Steps to achieve financial security

All of us want financial security, but are we disciplined enough to achieve this goal? If we are ready, then financial security can be achieved in a jiffy. First thing to do is save at least 10% of your income, it would be best to save around 40%, but first start with 10%, that is easy, right? Set goals and amounts to which this saving would be allocated and keep increasing this amount every year, with the same percentage as your income increases. These savings are to be used only for the purpose for which they are saved. So in case you want to go for a holiday and you had not saved enough for it, increase your savings for this purpose, but do not use the money from other goals unless it is an emergency.

Next for Emergencies create an emergency fund. Also buy a health insurance cover for yourself and your family, in addition to a term plan. This will take care of your emergencies, so that your savings for your goals remain intact. Next book profits regularly, one of the ways to do this is asset allocation and rebalancing, with every rebalancing of your asset allocation you would be booking profits and buying cheap the asset which has dipped. Ensure that the investment is in line with your goal horizon. Do not take extra risks, because if the markets fall as in the last few days, your goal will be difficult to reach.

Loans should be used to tide over temporary requirements and to build an asset only. Do not use loans for every small thing. If the loan does not create value in terms of increased income in future or an asset which will increase in value, do not take it. Every want is not a need, so stay away from loans. Even if you do take loans (for the purpose mentioned earlier) ensure that you repay them on time as per the schedule. Last, do not invest in instruments which promise extra ordinary returns, many persons (some your friends) would give testimony, but do not fall for this. Follow these steps and you should be on your way to financial security.