No matter how much you earn, there’s nothing left if you cannot manage money. Being good with money is more than just making ends meet. How you spend money impacts credit score and the debt you carry. If you are living from paycheck to paycheck even after earning well, here are some tips to manage money better.
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Separate needs from wants:
If you think before spending, it’s easy to separate needs from wants. Postpone a large purchase. If you still need the item, it’s a need and not a want. Go ahead and make the purchase.
Make a budget:
Make a budget to track spending. The budget must account for every rupee earned and spent. This squeezes the juice out of every rupee.
Find making a budget difficult? Don’t focus on the process of creating a budget. Focus on the value a budget brings to your life. A budget can be made in a few hours and get spending on track.
Make a “Bills” Calendar:
Make a list of all your bills and write the due date next to each of these bills. Write the day you receive the salary. If it’s the 5th of the month, pay off bills on the next day you receive the salary. Most people don’t pay bills late. They just forget the due date of the bill. Paying bills late especially credit cards can be terribly expensive. Credit cards charge late payment fees on delayed or late payment of credit card dues.
Build an Emergency Fund:
Make sure there’s enough money for emergencies like a medical emergency or a job loss. You can keep money in a liquid fund or FDs for that emergency fund. Keep at least 3 months of living expenses in your emergency fund if you are unmarried. Married people must have at least 6 months of living expenses in the emergency fund.
SEE ALSO: Manage Your Money Better
Choose something to save for:
This is where a financial goal comes in. Financial goal is setting aside money and investing to meet certain goals like buying a car, house, going abroad for a holiday and so on within a set time frame.
If you have a reason to save, then you’ll save. Investments come with risks and there’s the chance of losing money, especially with equity funds. You also get the chance to earn compounding returns or return on return.
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Understand the different investments and benefits of making them. Invest based on risk profile and time horizon. If you are a conservative investor, invest in fixed income like FDs, RDs, and small savings schemes. If you are an aggressive investor invest in shares and equity mutual funds.
Time horizon is very important in investments. If financial goals are a year or two away, invest in debt funds like liquid schemes or fixed income like FDs. Don’t invest in equity unless you have a time horizon of 4-6 years.
SEE ALSO: Different Investment Options
Don’t have too much money in your wallet: This is an excellent way to manage money. If you have too much in the wallet, you spend a lot. You could even lose money and never know; if there’s too much money in the wallet.
Avoid personal loans: Personal loans charge high interest and its best to avoid them. Many people avail personal loans and payday loans for emergencies. It’s better to have an emergency fund for any sudden expenses.
Repay debts: Money is never truly yours as long as there are loans to repay. Get rid of expensive debt first. Repay credit card dues and personal loans. Get rid of car or two wheeler loans as fast as you can. Home loan has tax benefits and is considered a good loan as it helps get a roof over your head. Never miss loan repayments as credit score goes down. Credit counseling helps remain debt free and get you out of debt.
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