Managing your money wisely

 

  Managing your money wisely

Financial planning has to be started as soon as you get a job. However, most you employees do not know how to manage their income. As long as you are living with your parents, you will not feel the need to save money. However, when you start living away from your parents you need to set up a monthly budget. A good budget will help you to save money and to stay on track in reaching your goals. You have to remember that you cannot get into the savings habit without a proper plan. Economists call it the science of self-monitoring.

Our income levels are different. Therefore, you have to determine your monthly income, which includes your salary, rent from property and the money you get from outside jobs depending on your skills. Today, most of us cannot manage with our salaries. Therefore, teachers start giving tuition and doctors do private practice. You can do many part time jobs according to your special skills and the time you can devote to them.

From the start figure out how much you spend. Write down everything, keep all bills, and receipts I a file. Do not get into the habit of throwing away receipts because you may need them later as proof of payment.  Even when you buy something using your credit card, do not throw away the receipt. When you meticulously track every single payment, you will have nothing to worry about later.

The bulk of you income will have to be used for fixed and committed expenses. You simply cannot ignore them. However, there are many discretionary expenses which you should handle with care. For instance, you have to decide whether you can buy new clothes every month. Sometimes, you can easily manage your expenses as far as entertainment is concerned. Some of us are in the habit of buying books, news papers and magazines regularly. Then your children will need money for extracurricular activities. In addition, you may have to spend money on medical care.

Man is a gregarious animal. He cannot live alone. He has to entertain friends, attend weddings and birthday parties. Only you can decide how much you can spend on such events according to your income. When you commit everything to writing, you will get a clear picture of the financial situation. If you spend money haphazardly, you will court disaster.

One major lesson I have learnt is that you should spend less than you earn. Otherwise you will be indebted to others. If you are just starting your career, recognize the basic principle of financial discipline. If there is more money going out than coming in, you are in trouble. This is the time to prune down your discretionary expenses. Perhaps, you may have to cut down the number of days to entertain friends at home or elsewhere.

Even committed expenses can be curtailed. You can walk from the railway station to your office instead of getting into taxi. Think twice before you invest money in an expensive mobile phone. Even at home, repair the leaking taps and be water efficient. Switch off lights, which are not necessary. Such steps will help lower your utility bills. Sometimes you are fixed expenses maybe more than you are earn. Think of making big changes. Otherwise, you will not be able to save money.

Savings and investments are essential not just for emergencies, but also in terms of looking ahead to big expenses such as buying a house or car, paying for children’s higher education, as well as planning for retirements. As you will not remain young forever, you have to think of such eventualities.

Try to maintain an emergency fund to cushion the blow of losing your job due to ill health or some other reason. The recent economic downturn after the covid 19 pandemic only reinforces the importance of having this safety net. Always maintain the emergency fund in a savings account because you will get some interest. When you are financially stable, you can have a fixed deposit account and enjoy higher interest rates.

Managing your money is not rocket science. Any sensible person can do it provided he decides on a plan and remains committed to it