Receiving the first salary credit to your account was indeed a top-of-the-world feeling. Right? However, you will
realise that earning the salary is perhaps the easy part, the bigger challenge is to manage it efficiently to meet
future goals. Now, managing your money doesn’t just mean meeting your day-to-day needs and wants but also about
being able to save up a part of your salary with an aim to attain financial independence.
So, if you are struggling to manage your salary, consider yourself lucky that you’ve landed up at the right place. These tried and tested, simple yet super effective tips can help you manage your salary efficiently.
1. Track your money –
The first step towards good management of money is to know where every rupee goes. You can maintain a record of where you spend your money to have an idea of how much your monthly spending is and manage it. This might seem like a daunting task at start, but if you do practice every month, dedicatedly, you might successfully control your expenses.
2. Create a Budget –
Planning can help in managing your finances properly. If you can make a budget for monthly expenses, you will know what the outflows are. To begin with, you may pen down your ‘what are you’re spending on vs. what you want to spend on’ expenses to cut down on the unnecessary expenditures. Followed by, apply the 50-30-20 rule and see the difference. i.e. 50% for your needs, 30% for your wants and 20% for savings and investments.
3. Set Financial Goals –
It is important to set yourself some financial goals and work towards achieving them. You can start by listing down short, medium and long term goals separately. For example, buying a bike or planning a mini vacation can fall under the short or medium-term category. Whereas, planning for a happy retired life or your child’s education could be termed as a long-term goal.
4. Start Investing Early –
Leaving your entire salary idle in the savings account is not a wise idea. You should have enough money in the savings account for your everyday needs and for emergencies, however investing your extra money could be a lucrative option. The best time to invest was yesterday but the next best time is right now. If you’re a beginner, you can start a SIP in mutual funds with as low as Rs.500 investing to earn potential returns.
5. Save Tax –
When you earn a salary, you will have to start paying income tax at some point in your life. However, there are smart ways of reducing your taxes by making tax-deductible investments. You can invest in an ELSS (a type of SIP investment with a minimum monthly investment of Rs. 500) that will give you the double benefit of tax deductions as well as potential appreciation.
6. Build an Emergency Fund –
The future is always uncertain and it helps to save some money for an emergency on account of illness or a job loss. It is advisable to put aside a small part of the savings towards a contingency fund that is liquid and easily accessible.
Managing your salary is the first step towards achieving financial independence over a period of time. The golden rule is to start managing your salary from the first paycheck and be consistent. This will help you enjoy passive income over a longer period of time. Just allow professional fund managers to manage your investments while you focus on building your career and keeping that paycheck growing.
An investor education initiative by ICICI Prudential Mutual Fund
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