Simplify Your Personal Finance

Simplicity is an understandable virtue. Simplicity in each and every segment of life is the inside flavour which ever body likes . When anything taken in a simple way it does not allow any confusion.  If we take all the things in a simple and positive way it will have a huge impact on your success and to live easy life. Managing money is also simple if we take it in a smooth and simple way.  Managing money needs a dose of simplification.  Most of  the people thinks that finance is a complex vehicle ,some of them are in a dilemma of choices and decisions and some do not like numbers and calculations. Routine management of personal finance can be rescued by the perils of indecision .If you follow the  below mentioned points to simplify your finance, it will have a limited effort to manage it.

Recognize the bank a/c as the primary books of account in personal finance. Streamline your income into one or two bank a/c. This helps in understanding all income source and how it grows  over time. It also helps in deciding how to fund the expenses and investments.

Set up your routine expenses through your bank a/c. It is easier to pay bills, utilities, EMIs , taxes and insurance premiums by giving standing instruction to your bank.   You will not feel any stretch while  paying . Take time to read your bank statement to see how your income is apportioned. It is possible to export your bank transaction to apps to analyse income and expenses. There is a lot of tool  in the apps which help you to set limits for the various heads, alerts you when it crosses the limit and automate your monthly budget.

Reduce cash in your life. When you transact with your debit or credit card , your expense are documented. Your bank statement will tell you how you have spent your money. If you want to take charge of your finance then you have to make three realistic estimation – the adequacy of income , limit to your expenses and consistancy of your savings. When you are taking charge of your finance all expenses should be documented otherwise you have a limited control on your finance. Cash only shows the withdrawl without the clarity of expenses , so it effects the accounting effort.

Reduce the number of advisors and intermediaries with whom you deal. If you have different person for different investments like your stocks  are from stock brokers, your investment done by your financial advisor, insurance by an agent. You are dealing with too many people.  You will be confused while taking decision because you are getting different advice from different people. Add to this if you list  your  no. of stocks , mutual fund investment in different folios, bonds and saving certificates which leads to a  complicated portfolio. It is better to have financial advisor who will consolidate your portfolio and help to outsource the functions which they cannot perform than have multiple entities to deal with while managing money. You also have less stress because you are dealing with one.

Reduce the no. and type of product in your portfolio. Holding too many variants of funds, insurance and stocks does not help to increase  your wealth because it is too much fragmented. If you hold 30 items in insurance, Mutual Fund Investment, stocks and savings scheme in your portfolio, you have too much.  Choose a few reputed stocks and mutual funds which have a good track record and which likely to have all that which you need. You do not need a  new tax savings and ULIPs every year. Try to avoid manifold investments and start saving in simple tools.

Consider the merits of passive investments that is choosing products that do not require constant monitoring. Pick diversified large cap stocks or mutual fund, index fund, bonds of AAA issuers and fixed deposits  of well known bank  and Govt. schemes. These investment choices may not have the excitement of novelty value, may score low but will save from the heartburn of wrong decision. Start with regular investment habit in asset class according to your risk profile. Your investment should be align with your goals. Regular and consistant Investment Planning is a smart approach to create wealth without any mental stress.  Choose simple and time tested products for your investment. When your investment is aligned to your goals you will be able to enjoy the merits of passive investment.

Avoid dealing with investment cash flows when you don’t need it. If you have a regular income and are building a portfolio to generate long term wealth. Pick growth, cumulative, re- investment and accumulation option. You will save yourself from the trouble of monitoring your inflow in your account and again take another decision of investing it. Many of us intend to review and reconsider  periodically but fail to do so. It is a good idea to stay invested and keep the money deploy into it, not idle.

Align your investment to your savings habits. Don’t spend recklessly. You can start auto debit facility from your bank account which directs money to investments before it is available to spend .Start some of your investment in the first week of the month and if you have a surplus at the end of the month before the next salary comes in , deploy the balance by electronic transfer in existing folio. Don’t let it carry forward in next month balance. By this you are apportioning your left over which works as a fragrance to your investments at the end.

Take time to form simple rules while dealing with money. You may have a free space in your mind while taking other financial decisions.

Read: SEBI Registered Investment Advisor l Best Taxation Planning Services l Planning for Early Retirement