Don’t want to fall into a financial trap? Follow these simple tips and improve your finances easily.
Have you always been worried about what you’d do if you lost your job or don’t get your salary for a month? Well, you’re not alone. That thought has daunted even the best of us at some point in life.
One of the main reasons behind this anxiety is not having a safety net for such emergency situations. We often end up spending beyond our means, or relying on our Credit Cards, or even borrowing from friends or family. Whatever your monetary affliction is, you’re basically ruining your financial future by opening yourself up to a world of debt.
Don’t want to fall into such a financial trap? Then it’s time to examine your finances carefully and make changes to your lifestyle accordingly. Trust us when we say that it isn’t as difficult as it may seem.
Here are a few, simple tips to improve your finances and start saving money:
Review your bills
How many times have you looked at your Credit Card bill or bank account statements? Most of us usually just pay the minimum amount due and move on with our lives. It’s no wonder we barely manage to save any money. Do you have any idea what you’re missing out on by not looking at your bills?
Well, for starters, it will help you identify any mistakes in billing. If you have been paying only the minimum amount, or have missed out on payments, it will give you an idea of how much interest you’re being charged every month. To add to this, you will also be able to determine how much money you spend on unnecessary stuff every month. This will not only help you figure out what expenses you need to cut down on, but it will also help you devise a better strategy to pay your bills on time (and in full) to avoid high interest.
Additional Reading: Your Credit Card Billing Cycle In A Nutshell
Create a savings plan
Try creating a weekly or monthly savings plan. If you have been living paycheque to paycheque, it may initially be difficult for you to save even a small amount on a weekly or monthly basis. But, unless you make a habit of it, you’re never going to be prepared to build your savings for unexpected financial situations.
Start by setting an easy target. For example, aim to save Rs. 100 every week or Rs. 1000 every month. You can easily save this amount by cutting out one or two of those unwanted expenses (like that daily cup of filter coffee or scoop of ice-cream).
Additional Reading: 6 Lazy Habits To Build Your Savings
Negotiate with your creditors
Finding it difficult to keep up with your Credit Card or Loan payments? You can renegotiate with your creditors on the same. If you’ve been proactively working with your lenders when it comes to paying off your debts, you can actually get them to work with you too (when you need help).
You can negotiate with them to lower your monthly payment or interest rate, restructure the repayments to match your financial situation, waive off late fees, or even defer a payment or two. However, keep in mind that this may or may not happen. It is totally your creditor/lender’s call to take.
Don’t skip investing
If you want to end up with a fairly sizeable sum of money somewhere down the line, then you need to start investing. And your investments should not be restricted to risk-free options only. Investment options such as equities, though risky, can help you build substantial wealth in the long run.
Also, it’s better to start investing when you’re young. Why? Firstly, because you can take risks. And secondly, you have enough time for your money to compound. However, most young investors tend to be conservative towards investments. While it’s good to be conservative, it isn’t going to help you build a lot of wealth in the long run.
You’re probably wondering where you should invest, right? It depends on your risk appetite. But, if you’re in your 20s or 30s, asset allocation is a must. With the right balance of risks and rewards, you’re likely to build a solid financial foundation.
Additional Reading: Introduction To Equity Mutual Funds
Create a clear-cut budget
If you want to have control over your money, then you need to create a precise budget and stick to it. This will also help you save for your short and long-term goals easily. Creating a budget will give you a clear-cut idea on how to utilise your money. This will, in turn, help you cut out useless expenses.
Your budget should include all your expenses – major and minor. However, avoid creating a tight budget as it will make it really difficult for you to stick to it. Also, ensure that you revisit your budget every six months at least. Your income and expenses will change over time, so it is important to tweak your budget accordingly.
Additional Reading: 4 Possible Leaks In Your Budget
Get rid of unwanted expenses
Like we mentioned earlier, it is important to track and do away with any unnecessary expenditure if you want to improve your finances. If you want to build your savings and pay your bills in full, you’ll need to cut back these expenses.
But, what exactly can be classified as an unwanted expense? Well, it could be anything that does not serve a practical purpose. Let us assume that you have a wardrobe full of clothes that are practically new, but you still shop every weekend. Don’t you think that is an unnecessary expense?
Here are a few unnecessary expenses and their less-expensive alternatives:
Cable – If you have an internet connection at home and you’re glued to the online world most of the time, then it really doesn’t make much sense to pay for cable unnecessarily. With a variety of sites such as Netflix, Hotstar, and Voot, all you need is an internet connection to watch your favourite shows and movies.
Gym – Unless you regularly (and religiously) go to the gym, it doesn’t make any sense for you to churn out money on monthly membership fees. Instead, you can go for a walk/jog in the nearby park (for free!) and do simple exercises at home to stay fit.
Beauty – Find yourself running to the salon every two weeks? Why spend thousands of rupees at the salon when you can beautify yourself at home? There are a variety of do-it-yourself tips available online that address all your beauty-related concerns for a fraction of the amount a salon charges.
Additional Reading: How To Take Stock Of Your Household Expenses
Prioritise your goals
If you save blindly, you’re likely to be tempted to spend all that cash sooner or later. But, if you set short and long-term goals and prioritise them above everything else, you will refrain from spending your savings. A few goals that you can set for yourself can be setting up an emergency fund, buying a car or a house, or paying off your loans.
Not too difficult, is it? All you need to do is keep these tips in mind and you will be well on your way towards getting your finances in tip-top shape.