Do you earn a handsome amount of money but have no clue where your money goes? Do you run out of money every month?
This blog is about the best ways of staying in control of your finances and never run out of money. We will discuss how to stay in control of your debt, avoid frivolous spending, and optimize your income.
1. Keep track of your income and spending
Keeping track of your everyday spending may appear tedious, but it is the most effective approach to avoid unnecessary financial withdrawals. You will become more aware of how you spend your money after this exercise. You may find the flaws in your budget by looking at the cash withdrawals at the end of each month. Once you identify the flaws, the following step is to eliminate any unnecessary costs to free up resources that may be put to better use elsewhere.
2. Make projections for future requirements
Determine your sources of income and spending. Future financial obligations or needs, such as the amount of money that you will need to maintain a particular quality of living, the amount needed for retirement, and so on, can be predicted in advance. For correct calculations, you need to include inflation. When your financial situation changes because of shifting life objectives, you must account for these changes in your future forecasts.
3. Make saving a top priority
We all have seemingly limitless ambitions. Prioritizing helps you to discover and focus your efforts on the most essential goal at any given time. The first item on your priority list should be “saving.” Saving compels us not to get goods now so that we can have greater ones later. Once you receive your pay, you should set aside a portion of it for savings. Ideally, you should set aside 20% to 40% of your salary for savings. You can spend the rest of your money for other purposes.
4. Investment is equally important
Saving is a good habit. But it’s also vital to put your money into growth opportunities that will help you develop a healthy portfolio. As a general guideline, invest a percentage of your money equal to 100 minus your age in stocks. For example, if your age is X, invest (100-X) % of your funds in equities. Equity has traditionally delivered a CAGR of about 15-16% over 15-20 years, making it an appropriate investment instrument for medium to long-term goals. The easy way to invest in stocks is through mutual funds. You may get the benefits of diversification by going the mutual fund way.
5. Put the power of compounding to good use
Using Systematic Investment Plans, investors may make compounding work to their advantage. This also helps them to be more disciplined in their investment. After 30 years, a monthly investment of Rs 10,000 in a SIP in an equities mutual fund with a 12% annual return results in a corpus of Rs 3.2 crores. Even if one does not have much money, beginning a SIP early on can help one gain a lot of money over time.
6. Save for a rainy day
Any emergency has the potential to deplete your resources. In the event of such a calamity, having an emergency fund separate from your savings and investments can assist you in meeting unanticipated financial obligations. An emergency fund should keep you afloat for at least three months, even if there are no inflows. You may automatically save a specific amount from your salary towards an emergency fund. You can also invest in options such as short-term debt funds or liquid funds as an alternative.
These were the six tips that can help you from running out of money. Consult us to know more and make sure that you never run out of money.
This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.
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