You may have worked hard on concepts like algebra, geometry, and trigonometry in school. Sadly, these subjects find no place in the daily lives of most people. Shouldn’t education focus on life skills like managing money? These skills are especially, important in the initial years of your career when you’ve just started earning and do not know much about managing money.
Despite regular paydays, there seldom seems to be enough savings for your dream holiday. Managing personal finances is as important as finding a good job and can prevent you from living paycheck to paycheck. Whether you are a fresh working professional who is studying simultaneously through distance education or you are in the initial years of your career, now is a great time to start learning to manage your money by using the following tips.
Being aware of your money flow
Keeping track of your money is probably the most important part of money management. Start with recording both your inflows and outflows, which will allow you to scrutinize your spending habits. Ideally, you should earn more than you spend, but if you are not, then drastic changes should be made in your spending habits.
Determining your savings goal
Creating a tangible goal helps provide an incentive to save. Savings need to provide for insurances, a stress-free retirement and an emergency fund as well. Before buying the latest phone in the market, set-up a monthly payment plan towards your retirement and emergency fund. This can be done by making monthly payments to your pension or provident fund and setting up a simple recurring deposit account in your bank.
Make your money work for you
Investments are a great way to create passive income and help secure your future. Ideally, they should be a 60:40 mix of risk-free investment coupled with other investment options. Risk-free investments include Fixed Deposits, and Life Insurance. Stocks and mutual funds are other investment options. However, they would require some time and effort as they come with a risk factor. Take time to assess your options and make a thought-through decision.
Managing your debt
It is necessary to be prudent with your credit card usage, as this could affect your spending habits for the next few months or years. Therefore, before signing up for an EMI payment plan, you need to be sure of making the payments regularly for the stated period. If your credit card is used wisely, you can capitalize on cash back offers and reward schemes. Disregarding the importance of managing your debt will result in higher interest rates and a lower credit rating.
Understanding your taxes
Certain investments give you tax benefits and deductions. It is also important that you are able to make your tax payments. Ensure that it is factored in so that you don’t feel the pinch when your tax payments are due.
With the number of money management apps and online services available, you should be able to find the bank offering you the best interest rates, insurance plans that suit you, easy ways to track your expenses and short-term as well as long-term investments that make sense to you. Here are some useful money management apps and online services:
Give them a try and let us know how they helped you reach your financial goals!