It is extremely essential to respect one’s money and to think about savings and investment as soon as one starts to earn. This is one of the biggest problems seen in today’s youth because they have a tendency to not spend a lot of money in a very short span of time, mostly on depreciating assets and then when the time comes to spend on something worthwhile they often find they do not have the resources to do so.
Considering that we live in an age which promotes immediate gratification, this is more of a problem and youngsters do not have the farsightedness to understand they might face difficult times ahead. This poses greater problems than not being able to pay for a particular lifestyle- with no savings they might not be able to pay for a medical emergency if it unfortunately happens and they are often also not eligible for loans in the event they do want to settle down and try to accomplish something worthwhile, like a car or a home. Hence, to avoid such financial anomalies in the future, certain steps can be taken.
Tips to keep in mind
One of the best ways of doing that is to create a budget. One needs to make a budget about the expenses that are mandatorily incurred each month, like the basic expenses for food, clothing and shelter, rent, transportation, and basic medical expenses.
Next comes the tricky part- instead of spending for entertainment and leading a lavish lifestyle, and then trying to save whatever is left from it, one should try the opposite. One should make it a point to save a particular amount each month after the compulsory expenses are meant, and then spend from whatever is left for entertainment. There could be certain deviations a couple of times a year of course, but this should be the basic plan. Making it a habit of saving a certain amount each month will help you gather a substantial capital in as less as five years which could then be utilized for any emergency that might crop up or invested further for greater returns in future.
It is important to set some financial goals if one is aiming to accumulate a certain sum by a certain age and this can be done with the help of investing in fixed deposits and SIPs. Most FDs cannot be broken before a certain time and this keeps the money safe even though one might feel tempted to spend it. One should also build an emergency fund so that just in case one finds themselves in between jobs, there should be enough in the fund that would take care of at least three months worth of household expenses.
What else should you know?
It is a responsibility of every earning member to get insurance for himself and his family. However, there are quite a number of insurance providers in the market and all of them charge their own premium rates. Be it car insurance, health or home, thankfully it has become possible to compare the various premium rates. Home Loan Insurance and Income Protection Insurance can serve the dual purpose of covering your family and at the same time, help you save money. For Small Business Financial Planning, you can also contact professionals who can help you set up business at the budget you have.
The groceries in the household are another area where a lot of money can be saved. Instead of buying your products from high-end shopping malls which charge extra in terms of the retail price, shop from local stores where the same products are available at discounted rates. Keep your eyes open deals and offers that can help you get more products for less price. Coupons and vouchers when used wisely, can also help in saving a lot of money. Likewise, although this might seem like a very clichéd method, it is a fact that we can save a lot of money by conserving energy. It is not just enough to turn off the lights when not in use, try and use LED bulbs instead of conventional lights on a regular basis. Use your brighter lights when there are guests coming over and on a special occasion. While installing new gadgets, make it a point to check that they are energy savers.
In case you do not have a very low income each month, while taking a loan, talk to your creditor so that you can pay over the EMIs as soon as possible because certain creditors charge extra interest if the EMI is paid over a very long period of time. By paying the EMI faster you will also be able to get rid of the loan faster.
Credit Card misuse is probably the most common form of financial error. Call it consumerism or the promise of high living that is slowly absorbed by us, we often end up buying commodities that are of little use to us. And because credit cards allow us to buy items even before we have cash with us, we do not even spare much thought. Somehow, the feel of actually, physically, counting dollar bills and paying gives us a sense of spending more because we can see the money parting from us. With credit cards, the virtual money does not make the impact and by the time it does, you have ended up spending thousands more.
The idea is to save first, and then start spending, rather than trying to save after much of the money has been spent. With some regulation, it is possible to create a bulk saving amount which will help you realize your financial dreams in the future.