Five financial habits to become a more disciplined investor in 2022-23

Here are five financial habits you should adopt to make your investments work.

Budgeting and building emergency corpus

Knowing your money inflows and outflows is essential to financial planning. One may face the consequences without budgeting. To start with:

1. Jot down your estimated income and your likely expenses for the year.
2. Differentiate between your needs and wants.
3. Take a note of costs that can be cut down to save money.

Meanwhile, it is advisable to set aside a fourth of your total income, if not more, for growth-oriented investments. If you don’t have one, build an emergency fund systematically, and keep it handy in your savings account or as a fixed deposit. Ideally, the size of your emergency fund should not be less than six times your monthly income.

Don’t add undue liabilities

Adding financial liabilities adds to your stress, which may derail your financial planning. It means that your expenses negate your income, which is not suitable for healthy finances. Go for need-based purchases, which are necessary and can’t be ignored. If there are many, try to prioritise and focus on immediate, unavoidable needs.

Have consistency and systematic approach

Being consistent with a systematic approach always yields excellent results in the long run. If you have your regular investments, keep them intact. Be regular with your SIPs, insurance premium payments and other investments. In case you have a loan, don’t miss your EMIs. If budgeting allows, pre-pay on the loan periodically to get out of debt faster. Timely payment of your credit card bills needs to be a priority. This helps you get a healthy credit score which increases your creditworthiness. These small but meaningful steps will keep your liabilities under check, which ultimately helps in financial planning.

Avoid premature withdrawals

Investments made should always be goal-specific with stipulated tenure. Premature withdrawals bring you to square one, and restarting the same may not always be easy. Further, an earlier than planned or a partial withdrawal does not let you see the benefits of compounding and can potentially derail your plan. Here, an emergency fund comes to your rescue, which you may liquidate during urgent times. You may use credit cards if the situation demands a short-term loan and you are comfortable settling it in your next bill cycle. So one should not keep an eye on your investments for every intermittent and unexpected need. Investments are long-term, and withdrawal actions do not let your money work for you.

Increase your investments regularly

Every penny saved when invested creates wealth. Often, it is seen that investors do not review to increase the quantum of their investments. This is not a good practice. As the years pass, it is worth looking at your finances, and as per the increasing income, you should increase your investments. For instance, on a salary of Rs 40,000, try to invest at least 20 per cent (Rs 8,000). And if the income increases to Rs 50,000, your investment should rise up to Rs 10,000 and so on. This helps keep your investment journey on a strong trajectory leading to future financial independence.

Small but regular steps are essential to restore discipline in your financial behaviour. A few deep thoughts, a periodic review and sticking to basics without over-stretching your finances can help you go a long way. It not only improves your self-confidence and propels you to do better, you feel empowered as financial-related stress remains at bay. Try it.

The author is the CEO of BankBazaar.com. Views expressed are that of the author.