If you are counting success merely based on earning money, wait! You may be living in an illusion. Earning money is not the endpoint to your success story; you have to go a mile for managing it too. This blog is all about managing your money and to contribute to your wealth creation.
10 Personal Money Management Tips
I often write about money making ideas, freelance opportunities, etc. and this time thought of writing about managing your money. Though this is not an uncommon subject I am writing about, I tried to make those suggestions practically feasible (mostly based on my personal experiences). Here I will mention the money managing tips that not only save your money but saves you from anxiety and hypertension as well. Let’s start with the points here.
1. Don’t Evade Tax:
I don’t know how many financial planners talk about tax evasion, but to me, it’s the core of your money management. Since I was a tax planner, I have special experience in this regard. I won’t mean otherwise, but generally, what I have seen in most of the cases, people who are in the high tax bracket or earn more than an averaging earning person, have a natural tendency to pay tax below their legitimate amount. This is done either by deflating the income or artificially inflating the expenses incurred to earn such income.
This is my first advice that you always pay the legitimate amount of taxes on time. This gives you an anxiety-free life in two ways. One you don’t have to pay interests and penalties on taxes and number two you will not be questioned by tax officials. Though payment of the right amount of taxes on time takes a pinch in your pocket, yet you can save a lot by not paying interest and penalties in the future.
2. Take Life Insurance Cover:
Some people will wonder, how can it be a money management tip. You won’t believe that I have seen numbers of cases where the bread earner of the family has no life insurance cover. And the worst thing is, the whole got financially devastated with the sudden demise of the earning member. In such a situation, the financial stress engulfs the family prosperity and happiness. Those families have nothing but the consolation.
So, my next advice would be to take life insurance cover for the whole family. And if not possible, take a coverage for the earning member at least. Moreover, payment of life insurance premium saves you taxes too. There are other instances where a person takes a loan for acquiring an asset like a house and in the midway while repaying loan dies. As a result, the whole loan liability shifts to the existing members of the family. In such a situation, a term life insurance policy works like a saviour. Remember a small amount of premium paid today, can save your family from great disasters in future.
3. Involve Your Better Half In Family Budgeting:
If you are on a shopping spree, then stop. It’s time to rethink and replan your budget. Spending money on aimless shopping doesn’t take you anywhere. Moreover, shopping without any budget will take a toll on your financial prospects, if unattended for a long time.
Normally, women are more of a shopper nature than men. As per a study, a woman enjoys shopping more than most of the guys. Statistics show that on an average, 85% of all consumer purchases are made by women.
So, while preparing a family shopping budget by keeping your wife at bay, is useless. If she doesn’t agree with your budget or doesn’t understand the real essence behind your frugalness, the goal of your money management will be defeated.
4. Think About Retirements:
This is the fact of our life. With the passage of every day, our workability gets deteriorated. When you will be old, you cannot expect the same level of income as you are earning now. There are some common mistakes made by people, by not planning for retirement. Service holders often console themselves of having a pension from their respective departments. But, let me ask as the inflation rate is ever increasing, will it be sufficient to carry the same lifestyle with the then pension amount?
As a financial advisor, I would suggest that take up a retirement plan by paying regular installment over a long period of time say till your retirement age. The best thing about the retirement schemes is they are invested in a fund called Annuity and the return generated out of it are again invested. So that the retirement benefit yield at that time would commensurate with the price rise.
5. Invest In Mutual Funds:
If you are still investing the whole of your savings, in conventional schemes like fixed deposits, recurring deposits, NSCs etc. then you are missing the superb opportunities to grow your wealth. The returns offered by the age-old scheme are somewhat acceptable for a short period of time say 1-3 years. But investing beyond that period is not that wise as it used to be.
Though many experts may not support me, yet I tell you mutual funds are the match to none. The flexibility and the returns offered by the mutual fund houses are really awesome. If you are planning for the long-term then mutual funds are great, say more than 3-5 years. Moreover, the liquidity and multiple investment opportunities in mutual funds make it very lucrative. My exclusive suggestion would be to invest in mutual funds through SIP mode for a period of five years or more. You simply have to choose the right fund for yourself. Here’s the guide to choose a mutual fund.
6. On Time Bill Payment:
This is another important point; I would like to draw your attention. Many people will find it irrelevant and even find it silly. But believe me; this is critical to your financial success. This is purely about habit. A habit to save money. Most of the people are reluctant in paying their bills on time. People, who procrastinate payments, are prone to get into the debt trap. Delay in paying bills eventually creates backlogs and are levied with fines, penalties or interest. Obviously, that leads to extra cash outflow from the pocket.
By paying bills on time, you can save two ways. First, you don’t have to pay the extra money that would have been levied if paid after due date. Second, on time payments often rewarded with extra cash discount or money backs. In addition to that, your credibility also rises which ultimately improves your creditworthiness.
7. Prioritize Your Spending:
It’s a problem with many guys who cannot prioritize their spending. Money management always vows for prioritization, be it for big corporate houses or common individuals. Prioritization stands for choosing an expenditure over others. Why is this important? See our demands are unlimited but our money is not. So, if we treat all the expenses at the same level and spend equally, the chances are vivid that most of the works (even the important one) will stay half-done.
There may be some time-barred works which we cannot treat equally with other non-time- barred works. To counter such a problem, prioritization is inevitable. You have to choose the spending as the most important one, second most important one, third most important one and so on. This way we can categorise our works and complete them on time and that also with limited resources.
8. Try To Add Passive Income Or Part-Time Income:
Although it cannot be related to money management, I felt strongly to include the point here. Many of us, in fact, everybody (who has lots of money) sometimes feel if we could have more income, we can spend there, buy that and so on.
For them, it’s a good idea to have a passive income. Passive income means the income that is generated without your active intervention. Such type of incomes are rental income from assets or property, affiliate incomes etc. Again you can go for freelance jobs where you can work at your own freedom and from your place of convenience. The advantage is that freelance incomes don’t interfere with your regular earning jobs, but adds a good amount money to your family income.
9. Take Up A Mediclaim or Health Insurance:
When you or your family members get admitted to a hospital, you know how costly the treatments are. Hospital bills are so merciless that it can even break down your whole financial health. Hope many of us faced such situations once in a life.
Hence I thought to include the point here. Taking a health insurance coverage has a moral boost up too. It keeps you out of anxiety about the cost of treatment and virtually protects your health as well as money from disruption. It has another great advantage. If you pay the medical insurance premium you can also get the benefit of tax deduction, which ultimately saves your tax and money.
10. Avoid Loans For Regular Expenses:
In one of my previous blogs, I mentioned about debt-traps and the measures to get out of it. I thought that is quite relevant here. With my varied experience as a financial adviser, I have noticed that some people take interest in grabbing loans even for making regulation payments like salaries, power bills, shopping bills etc. Well, that can be an identical situation in a particular month. But when it turns out to be a regular crisis, no doubt it is heading towards debt trap situation.
Hence, it’s a suggestion for them to stop it right now. If you don’t have money stop spending and in no case borrow for such recurring expenses. Borrow only for those things that can generate revenue for you, like fixed assets. Revenue generation ensures timely repayment of loans and interest and loans never turn to be a burden on your hard earned money.
The points cited above are reproduced from my personal experiences. I know how tough it is to manage your money. As we don’t have abandoned resources, we have to adjust everything within this limited money. I guarantee you that the points mentioned here would certainly guide you to manage your money efficiently. But at the same time, I would also suggest you check out for your own findings. Because no one knows you better than yourself.