Unable to manage your finances? Here are some tips to multiply and save money
The best way to overcome the problem of mismanagement of money is to follow some basic strategies and rules of finance that can help you increase your income, savings, and profit.
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Despite having sources of good earnings or a decent salary, many find it difficult to manage their finances. At the end of the month, they almost or completely drain out their income and are in dire need of more money. While the jump in income may take some time and sources of income are not easy to generate, the best way to overcome the problem of mismanagement of money is to follow some basic strategies and rules of finance that can help you increase your income, savings, and profit. Here are some tips for both saving and earning money.
Begin investment
It is a proven and time-tested way to increase your income. Though no one can guarantee you a return on your investment, there are chances that your income will grow after investing money. Investments in government schemes, the stock market, mutual funds, etc., are effective ways to boost your income. However, one needs proper research or expert guidance before investing money.
Various types of investments at initial stage:
- Fixed Deposits
- Mutual Funds and SIPs
- Unit-Linked Insurance Products
- Recurring deposits
Financial literacy
Understanding financial skills, such as personal financial management, budgeting, and investing, are components of financial literacy. It can help you understand the value of money, compound interest, debt management, and financial planning, which can also help you save and multiply your salary or pocket money.
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50/30/20 Rule
The 50/30/20 budget rule was introduced by Senator Elizabeth Warren in her book 'All Your Worth: The Ultimate Lifetime Money Plan'. The 50/30/20 budget rule divides your after-tax income into three categories of spending: 50% for needs, 30% for wants, and 20% for savings and debt repayment.
15-15-15 Rule in Mutual Funds
The 15-15-15 rule in mutual funds can be a mantra to become a crorepati by investing Rs 15,000 per month in mutual funds for 15 years and getting returns of 15 per cent. In such a way, after 15 years, your investment amount will be Rs. 1 crore. The amount we accumulate increases significantly if we apply the same returns and contributions for an additional 15 years, according to the compounding principle.
Different income sources
Explore different sources of income, such as freelance work or a side business. Diversifying your income streams can provide you stability and increase your overall earnings.
Advantage of technology
Take advantage of technology and the internet to find money-saving opportunities, such as comparing prices, using coupons, or participating in cashback programmes.
Expert viewpoints:
Atul Monga, Founder and CEO of BHL, a home loan company, shared some tips to manage your finances:
According to Monga, making a budget helps one save money and avoid extravagance. "Creating a budget helps you allocate your money wisely and prevents overspending," Monga told Zeebiz.com. Other tips that he gave are listed below-
1. Create your own budget
- List down your income and expenses: Begin by taking a note of your income and expenses. List down all your sources of income and categorise them into fixed expenses such as rent, mortgage, utilities, insurance, and other side variables such as entertainment and dining out.
- Track your expenditures: Monitor your spending habits to identify areas where you can cut back. Analyse your monthly expenses and identify areas where you can save money. This could include cancelling unused subscriptions, reducing dining out, or finding cheaper alternatives for goods and services. Redirect the money you save into savings or investments. This practice will help you make informed decisions about your spending habits. Use apps or spreadsheets to record every expense, and review them regularly to pinpoint unnecessary expenditures.
2. Emergency Fund
Set up an emergency fund with at least three to six months' worth of expenses. This fund acts as a safety net in case of unexpected expenses like medical emergencies or job loss, preventing you from going into debt.
3. Automate Savings
Make saving a consistent habit by setting up automatic transfers to a separate savings account as soon as you receive your paycheck. This ensures that a portion of your income is saved before you have a chance to spend it.
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