Your guide to managing money

Your guide to managing money

When it comes to managing your money, you can never be late to the party. No matter how earlier or later in your life the realization sets in, any time is the perfect time to start managing your money. Now you must have seen a careful use of the word ‘managing’ and not ‘saving’ money. The reason being, a wise path to increasing your safety net doesn’t simply lie in increasing your income or saving up all your earnings, it also lies in making rightful choices in the types of expenses you make. 
If you are watchful of the spending, you will stay in control of your finances.

Following are the ways in which your Thinking Hat can serve its purpose.

 

1) Label and State your Budget

If you want to be at the top of managing your finance it is essential you know exactly how much of it you have coming in every month. For many there are multiple sources of income (lucky them!), they need to consolidate and state how much of it is open for use after deducting the quintessential monthly expenses such as EMIs, Insurance premiums, taxes etc.

What you arrive at is your pool of budget.

 

Tip: Use an online budget planner to add the chic factor too your otherwise dull and drab paper-calculator charade.

 

2) Watch the outflow

If you are spending more than you are earning then you need to stop in your tracks. Sometimes even harmless and hence ignored seepage of money via some magazine subscriptions, sandwiches during lunch, direct debit for notification alerts or GPRS schemes, gym you no longer visit etc. build up a chunk of wasted spending.

 

Tip: Keep a spending diary or download an App where you can record your real-time expenses. At the end of each day/week evaluate and cut those loose ends.

 

3) Pay off your debts

You’ll never be able to earn more from your savings than you will pay on your borrowings. So aim to pay off your debts first – especially those with the highest interest rate.

 

Tip: Keep larger chunks of EMI’s in initial months to get rid of the burden. Whenever possible, pay off lump sum amounts.  An extra installment a year on a 30 year home loan will shed seven years from your loan tenure.

 

4) Work Back Method

Instead of saving what you can, spend what you have. Meaning to say – set up a Savings Goal for yourself instead of other way around. It makes it a lot easier to spend peacefully if you know that you have made all your necessary payments for the month – saved enough and are then spending what is rightfully meant for your lifestyle expenses.

 

Tip: Set up an incentive. eg: Put up a poster in your room of the holiday destination you’ll be going to with your partner if you achieve your savings goal etc.

 

5) Saving Wisely

Curating the money in your bank account is the least intelligent thing to do. Market is brimming with lucrative interest rates in order to encourage you to invest. Make a wise choice and go for a fixed deposit if you are not anticipating any huge expense in immediate future (wedding, baby etc.) or go for an SIP plan.

 

Tip: Take help of a financial advisor before you plunge into any shiny saving scheme.

 

 

You see. Few careful steps to financial wisdom and you will be a peaceful person. Know what you are doing and why, instills a lot of confidence.


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