By Pushkina Nautiyal
New Delhi, August 28 (IANSlife): The most coveted type of independence is financial freedom. However, even those with the highest incomes can fall deeply into debt due to a lack of personal money management skills. Financial management is a fantastic strategy for reaching your financial goals and can help you gain a better understanding of where and how you’re spending your money. Here are six tips to help you manage your finances for better financial results.
The importance of the budget
Budgeting is the process of creating a plan for spending your money. It basically involves listing all your expenses and allocating funds to them, balancing your expenses with your income. This plan allows you to determine in advance if you have enough money to cover your expenses and possible shortfalls. This simple exercise can help you prioritize your spending. Following a budget or spending plan will also keep you out of debt or help you get out of debt if you are currently in debt.
save before you spend
Young people who have entered the workforce and earn a good salary tend to have the impression that they are financially secure for life. As a result, most of them avoid or even ignore investing for long-term or even short-term financial gain. While the savings will help you cover your everyday expenses, they are best used when invested in long-term investment opportunities. An important aspect of financial management is setting an investment goal based on your priorities in life. Do you need money to finance higher studies? Is marriage in the cards? Are you a young father? Depending on your requirements, you can choose from various types of investments, such as mutual funds, time deposits, real estate, government bonds or corporate bonds, stocks, etc. These can provide investors with good returns at the end of an investment’s tenure, while also working as a corpus to pay for emergency needs.
The power of compounding
Einstein once said: “Compound interest is the eighth wonder of the world. He who understands it earns it and he who does not pay it.” The power of compounding adds the profit earned to the principal amount and then reinvests the entire sum to speed up the profit-earning process. Compounding is basically a long-term investment strategy and you benefit most from an early start. The longer your money is invested, the more time it has to grow. When it comes to compound returns, time is at an advantage. The trick is to contribute regularly and consistently, regardless of the amount. Even small contributions made each month will grow.
Choose safe loan options
Sudden unplanned expenses or emergencies can sometimes mean that we may not be able to meet our financial needs at all times. While having cash problems between payment cycles can be attractive to take out payday loans, these loans can cost you a lot. Payday lenders often charge high interest rates and fees and have significantly higher late fees/penalty charges. Other options, like credit cards and Buy Now, Pay Later programs, can be convenient, but they can also charge interest and late fees that can be costly. Instead, opt for solutions like Salary On-Demand that allows you to instantly access your earned but unpaid salary without loans or high fees.
Ask the experts
As a young adult, don’t make the mistake of thinking you’re too young to manage your finances or too rich to keep track of them. He talks with financial advisers and makes the right decision based on his needs. It’s never too late to start learning and honing your financial knowledge from him to better understand banking, budgeting, debt and credit management, and investing.
Whatever stage of life you’re in right now, having a prudent plan for managing your personal finances is a must and it’s important, because it will help you live a good life now and in the future!