Over the years, you might have come across quite a few ‘golden rules’ of personal finance. You may have read up about these personal finance tips online or learned a rule or two from friends, family, colleagues, etc. The rules almost seem quite predictable: Save more, spend less, invest, plan for retirement, etc. The list may almost seem endless.
When the time really comes for you to take charge of your personal finances, you tend to get confused about which rule to actually follow. This article will address that problem.
Rule 1: Do Not Just Set A Budget, Look Beyond
Most financial experts will first tell you to put a budget in place. This is very easy. But how many of us actually end up sticking to the set budget? While, having a good budget in place cannot be undermined, it is also important to look beyond this. Instead, what I recommend is for all individuals to first take a look at their debt. Getting yourself out of bad debt is the first and most important step towards a healthy financial future. Let us understand more:
- Manage your credit card debt better and avoid paying minimum balance all the time.
- If you have any outstanding debt, try to clear it as soon as possible.
- Having debt is not a bad thing per se, you just have to manage it better or it will affect your credit score.
- Having a bad credit score will reduce your chances of having access to credit in the future.
Rule 2: Use Technology To Your Advantage
If you really want to take control over your finances, embrace technology unapologetically. To better manage your money, you need to know how much is coming in and how much is going out. The best way to figure this out is to track expenses. For this:
- You need not carry a pen and paper everywhere you go. There are many awesome personal finance apps that are available today.
- The BankBazaar Mobile App is one such Personal Finance App that helps you take a look at the aggregated balance in multiple bank accounts, keep track of bank balance and other expenses incurred. Not just that, you can also track your credit card expenses and get regular reminders on credit card EMIs and bill payments too. It’s time you manage your money smartly!
- Most of these apps are free and hence it will help simplify money management.
- It will help you have a consolidated view of all expenditure.
- You will also get a complete picture of your overall financial position.
- This will also help you analyze where you are spending excessively and how you could save much more.
Rule 3: Don’t Live Within Your Means, Live Below It
One of the key secrets to increasing your pool of assets is to live below your means. This does not mean that you have to starve yourself. Just make sure that you avoid spending on luxury goods and do not go on a shopping spree with your credit card in hand. Lets us take a look at some tips:
- Try to spend less than 50% of your take home.
- Take a vacation close to home rather than spending heavily on flight tickets.
- Quit smoking, yes, this can help you save quite a hefty sum at the end of the year.
- Save money on groceries by growing your own vegetables in the backyard.
Rule 4: Sometimes, The Secret Is ‘Within’
The real secret sauce to financial success is ‘inner contentment’. Not convinced? Let me explain. There are always more places to see, more things to buy and a better phone to own. It is all a ‘trap’. And, no matter how much you earn, you will not be financially successful if you are not happy with what you have. Here is how you can manage your expectations:
- Learn to differentiate between ‘wants’ and ‘needs’.
- Avoid spoiling your children with too many expensive toys and gifts.
- Avoid comparing yourself with others. Don’t be tempted to take that expensive vacation just because you saw your friend do it on social media.
- Focus more on personal fulfillment rather than material fulfillment.
Rule 5: Automation Is The Order Of The Day
Automate your savings and investments at the beginning of each month. This way you will not have money left to spend and will be saving, rather ‘automatically’!! Here is how:
- Save a certain amount each month by setting up auto debit instructions to another account.
- Also, set up auto instructions for all your investments.
- Get a credit card with a low credit limit.
- Automate all bill payments.
Rule 6: Educate Yourself
It is important to have some basic financial knowledge. By this, we do not mean that you have to ‘know it all’. It only helps if you know some of the basics of banking. Here is what you should know:
- Equip yourself with some basic knowledge by reading up online or take up a basic online course.
- Learn how to do your taxes.
- Do a little more research about the investment options before making a decision to put your money.
- Know the rules and regulations surrounding the credit card you own. For example, learn how interest is calculated.
Rule 7: Analyse Your Spending
Last but not the least, sit down each month and do a thorough analysis about your spending. See, where your money is actually going. Are you spending too much on going out or splurging on online shopping? Take a look at:
- Any excessive expenditure that you may spot in your bank statement.
- Analyse your credit card bill statements every billing cycle.
- Select the list of expenses that you could have avoided at the end of each month.
A little bit of effort can go a long way in helping you pave the way for a sound financial future.