Mid-year tips on checking your financial well-being

No one could ever think even in their wildest dreams that someday a man would be caged inside his home and an activity as simple as going out would become such a huge task to undertake.

The past year and a half has been unnerving and distressing for most of us. From the onset of the pandemic to getting confined in our homes, losing jobs, being furloughed to losing loved ones. One takeaway from it has been the importance of maintaining and improving your financial health. How having a financial cushion can help you get through difficult situations.

The key here is to take a moment and reflect on how the past year has been and how to move forward. This is also true for your 401k investment funds.

Here are some tips to help introspect your your financial well-being

1. Invest in the future –

Prioritizing your saving commitments is very important. Spending your paycheck on the expenses and then saving whatever is left is not the right way to approach your saving. Decide on your goals and make provisions to save accordingly. This along with the compound effect will help your money grow.

2. Start early –

If you have decided to invest in 401ks start as soon as possible and let the compounding effect grow your assets. Let your money work for you while you sit back and see your money grow into a decent amount until you retire.

Like, if you save $400 per month it will be $4800 per year and if we get a return of 5% on it every year it will be $5040 every year. Now imagine a person started the age of 25 and another who started saving at 35. 

3. Employer match –

Many employees do not maximize their 401k savings just because they do not take full advantage of what their employers have to offer (refer #3). Yes! Your employers. Many employers match their employees’ contribution to the retirement plan to a certain percentage. Now, if an employee contributes less then even his employer contributes less to the fund and ultimately the employee misses the opportunity to save more for the future.

Generally an employer contributes 50% up to the 6% of his employees’ contribution. Now if any employee contributes less than 6% in his saving fund, he is also saying no to the free-money offered by the employer.

4. Do not try to predict stock markets and invest for the long term

Always remember the goal of this saving is to have a better time after your retirement. It is a long journey to reach there! Hence, do not focus on short term ups and downs in the market and base your decisions on it. To maintain your financial well-being and not fall into this trap you should diversify your portfolio and divide risks. 

5. Start learning about finance early

The pandemic has shown everyone the importance of having sound financial well-being. Main aspects of achieving this is by understanding how to channelize personal finances and also learn about money management. By imbibing in young minds habits like saving from a tender age will help them in the long term. Also, having this knowledge will help the individuals make right choices about investment options and make better choices.

6. Reduce debt –

Lowering or lowering  debt is one of the greatest ways to handle finances. It gives you a clearer picture on how your money is moving. It also gives you room to think about investing your money and getting its worth. This way you ensure your financial well-being and also invest in your future.

7. Save on taxes –

Using a percentage of your paycheck amount to invest in a retirement plan is always a good option. Almost all retirement plans have offered tax advantages to the customers during the saving and withdrawal stages. A person can choose from 401k, IRA, 403B, 529 and even select more than one option to reduce taxes.

8. Don’t get carried away –

Every person has been around an individual knowing everything about everything. Such people have the ability to sway you to make choices you don’t want to make. This is also true for financial planning, there will be a lot of people out there who consider themselves and give out financial advice, this could be your friend or a TV personality or just media hype about a company. Making decisions based on their knowledge might cost you a lot.

If you are really in a fix about your investment options, consulting a professional financial adviser is a good option. 

9. Take calculated risks

Investing is all about maintaining calculated risks lower than the rewards or more so creating a balance between them. You should also be aware about the risks that you are undertaking and check if your tolerance is up to that mark or not. Also, one must always assess the compensation for taking the risks with your investments.

Financial exposure is the money that one stands to lose if the investment decision fails. For reducing the risks and the exposure diversification strategies are used. For this reason people can invest in principal protected investment schemes with low or little risks.

10. Financial Planning –

Making a financial plan and following it to the T. It will help you set goals in life and achieving these milestones will leave you happier. Also, making a plan helps an individual to rule out making unnecessary expenses and save you from drawing in your debts later. Using all the money saved from taking these measures can be invested in any retirement plans of your choice so that you enjoy your golden years without bounds. Most important of all, a financial plan will help you during emergencies and the pandemic has shown us how helpless one can get without good financial planning.

Until next time!

Be Safe & Healthy,

Sunil Gangwani

Sneha Kotian

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