December is here, and very soon, we will say goodbye to 2023 and welcome 2024. It is a good time to reflect on your financial planning journey by reviewing the past year's achievements and planning for the year ahead. You may take the following 6 steps for a smooth financial planning journey.
Budgeting helps you to allocate your income towards expenses, savings, and investments. If you don't follow budgeting, you can start with 50/30/20 budgeting from next year. It helps you allocate your income as follows:
a) 50% towards needs that are essential for survival. Some of these include food, clothing, utility bill payments, medicines, transport, rent, EMIs, school fees, etc.
b) 30% towards wants that make you thrive. Some of these include dining out, shopping, entertainment (movies, sports, OTT, subscriptions, etc.), vacations, spending on hobbies, gadgets, lifestyle expenses, etc.
c) 20% towards savings and investments to achieve your financial goals.
The 50/30/20 budgeting method helps you maintain a balance between enjoying the present by spending on wants and securing the future by investing towards financial goals. If you are already following the 50/30/20 budgeting, during your year-end financial planning review, check if you can increase the 20% amount going towards savings and investments. It will help you achieve your financial goals earlier than scheduled.
Once the budgeting part is sorted out, focus on the emergency fund during the year-end financial planning review. An emergency fund helps you tide over any unplanned or unexpected financial emergencies. You can have an emergency fund with 3 to 12 months of expenses. The amount depends on your current financial position, whether you are salaried or self-employed,
Read more on livemint.com