When you’re young, it’s easy to never worry about managing your finances. But, as you get older and hopefully wiser, you realize how important it is to have a healthy financial life.While some of us are better at managing our money than others, there are several things that all youngsters should know about money management.
Here are a few basic concepts that can help everyone make smarter decisions about their money. Try your best not to make these common financial moves:
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1. Spending more than you earn
This is the most important rule in personal finance. Say, your monthly take home salary is INR 50,000. After depositing in your savings account, you should aim to set aside 20% of it and spend no more than INR 40,000 in a month. That means, you should avoid outstanding balances on your credit card and other kinds of small loans.
Of course, there will be situations when you’ll need to make big purchases. When you start your adult journey, you’ll need to buy things you never considered before—refrigerator, washing machine, water heater, air conditioner, oven, and more. Make sure to plan ahead for these purchases. More on that later!
2. Not having an emergency fund
This is all about staying one step ahead of whatever may go wrong in the future. How much money should you have saved up in case of emergencies? Experts suggest between three and six months’ worth of living expenses (rent, food, utilities, etc.) may be a good idea.
It’s challenging to think about adverse events, but you can weather the storm with some preparation. Having an amount tucked away in a savings account will also help you feel financially secure.
A good tip here is to choose a savings account that will earn you a high-interest. Online savings account offer higher interest rates than traditional banks. There are several options for digital banking in India so, choose what suits your needs in the best way.
3. Not saving for retirement
Starting early can really pay off later in life, so don’t forget to put at least a little money away every month. You should also take advantage of resources such as your employer’s retirement plan if it’s available to you. Every little bit helps when it comes to meeting your retirement needs.
4. Not planning for big purchases
It can be tough to save up for a new car or even an engagement ring, but it’s certainly possible if you make this type of purchase (or both) part of your budget. Plan ahead for the purchases you need to make and put them on a timeline. Then, work towards saving enough to buy them.
Also, try researching the best quality products at affordable prices. Take a look at reviews online and compare features and prices. It’s also helpful to remember seasonal sales to get the best deals.
5. Ignoring the big picture
If you want to be financially free, stay away from anything that ties you down and that includes excessive credit card use or payday loans. Make it a habit to spend responsibly. Avoid situations like impromptu dinners at fancy restaurants where you’ll have to pay out of your budget.
Dedicate time to think about your financial future. Do you want to get out of debt? Buy a house in the near future? Save for college? Whatever it is, think about where you want to be in 5 or 10 years and start setting financial goals.
Not all of us learned about financial literacy in school. Even if we don’t realize it, this lack of knowledge and skill can cost us. Make sure to educate yourself about financial literacy basics and, most importantly, apply what you learn.
I am Arjun Kumar. I am the owner and administrator of Finance Gradeup. I have completed my education in Arts & Technology. Arjun Kumar usually has interests in playing games, reading and writing. He was a brilliant student during his college days. He also works for many private companies, but the main interest of Arjun Kumar is digital marketing. He thinks that reading is a must before providing any quality information to his readers. You can find Arjun Kumar on much social media handles online, or you can learn more about him in about us page.