7 tips to spend wisely to ensure you don't fall into debt trap

Money management is important and we should ensure we follow some rules. So set budgets as per spend categories like food, travel, shopping, etc and also set limits on the money spent per transaction or per day.

Here HDFC Bank suggests the 7 basic calculations you must do to manage your daily expenses, Photo: Reuters

Today, with the use of technology, it is easier for us to spend hard-earned money with just a few clicks on the mobile phone. We tend to look to spend more than we earn sometimes, which has made increased expenses in our day to day life. The use of technology creates financial pitfalls that, in turn, creates debt. Money management is important and we should ensure we follow some rules. So set budgets as per spend categories like food, travel, shopping, etc and also set limits on the money spent per transaction or per day. It is also necessary for us to know the basic calculations to manage daily expenses.

Here HDFC Bank suggests the 7 basic calculations you must do to manage your daily expenses

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Monthly/weekly budgeting: By doing this it helps us to spend within predetermined limits. As someone who has been earning for a while, you will have a fair idea of how much you tend to spend on various things. So you can draw up major expense heads like food, rent, travel etc. As you approach the limit set for a particular expense, you would automatically slow down the expenditure in that category.

Financial stock-taking: This means a person should have the habit to check the money in hand and the bank, instead of the credit limit on your Credit Cards. Your spending capacity should be the money you have in your wallet and in your bank accounts, post your monthly expenditures, savings or investments. HDFC Bank says, If you have had a regular income for several years you will have a respectable credit limit, and it is also important for us yo use it wisely because this is how you can avoid the debt trap.

Follow the 50:30:20 rule: HDFC Bank suggests us to spend 50% of your salary on your needs and 30% on your wants, and ensure that some income is set aside as savings. Needs would include expenses on rent, mortgage, utilities, groceries, clothes etc. While we know that human wants are unlimited, you must ensure you don't spend more than 30% on your wants. You can save your savings with HDFC Bank Mutual Funds, trade-in derivates, book a Fixed Deposit, Recurring Deposit or Dream Deposit, where you can decide your monthly instalment as per your need.

The 28/36 debt rule: This rule is not only used for measuring personal expenses but also by Home Loan providers, which says that the household expenses should not be more than 28% of the gross income and no more than 36% of all existing debt.

Reducing debts: This is the most important step as it is difficult to manage expenses and save if you are heavily in debt. Young people today aspire to own a car, buy snazzy electronic gadgets, and vacation abroad. These goals can be easily fulfilled by taking loans. But it is always smarter to pay back such debts at the earliest.

Automating finances: The step can help you manage your expenses better. This can be done HDFC Bank NetBanking, as you can set standing instructions for payment of recurring expenses such as monthly house rent, telephone bill, and other utility bills. It eases your expense management role as you can concentrate on the remaining variable expenses such as travel and grocery shopping.

Developing expense-monitoring habits: It is a way of life that not only instils financial discipline but also helps improve overall lifestyle habits. Always go to the store with a 'to-buy' list so you don’t indulge in impulse shopping. Don’t spend more money than you have accounted for on something else and end up paying a penalty for your tardiness next month.

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