Three ways to manage your finances
Financial management is key to your financial security. Managing your finances is an art, and Maneuvering finances is a skill. Appropriate use and distribution of money can help you to survive in tough times. Simultaneously wealth increase is pivotal for your growth.
Please read the below steps and understand in detail three simple ways to manage your funds.
1. Practice keeping aside a minimal of 10% of your monthly income as savings.
2. Set up a monthly budget and try to restrict your expenses to the limit of the decided amount.
3. Invest your funds into mutual funds or SIP which can give a fruitful return on the invested amount.
A Penny saved is a penny earned:
Saving from your income is a vital source of financial management. Make it mandatory to keep aside a minimum of 10% of your monthly income. Gradually increase the saving as monetary growth accelerates.
Build a goal like (buying a house); this will drum up the passion for garnering extra cash each month. In my bachelor days, I practised separating 50% of my income, which helped me to sponsor the down payment of my 1BHK apartment.
The below options can execute the plan of saving successfully.
- Open a separate account and transfer at least 10% of your income on the first day of the month.
- Start operating a recurring deposit of the desired amount, which will automatically get deducted from your account. Amount in Recurring Deposit facilitates to withdraw money whenever required.
Budgets are blueprints & priorities:
Managing your spending by creating and sticking to a budget is critical to meeting your financial goal. The vital point is control over the mind so that one avoids surrendering to the temptations of unwanted desires.
One needs to understand the right allocation of money in the best way. Optimum use of available funds can bear the sweetest fruits.
Senator Elizabeth Warren has explained about the 50/30/20 budget rule, which bifurcates 50% of income for “needs” like groceries, utilities, housing, etc.; 30% as “wants” Shopping, dining out, etc. and 20% as “savings” which we have already discussed. Implementation of such rules can make life easier, beneficial, and help achieve financial targets.
The internet has umpteen budgeting tools, financial websites, mobile apps, etc. One of the options is to download apps like Pocket Expenses, which can maintain and calculate expenses. The traditional way of preserving a diary can also help manage the budget.
Invest for Long Term:
Money saved in bank accounts cannot grow like a plant, except that it gives tiny leaves of 3.5% annual interest. Be tactful to divide your surplus amount by segregating your savings into different investment schemes. Be tactful to divide your surplus amount by segregating your savings into different investment schemes.
Long term investments can ace up a financial goal than short term ones. Make an annual investment for five years, starting from the 6th year this chain of investments will reward with high returns in the following years.
- Invest in the Systematic Investment Plan (SIP). SIP has the potential to boost up meagre amounts into a substantial return. It also has an option of withdrawal in case of an emergency, which is a safe investment.
- A mutual fund is another option if kept for a long term can yield good returns.
- Put your money in market-linked schemes, although risky, but is competent to grow wealth in folds.