India has seen a paradigm shift from being a country of “Savings” to “Expending” populace. Our forefathers believed more on saving for future and less spending for the present whereas the today’s generation has catapulted into a contrarian view, i.e., send today, even if you have to take credit, and think later about the future when it comes. The world is undergoing a change and today’s millennials they want to leave in present and don’t want to compromise their present with any future benefits, seen and unseen.
Having said that it becomes pertinent for the current generation to, at least, inculcate a sense of financial discipline to ensure that the one does not get trapped into “debt trap” and has enough resources to manage its needs and responsibilities.
Personal Loans and Credit cards have become norms of the day and nobody is shying away from availing them even beyond his financial capability of repaying them. In my view there is no harm as long as ne has a control over the expenditure and payment cycle for these types of credit and also one can bring in lot of financial stability with little bit of discipline.
Here are some tips which can help a person to manage his finances well;
1. Personal Loan: Mostly the salaried people and self-employed will get the personal loans sanctioned by the Banks. One must ensure that before you take the loan find out which is the bank providing loan on lowest interest rate. This way you can save, cumulatively, a good amount of money. Never ever miss out on EMI. If for any reason you cannot pay the EMI then ensure to pay the Interest portion to make your loan active and also to manage a good CIBIL score. Whenever possible try to close the loan by going for “preclosure”.
2. Credit Card: The very first rule is that do not go for a credit card unless you need it badly for example you are a frequent traveller, need to manage your cash cycle etc. Once you have had the credit card the most important step is to read the terms and conditions carefully and memorize the credit period and payment cycle. Once you have it on your finger tip then by paying back the outstanding amount you can almost use the credit card for free. Remember there will be credit cycle and if you pay the outstanding within the that period then the Credit card company will not charge any interest on that. Never ever default on credit card payment as that will lower down your CIBIL score and your other loan application might suffer a risk of rejection due to low CIBIL or credit score.
3. Home Loan: Same as previous two topics ensure to pay the EMI within time and explore the bank which provides you the lowest rate of interest. Also, try to find out which bank allows you to go for part payment and preclosure. That can be a great help when you want to close the loan early to save on the total interest paid to the bank.
Other aspect of Home loan is that you can take tax benefits of the housing loan. That will also help you in reducing the total liability in year as your tax outflow will be impacted.
4. Systematic Investment Plan (SIP): SIP is a great way to create wealth in long term by putting aside small amounts of money on regular basis. You can start with any amount and there is no limit. You can put, lets say, Rs. 100 monthly in a Recurring Deposit Account (RD) or put 500 monthly in Mutual Funds. SIP brings in a beautiful sense of financial discipline and also helps in growing your wealth.
5. CIBIL Score: This has become a ‘Financial Character Certificate” for any borrower or applicant. You must be very careful with your CREDIT Score and never ever should meddle with it. How can you maintain a good credit score? One by ensuring that you pay all your dues within time and secondly you don’t keep checking your CIBIL score. Unfortunately, many are not aware but frequent checking of CIBIL score lowers down the score so, we must be careful on that.
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