Financial management is something that we all should know. It plays a vital role in our lives as every day can’t be a sunny day. Life is full of ups & downs and you never know what is going to happen tomorrow. To conquer any kind of situation at some point of time or another, we need to be financially prepared. Having a healthy personal financial state always does the trick. You can take the COVID-19 pandemic as an example where the whole world is in an economic crisis. In some sectors around the world, companies have even started pay-cuts and layoffs. Employees are going to suffer a lot financially, but what is the solution? The economy is crashed and most of the private companies have no business to provide salaries to their employees.
In this situation what is going to help you is your financial management skills and your savings & backups.
Here are some important financial management tips which will help you in these times.
Live within your means: This is the number one rule for successful personal finance management.
Make sure you buy what you can afford — This is the most basic thing which you need to learn. Don’t rely on credits to buy something.
Let’s understand this better- suppose you want to buy an expensive gift for your wife, it may be a diamond set or something else. You don’t have sufficient money to buy the same. You decide to take a loan, whatever it may be- a personal loan or using your credit card. But what you will realize after some time is- you are paying much more on interest than the actual borrowed amount. You need to pay monthly EMIs for a minimum of one to two years to settle this particular debt. These are unnecessary debts which can be avoided easily. If the EMIs which you are paying towards this would have been invested somewhere- it would have resulted in much more profit!
Track your spending: Keep track of whatever you spend. This way, you will be less likely to overdraw your account. It’s also a good idea to track your credit card spending as well so that you avoid and limit the unnecessary outgo from your income.
Have a plan: You should have a plan for your money. Like what you are going to do with it? What can you do to maximize its value? Suppose you have ₹ 50000 in your account. Make break-ups and plans for your expenses and investment. Like ₹10,000 you are going to spend on groceries, ₹10000 on debt repayment (EMIs), ₹ 5000 for commute and others. Plan for maximum savings and invest the left amount effectively.
Clear your bills monthly: Clearing your bills monthly is always considered as one of the good financial habits. It not only eliminates the risk of late payment but also results in savings. Credit cards are one of the commonly used plastic money which makes your financial life easier. But the interest rate charged on a very high side. Late payment for your credit card bills not only adds on the interest but penalties are the addons which make it huge. So, if you are using a credit card try to clear its bill monthly, if not possible paying the minimum amount is a must.
Keep your debt level low: Borrowing for a few things such as a home, car or education is your necessity. But when borrowing for these try to borrow only what you need. Try to borrow as little as possible & as per your repayment capacity. Your total debt payments should be no more than 36% of your monthly income for a better credit score.
Make sure you’re paying the best prices: While purchasing any item make sure to compare the price on different websites & stores. Ensure that you’re paying the lowest prices for products and services you are availing. Always look for discounts, coupons, and offers to make your purchase worth.
To conclude, following and respecting healthy financial habits will make you better prepared for tomorrow.