10 commandments of personal finance

We all work and earn money. Do we manage our hard earned money effectively and efficiently? New Year is the time to take resolutions. Why don’t you take a resolution to prioritize and organize your personal finance? Here are the 10 commandments of personal finance that can help you in managing your personal finance better. 1. Create a budgetrnMost of us hesitate to make a budget because we think it is about cutting all the fun in life. Budgeting is not about cutting all the fun; it is about conscious allocation of funds. Once we start spending consciously, our mind will find out a whole new way of having fun within the budget. You need to create a workable budget that gives you extra money and life. 2. Spend smarter and save morernSpending less and saving more are lifelong living skills that need time to develop. Unless and otherwise, you have a clear written budget, you will lose your focus and go after consumerism and materialism. To save more, obviously you need to spend smarter. To spend smarter, you need to understand your own spending patterns. Consciously you need to track all your expenses on a daily or weekly basis. So that you can find out what influences your spending pattern and you can stay away from those influencers. 3. Family protectionrnAs a bread winner, you provide a lifestyle to your family. This life style need to be protected with sufficient life insurance cover. Otherwise your family may not be able to continue the same lifestyle in case of any mishappening to you. A word of caution here, don't fall prey to ULIP schemes. Opt instead for a pure term insurance policy. These policies give you high coverage with low premium. rnAlso cover yourself and your family members with adequate health insurance coverage. The coverage amount of the health insurance policy needs to be decided based on your health consciousness, your family health history, and the class of hospital you choose for treatments.rn4. Asset protectionrnBefore starting to build fresh wealth, it is our duty to protect our existing assets. Assets like house, flat, or car can be insured against accident and natural perils. The event of earthquake or terrorist attack to our flat/house seems to be remote. But the impact of such things could change our financial stability upside down. So protect your house and other major assets with proper insurance.rn5. Emergency reserve rnYou need to accrue savings for some surprise situations like loss of job, break in job or sudden expenses like a major repair to your car or house. Generally, the emergency fund needs to be in the range of three to six months' family expenses. If you have created this contingency fund, in the event of an emergency you need not pre-close your other investments and thus you avoid paying penalty or booking losses. 6. Debt payoff planrnIf you are in debt, you need to create a debt payoff plan with different scenarios. So that you can find out how some more savings or a different repayment order will help you get out of debt faster. When creating a plan, you need to choose one which fits your attitude.rn7. Setout goals & layout plan rnIf you don’t know where you are going, you may end up somewhere you don’t want to be. Decide your financial goals first. It may be buying a home, buying a car, or children’s higher education. To get where you want to go in life, it is important to decide in advance how you will get there. What you need is a roadmap, a financial plan to achieve your financial goals. So create a financial plan for you and your family. rn8. Retirement planrnIn spite of the world wide pension crisis and a growing acceptance that we must plan and save for our retirement, the harsh reality is we are actually not saving enough. Research reports reveal that only 15% of the individuals are saving sufficiently for their retired life. Don't put off today what you can't afford to do tomorrow. Do your retirement plan TODAY to have a comfortable and enjoyable retired life.rn9. ReviewrnYou need to check up your financial plan and investments semi-annually so that when there is any deviation from our original plan, you can take corrective measures to control the deviation. rn10. Work together with a professional financial planner rnThere is a lot of help available for you online to create a financial plan in various websites with financial calculators. But if you want to create a complete, comprehensive, customized and workable financial plan, you may seek assistance from professional financial planners. rnYou really need a professional assistance when you want to review your financial plan and investments, when you want to add a new goal, or when you want to pre pone or postpone one of your goals.rnIf you follow these simple but authentic 10 commandments, by next year you will be richer than what you are this year. Celebrate the New Year with much more confidence and peace of mind by following these simple steps for financial success.