Your Money: Five steps to spending wisely, investing smartly

Market volatility is part and parcel of the game. To get good returns, you must regularly invest for a long period of time

By Shams Tabrej

A new year is a good time to audit our choices and decisions towards financial health. A good financial plan always serves its purpose and never lets one go off the track in accomplishing the financial goals.

Review investments
It is important to audit your portfolio periodically to assess the situation with your assets, their developments, and to watch out for your income. Investment portfolio changes with regard to your risk profile, with age. At a young age with limited liabilities, you are open to high-risk, high-return investments. Conversely, with numerous liabilities, you probably will turn cautious towards high-risk investments in the latter stage of your life. Organise all your investments in one place and evaluate their overall asset allocation. Track the returns on the investments and check whether these meet your presumption.

Examine expenses
Understanding your spending pattern is also very crucial. If you are unaware of your actual spending habits, you may end up setting restricted spending goals, resulting in dwindling month-end savings. Assess your monthly income and expenses with the help of a spreadsheet or app to know what mortgage payment you could bear or which costs you could cut. If you have those numbers coordinated, it is easier to have a clear picture of the cash flow and your financial stand regarding what you can afford.

Set goals with reasonable return expectations
Many times, people tend to have preposterous assumptions and are more enticed to invest in certain assets just because the previous years market returns were great. However, that may not be valid forever. List your short-and long haul objectives and adjust them to your return expectations. For instance, for transient goals, you might put resources into fixed income instruments which will give you moderate returns, while for long-haul objectives you might invest in equities for higher returns.

Automate longer-term savings
Setting up automatic transfers into your investment funds every month ensures sufficient cash flow for savings and investments. It is beneficial to have things automated as much as possible for improving long haul outcomes. Automating your savings also includes investing in a retirement fund or term and health insurance at a young age. Automating the saving funds ensures thaty our biases do not hinder you from making these investments. It also ensures that you never delay or default in making payments or premiums. It additionally guarantees that you have a clear limit on your spending and assists you with keeping up with financial discipline.

Invest regularly
Market volatility is part and parcel of the game. To get good returns, you must regularly invest for a long period. At times, the market creates an impression of not yielding great returns for a considerate time. The last two pandemic years have shown us the importance of savings and its benefits in tough times. People with numerous liabilities should, subsequently, build an emergency fund along with the savings that can endure at least a six-month-long loss of income. Good financial planning can go a long way in providing peace of mind.

The writer is founder, Ezeepay

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