to six months’ living costs. In case of any sudden job loss, you may use that money to pay for necessities, and meanwhile search for a new job. Your emergency fund may also help you tackle sudden big expenses such as a car repair, some home renovation, or a medical emergency. So, creating an emergency fund is the best way to manage your finances.
5. Invest wisely
There are two types of investment options available for you. They are:
a) Long-term investments – Investment options that take a longer time frame to give returns. It comes with greater risks than other investments, but also provides a higher ROI (return on investment).
Some of the best long-term investments are:
- (i) Real estate
- (ii) Dividend stocks
- (iii) Small-cap stocks
- (iv) Stock funds
- (v) Bond funds
b) Short-term investments – These are the investments that come with low risk, and also a lower ROI within 5 years.
Some of the best short-term investment options are:
- (i) Short-term U.S. government bond funds
- (ii) Treasuries
- (iii) Short-term corporate bond funds
- (iv) Certificate of deposit
- (v) Savings accounts
It is up to you to choose the best investment option, according to your needs and financial situation. The best way to manage your money is to use it in such a way that it may generate more money for your future. Whatever investment option you choose, make sure you invest in multiple types of investments to diversify your investment portfolio.