27-May-2016 written by : FSI-Team
You flip a newspaper, gather from your social circle or turn on the prime time business news one common bulletin that resonates all across is that economically, times are tough. More and more people are being laid off and there are fewer jobs in the market.
While you may spend a moment to reflect on how the financial year that just went by was, but what you should primarily focus on is planning for the upcoming year. With the Union Budget 2016 behind us and the promise of economic growth from the Hon’ble Finance Minister, you can let those facial muscles stretch in a smile but do bear in mind that it will take a few years for the growth to actually trickle in.
Whether times are smooth or rough, our stomachs are ceaselessly in knots regarding our finances. We all have our share of seemingly unending financial woes. During good times our focus shifts from investments and most of us splurge on uncalled for places. During bad times, we suddenly wake up to our scanty pool of funds and look for investment options. We are doing it the wrong way.
To beat the wind out of your perpetual money worries just follow the below given tips:
Build a cushion – Invest while you can and insure for you must. When there are no cracks in your flow of revenue, the best thing to do is to start investing money for the unforeseeable future. There are several vehicles of investment that a person should have in his/ her kitty. For example, planning for retirement, taking medical insurance plans, investing in mutual funds, taking advantage of tax saving investment tools etc are some of the common avenues that people select for saving. These investments can help you tide over the days when you are short of money. For instance, you could use the tax saved by making certain investments to fund a trip rather than taking a personal loan for it.
Saving for rainy days – When you have a stable job and perhaps more than one members of your family contribute towards your family income then, the foremost thing to do is to estimate the absolutely necessary monthly expenses that your family cannot do without. Create a contingency fund where there is enough money to fall back on for atleast six months. This fund will help you sustain in times when either you or someone else in your family has been asked to leave the job. With one less salary to complement the family income, your monthly budget can take a massive hit. If you have been saving in the past, it helps you stay afloat without seeking help from creditors.
When you are not in the pink of your finances, taking loans can jeopardize the fate of your future credit needs. This is because, you may already be struggling to make ends meet and at such a time though credit will help you wriggle out of your tight spot, but non-repayment of this debt will leave a long lasting impact on your credit score. Thus, if you have rather forearmed yourself with an emergency fund, you have not only saved the day for your family but also saved your CIBIL score from plummeting.
One drop at a time – If you are wondering how to start building such an emergency fund then the simplest way is to cut back on expenses no matter how small they may seem. Take a pen & paper and for a month jot down all your expenses. At the end of the month you will be surprised to see the amount of completely avoidable discretionary expenses that you make. If avoided, you can save a sizeable chunk to put aside for rainy days.
For example, that pizza every Friday night can be cooked at home rather than ordered, or a movie every Sunday could be seen at home on DVD, a vacation abroad can be tuned down to a vacation within the country etc. Remember, one drop at a time makes your cup full. (Think leaky taps)
Get on top of bigger things – Having a good credit score would spell easy access to money when in need. Therefore, aim for a higher positive score at all times. Sometimes, reckless decisions taken can leave your score scarred for a long time. You may not even know which decision will really impact your score and how. It is always best to seek expert advice in such times. If you would like to check your CIBIL score online for free then log on to www.freescoreindia.com today. You can read more about on how to care for your CIBIL score on our blog.
We are not advocating the advantages of any investment tools over debt. Loans have their own role to play in your financial portfolio while other investment mechanisms have their own place. The point we want to drive home is that you must take utmost care while taking any financial decisions. Before finalising you must analyse your decision from the aspect of how it will impact your credit score. Incase you believe there would be a positive impact, whether direct or indirect, you must go for it or else reconsider, revise or discard your decision but do not allow a negative impact on your score to happen.
Take an oath this financial year to build on your score by taking prudent financial decisions and making the right investment choices.