10 Good Financial Habits for Successful Financial Planning

Developing good financial habits is the mark of a successful financial planner. Your family and friends will no doubt have a ton of suggestions and advice to offer. While you can always listen to them, remember that your financial goals are unique to you. 

Therefore, to be financially independent it is important to imbibe sound financial habits that will help create a significant corpus for you and your loved ones. 

The success of your financial planning depends on following these key mantras. Take a look:

1. Handle your Money Carefully

You do not need to possess a degree in finance and accounting to manage your money smartly. Take baby steps as you formulate your financial plan and remain dedicated and committed to it.

Financial planning also means a ton of decision making. Knowing where to start can be a challenge. There is no universal example that is going to help in modelling your portfolio. That’s because no two people have the same financial needs and goals.

2. Track and Review your Plan Periodically

If it has been over a year since you looked into how your assets are performing across the board, then you are long overdue. Check what you have saved in the past financial year. Assess if you are on track to meet your objectives in the current year. Incorporate any changes in income, expenses, retirement age and fluctuations in the market into your financial plan.

Update your financial plan periodically. This will help you build a greater financial corpus maximising returns, giving you financial freedom as you age.

3. Systematic Savings Approach

A great start to inculcating sound financial habits is to adopt a systematic approach to regular savings. The general trend is to save a minimum of 10% of your monthly income and put it towards your investment or savings and let it accrue interest over time.

Align your savings and financial investments with your life goals. Make certain estimations and calculations to arrive at a corpus figure that will help you to achieve them, one by one.

4. Regulate Your Expenses Wisely

You may be living way beyond your means if you observe that you are struggling to make ends meet. Check the number of unplanned expenses which may not be aligned with your overall financial planning.

You may get a personal loan from SMFG India Credit to tide over your shortfall and regulate your monthly expenditures in the short term. Use the Personal Loan Eligibility Calculator, a free tool available on our website to check if you qualify.

Must Read: 10 Rules for Beginners to Follow While Doing Financial Planning

5. Maintain a Personal Balance Sheet

Start a personal balance sheet as part of imbibing sound financial habits. List down all your financial obligations including debt on credit cards, all types of loans and more. Jot down assets, for example, property value, investments and bank balance. This will help you arrive at your personal net worth.

The goal is to reduce liabilities over time to gradually increase your net worth. Timely repayments on existing debt help to do that. Also, you must invest in assets that will appreciate over time or offer higher returns in the long term.

6. Diversify your Asset Allocation

It is best not to put all your eggs in a single basket. The mantra is to diversify which should pave the way to enable you to reach your life goals. 

Expose your portfolio to different asset classes. Stocks, bonds and cash are traditional. You may include equity, debt, or even gold with a mix of short and long term growth assets, giving your portfolio the balance it needs. It also minimises your investment risk whilst providing multiple avenues of income streams and returns.

7. Manage your Debt Wisely

Good financial planning also involves skillfully managing your existing debt. Otherwise, you will not be left with any savings at the end of the month.

The absence of doing so may compel you to take on more debt, adding to your financial burden. However, if the situation cannot be avoided, then it is best to apply for a personal loan from SMFG India Credit to help you get out of the debt trap.

Take the help of a personal loan EMI calculator. This is a free tool that is available on our website enabling the user to calculate the monthly instalments to be repaid to the lender.

8. Get your Risks Covered

It is necessary to evaluate how much risk you wish to take with your diversified investment portfolio. Take on too much, you put your savings at high risk. A severe market crash can wipe out your entire investment leaving your loved ones and you in financial jeopardy. On the other hand, playing it safe with low risk may not give you enough bandwidth for adequate wealth accumulation.

Therefore, your financial planning must include wealth accumulation along with wealth preservation. A combination of life insurance, healthcare plans can cover your risks and keep your family financially strong even in your absence.

9. Handling Surplus Cash Judiciously

If you have left over cash, then you should have a plan in place to manage it too. Do not let access to cash lead to unnecessary spending. Instead, use it to tackle future inflation enabling you to meet both your short and long term financial objectives.

On the other hand, if you need instant cash, then taking a personal loan is better than disturbing your savings or investments. SMFG India Credit offers affordable personal loan interest rates with convenient repayment tenure via fixed monthly instalments.

10. Planning your Taxes

You don’t really want to pay tax on your hard earned money or your investments. Therefore, tax planning forms a major component of sound financial habits that will assist you in maximising your potential returns.

Make sure you invest in tax efficient instruments. Remember to check the list of tax deductions and exemptions that can minimise annual tax liability.

Final Thoughts

When it comes to financial planning, you may need to rely on professional advice. However, inculcating these 10 financial habits ensures that you have a plan of action combined with a disciplined approach to achieve your life goals.