Do you think that your finances are not in order and something needs to be done to improve your financial health right away? If thoughts like this have been bothering you lately, you are indeed on the right path, because by putting your financial health in order you will also end up improving your credit score that in turn will open up doors of lenders for you when you are in need of credit. However, if you are losing sleep over the improvement of your financial health, and do not know where to begin, these tips will help you get started.
Pay off outstanding credit card debt
Just as prudent use of your credit card can help you increase your credit score, going reckless with your credit card could have just the opposite impact and bring down your credit score. Therefore, if you have a large outstanding on your credit card, make arrangements to get rid of this debt. You could consider liquidating some asset to pay off this outstanding or even borrowing money from a loved one for the same. Credit card debt is not just detrimental for your credit score you also pay the highest rate of interest rate on it which can range anywhere between 36-40% annually.
Make a savings plan
This may sound like a broad brush statement, but in order to improve your financial health you need to save more. There are few ways to augment your savings. Firstly, you have to spend lesser than you earn and prudently cut costs wherever possible and secondly set aside a minimum of 5% of your salary towards some investment schemes. Also to get into the habit of saving regularly, consider systematic investment plans (SIPs) of mutual funds. By investing SIPs in small measures, you can get the advantage of the power of compounding over the years without burning a hole in your pocket.
Spend according to a budget
If you are the kind of person who does not know where his salary is going you need to make a budget pronto. A budget will help you get an idea of your fixed and variable costs and help you regulate the flow of money. Once you have made out that budget you will be able to plug the loopholes and cut costs prudently enough. A good budget should allow you to pay off your fixed costs comfortably, save a portion of your income and yet have some money to spend on yourself for entertainment purposes. The idea of being in good financial health is not to live like a miser, but to deploy your money in a manner that it works hard for you.
Get adequate insurance cover
One of the cardinal mistakes that people make while making their financial plans is that they concentrate only on the investments part and focus all their efforts on enhancing their savings through making investments. But as any financial advisor would tell you that the first step of a good financial plan is to have adequate insurance cover. This is especially relevant in a country like ours where is no social security. Life insurance companies therefore provide the much required service of protecting your loved ones from financial vagaries if something were to happen to you. Do not therefore underestimate the power of insurance and check with your financial advisor to see whether or not you are adequately covered and your family will not be in a financial bind if you were to depart early.
Keep a hawk eye on your CIBIL score
Lastly, and perhaps most importantly, you need to make a habit out of keeping a check on your CIBIL score. You CIBIL score is a barometer of our financial health. Not only to do you need to make a continual attempt at increasing your CIBIL score, you must also make it a habit to check your CIBIL report at least twice annually to check whether or not it is free of any errors or discrepancies. Checking your CIBIL score periodically will also ensure that you do not become a victim of personal identity theft. Overall, keeping a watch over your CIBIL score and ensuring that it is above the level of 750 and above serves as a reassurance that you are doing everything right to maintain your financial health.
Like it is with your physical health, maintaining your financial health requires discipline and perseverance. With good financial health you can be assured that you will stand prepared even if life were to throw a spanner at you occasionally.
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