Just when you think you were doing your best to make ends meet, somebody moved the ends! Life is tough between paying bills, buying a house, paying off debt, providing food and clothing and not to forget all that jazz comprising the paraphernalia of our modern day living. Controlling your expenditure, managing your debt and a wee bit of judicious financial planning today can pave the way for realizing your long-term financial goals, be it paying off your credit cards, saving for a special abroad trip, or financing your child's education.
Wondering where all the money disappears within the first week of pay day? Of course, you squander it! It is a natural tendency to spend more than we earn, thanks to all the credit cards that have secured their permanent seats in our wallets, various easy-loan schemes and pay-in-installment facilities. Month-end catches us in a sticky situation. Our tentative financial planning goes for a toss and the mounting bills put a large semi-colon in our ambition to save money for the down-payment of our dream apartment in the posh high-rise. Medical emergencies compel us to scrounge money from children’s funds and daughter’s marriage forces us let go of our dream holiday we’ve been saving for a decade.
Financial planning is undoubtedly very crucial in life. Early planning can save you from a lot of financial impediments at a later stage. That said, saving money should be fun, not a bog-down! Do you want it to be easy? Here are some fair-weather tips on how to be financially disciplined and happy.
Start budgeting: You have a fixed income and mostly a fixed monthly expense. Start setting aside money for bigger investments and purchases like house down payment, sudden medical emergencies and retirement. The remainder is your disposable income. Have a budget and plan your lifestyle accordingly.
Understand your credit report: It is important to know where you stand. Hence, acquire a thorough understanding of your credit report and free yourself from debt in a planned way.
Pay time on time: Pay your bills on time. Thanks to online banking options, paying bills has become convenient and quick. Set up reminders if you have multiple accounts. Remember, the payment dates and ensure you have enough funds in your account so that you don’t end up paying off hefty fine amounts.
Pay down your debt: High EMIs are a pain and you don’t really want to pay double the money, unnecessarily. Think over your plans. Save enough money for bigger down payments so that you do not need to let go off whopping amounts as monthly installments later.
Have short term financial goals: Determine your short term goals – major expenses, savings, pay-offs and also the amount you need to keep aside every month. Stick to them. You will be amazed at the amount of money you save at the end of the term.
Collect and use coupons: That’s what they are for! Collect all discount coupons. Organize them by store name, expiry date, and value used etc .and take them along when you are out shopping next. Trust us, coupons help you save big, big money!
Shop at discount stores: Why spend a fortune for something that is available at half the price? Make a shopping list and hit the stores that offer discounts.
Organize all your financial documents: Create a file folder for all your expenses, insurance, assets, income and liabilities. In this folders put everything associated to that file – rent papers, fuel, electricity and grocery bills, taxation papers, et al and determine how much you spend in each category monthly. Create a balance sheet with your incomes in one column and expenditure in another. This practice will give you a clearer idea about where all your money actually goes and how do you need to balance the income-expenditure equation!
Find fun ways to reduce costs: Watch matinee show movies. Stay fit; cut on (or lessen) dine-outs. Spend quality time with family over coffee at home instead of at a coffee shop. Most importantly, remember to leave your credit cards at home.
Follow the 3Rs: The 3Rs stand for risk evaluation, risk assessment and risk management. Consider worst-case scenarios and have a back-up plan. What possible difficulties may arise while inheriting wealth, planning your finances, an accident or in the case of an unexpected turmoil? Develop management strategies to handle all the implications of a risk that may hamper your finance management plan.
Stop visiting convenience stores: Convenience stores are a myth. Convenience equals to inflated costs. Mineral water costing Rs. 13 at a local store costs Rs. 20 at a convenience store.
Get into a plan: Do you really need all that you are paying for? Start availing plans instead of paying higher charge for ‘unlimited benefits’ that you would never avail. Cell phone and internet are a case in point. Similarly, if you have a magazine that you buy fairly regularly, subscribe to it. Paying a one-time annual subscription fee will be more cost effective. Don’t carry all your money in your wallet or purse because you will end up spending all of it. Take as little money as possible. Sometimes it helps just to take change rather than notes.
Do away with credit cards: Okay, just keep one credit card! They are evil enticers that only egg you on to spend more and more money only to leave banks and credit card companies feast on whatever little remains in your coffers. Moreover, paying in cash makes you realize that you are really parting with your money and thus keeps a tab on your expenditure.
There is nothing that you ‘must have now’: Shopping is addictive (remember the movie, I am a shopaholic?). While it makes you feel good, it brings along the evils of debt, having to borrow from friends and 'buyer's remorse'. Stop spending money mindlessly. There is nothing that you can’t do without.
Whenever you get money, hoard it all away: If that seems unreasonable, put at least a part of it away for future use and make sure you don’t use it. It’s like keeping money in a piggy-bank. When you break the piggy-bank, you’ll be amazed at and proud of your savings!
Don't borrow money from friends and close or distant family for money: Money matters and personal debts, especially with family or friends are pressurizing more than anything else. You don’t want to perturb the close relationship you share with your near and dear ones. Unable to return the borrowed amount would only result to a show-down.
Stay in control. Do not give in to the temptation to spend. Spending more than required does not reflect your status; it only empties your pockets. So stay in control and do not brag about your spending ability. You’ll reap the benefit later on in life.
For an achiever, the sky is the limit. However, in the parlance of financial planning and security, it is wiser to have realistic goals. Take care of all the implications that your financial decisions will have in your life. Start early instead of waiting till you near your retirement age. Do not bank solely upon your investments to give your financial benefits; investments do not fall in the purview of financial planning. Be in-charge of your money and monitor it at every step of your life. Financial security is your safest bargain to survive in this unpredictable world.
Lastly, if you hit a milestone in your goal to save enough money to realize your long term goals do not go on a crazy spending spree and blow all of it to celebrate your accomplishment.
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