Tips On Personal Finance

We have often heard that no matter how much a person earns, it simply isn’t enough. It barely survives till the end of the month and won’t have much to save or invest. Then, in the next month, the paycheck arrives, and the cycle continues. The same is true for someone earning Rs. 15,000 per month or someone earning Rs. 1, 00,000 per month. If we analyse the pattern, the problem isn’t our earning capacity, but our personal finance management capacity. This doesn’t mean we should stop focusing on earning more, but it is always better to start by fixing the current situation.

In order to manage our personal finances, we must know how money is flowing into and out of our pockets. We can start by recording our expenses for a few months, noting down both the expense amount and the objective of spending. First of all, you will notice yourself becoming more conscious about your spending. In a few months, you can even start to analyse where the majority of your money is being spent. 

Maybe you eat too much in restaurants, maybe you make too many impulsive purchases on unnecessary items, maybe you spend too much on new clothes, and other similar expenses. There will be some patterns that can be seen and corrected. For example, instead of eating out too frequently, you can start packing lunch boxes. Before buying any new item, ask yourself if it adds any value to your life. Before buying new clothes, you can review the clothes you already own and analyse whether you really need more.

The first few days after receiving the paycheck are usually when the majority of expenses occur. The amount shown in your bank balance, or the cash available in your hand, gives a sense of high purchasing power and often influences overspending. To solve this problem, you can allocate your budget for each week and transfer the amount to your digital wallet or another bank account specifically for this purpose. Allocating the budget helps to ensure that you aren’t spending too much at the start of the month and that there is still a sufficient amount left for the end.

After you receive your paycheck and before making any expenses, it is always better to save or invest first. We often have the habit of using all the available resources and adjusting accordingly. For example, if you receive Rs. 25,000, you may end up spending the full amount in a month. But if you save and invest about Rs. 5,000 and have Rs. 20,000 left, then you spend only Rs. 20,000. Hence, it is better to allocate a certain amount for saving and investing as soon as you receive money. 

Investing can be done in various ways, for starters. After careful research, you can begin by investing in the stock market, investing as low as Rs. 1,000 in SIPs, or purchasing commodities. The earlier you start investing, the more benefits you can get from the power of compounding. Even a small amount of money, if invested consistently for a long period of time, can grow significantly. Apart from financial investments, you can also invest in yourself by purchasing new books or courses to improve your skillset.