Managing Your Finances

Understand how to allocate your monthly salary so you make the most of it.

You have just got a job with a good salary. Suddenly, all those things that you wanted to buy, but were not covered by your pocket money, are now within reach ! You have more money to spend on yourself, friends and entertainment. And the best thing about it is that you don’t need permission from anyone to spend it!

However, understanding a bit of personal financial planning before starting to spend, will go a long way to ensure that you use your money wisely and enjoy it too.

Budgeting - Budgeting is a plan of how much money comes in and where it should go. Just like in an IT program, budgeting lays the basis for a good management of finances. Budgeting does not mean that you have to cut down on all the spending. Rather, it just means that you will now allocate how much to spend. If you don’t know where to start, just start putting down all that you spend in a normal month. This will give you an idea of where the money is going and what you need to do about it.
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Understanding a bit of personal financial planning before starting to spend, will go a long way to ensure that you use your money wisely and enjoy it too.
managing your finance
The trick of saving is to first set aside money for saving and then spend what is left!

Saving – Now that you have started making a budget, factor in how much you want to save. Most people make the mistake of saying that they will save whatever money is available after spending. The trick of saving is to first set aside money for saving and then spend what is left! You could set aside a specific amount for saving or break it down into smaller amounts  -  one for buying a car a year down the line and one for emergencies for yourself or for your loved ones (this one is very important to plan for).

Spending – Once you know how much money you have available for spending, your chances of borrowing are highly reduced. Borrowing creates a vicious cycle where you will start borrowing more money in order to pay off your current debts.

Credit cards - Credit cards offer you the freedom to spend above your earning capacity and in the beginning, this can be very intoxicating. However, remember that the interest component will ensure you pay back much more than you budgeted for and for a longer period of time. The dangers of not repaying the credit card expenses are far reaching, from facing embarrassment to personal threat from the collections departments of credit card agencies. Needless to say, if you budget well, there is no need for credit.

Wealth creation – You can go one step further by planning for creating more wealth from the money you have saved. Some of the wealth creation options include investing the money in shares or mutual funds. Today there are many financial planning consultants who will guide you in making good investments.

Buying a home can be a dream for many. Owning a piece of land or home definitely goes a long way in securing the future as real estate prices  rise over a period of time. In addition, it leads to significant tax savings and provides security for middle and old age. There are many options to choose from for availing a housing loan, provided you have saved enough to make the initial investment of at least around 20% of the cost of the house.

Insuring – After making the right financial plans which account for saving, spending and wealth creation, it is time to look at some personal protection plans. One of the easiest ways to protect your assets is with insurance. You can insure your home, car, income, health, and even your own life. Some types of insurances provide you with interim money back, while some others provide you an option to avail significant loans. Some provide you with large chunks of money during specified hardships, while some others provide regular pension in old age. And most of them provide some tax relief. It is important to choose an insurance scheme that suits your needs.

Good planning and judicious allocation is the foundation for strong financial management. This alone will ensure that you spend happily and save wisely.


References:
http://financialplan.about.com/
http://personalfinance.tipcentral.net

 

  
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