Here are some tips to help you manage your money.
- Make a monthly budget
Draw a monthly budget along with your spouse. If you are single, make it for yourself so that you make it a habit. Allocate a proportion of your income to various heads like grocery and provisions, utility bill payments, kid’s school fees, rent, medical expenses etc. Make a specific allocation for each head and do not make the mistake of lumping most of the expenses in ‘others or miscellaneous’ category.
- Follow the ‘envelope’ philosophy
Once you’ve drawn the budget, follow the ‘envelope’ philosophy. Imagine your money being put in different envelopes, each bearing the label of the expenses head. For instance, if you have budgeted Rs.10,000/- for recreation, imagine that you have put that money in an envelope. All expenses on recreation have to be paid off from the money inside that envelope. If there is no money in the envelope, you cannot make any more expenses for recreation. You can go one step further by actually practising this technique using actual envelopes.
Always make it a point to keep an amount equal to 6x of your monthly expenditure in your savings a/c. This amount will be your safeguard against any unforeseen circumstances which may put strain on your finances.
- Earning saving = spending
Like Warren Buffet said, ‘Spend what is left after earning and not the other way around’. Always make it a point to go over your expenditure profile to find out if there is anything that you can trim in terms of the expenditure. Do away with all the wasteful expenditure to ensure that nothing puts unwanted strain on your finances
- Life insurance
Buy a term life insurance, and critical illness plan apart from a Medi-claim to protect you financially from any untimely twist of fate. A term life insurance plan like Edelweiss Tokio Life MyLife+ provides your family with a lump sum amount on your untimely demise. This ensures that even if you are no more, your family does not have to contend with the financial burdens. A critical illness cover like Edelweiss Tokio Life CritiCare+ gives you a lump sum pay-out in case you are diagnosed with a pre-specified critical illness. This ensures that you do not have to dip into your savings in case you fall critically ill. Your EMI’s, children’s fees etc will still remain regular.
- Don’t over-leverage
As a thumb rule, your monthly debt-servicing expenditure should not be more than 10% of your income. Do not over-expose yourself to debt, else you may reach a situation where you find it difficult to service your debts.
- Invest your savings to make it grow
Instead of letting your money lie idle in your bank a/c, invest it to make it grow. ULIP’s (Unit Linked Insurance Plans) like Edelweiss Tokio Life Wealth Accumulation (Accelerated Cover) presents a good combination of protection as well as investment. In ULIP’s, the fund managers invest your money into different money-market debt and equity asset classes depending on the fund that you’ve chosen. See your money grow and work for you.
Money management is not difficult if you decide to follow the above tips in a disciplined manner.