top of page
anchorheader

How To Use Your Salary Efficiently


Our income, or salary, is what most determines our lifestyle and it’s more important than ever to be more mindful of it so you can be future ready. The simple act of being more aware about how you use your salary can make marked differences in how and when you achieve your financial goals.


It may sound intimidating but it’s all about putting into practice tried and tested methods to get a bigger bang for your buck. Here are some ways to use your salary more effectively.


Steps To Put Your Salary To Good Use

Budgeting

The baseline of all financial planning, budgeting well can help you achieve numerous long and short term financial goals while ensuring that you don’t compromise on your necessities.

  • Always budget based on your net income or the salary you get in hand after all deductions.

  • Calculate how much you spend on the basics, like rent, food, commuting, bills (electricity, internet, monthly instalments or EMIs, etc.)and other basic expenses to create a budget and then stick to it.

  • Whatever is left is what you should be putting into your savings as soon as you get your salary.


It’s critical to save first and then spend rather than the other way around. Ideally, you should be spending 50% of your income on necessities, 15% on personal expenses and 35% should be going into savings.


Watch your spending

We don’t mean literally. This can be done if you:

  • Keep an eye on how much you’re spending and for what, especially when it comes to personal expenses. Presents and impulsive shopping add up to far more than you would realize.

  • By no means does this mean that you shouldn’t indulge in a few creature comforts but remember that even cutting down that spending by INR 500 can go a long way. What you spend today is what you’re taking away from yourself in the future.


Set goals for yourself

Saving without a plan is like setting sail without a compass. You may be depriving yourself in the short term if you don’t know what you’re setting aside money for.

  • Take a moment and ask yourself what you’d like to achieve in the short and long term.

  • Long term could be things like doing a master’s, buying a house and investments in equity funds while short term might be things like a vacation, buying a bike or a car or buying new furniture.

  • Based on what your goals are, you can decide how much to set aside and how long this would take.


Pay your dues

This might seem like an obvious one but paying off your debts in a timely manner saves you unnecessary expenses and hassles.

  • Most credit lines, especially credit cards, have interest and/or fees attached to them and late payments only compound the way this can affect your finances. Chances are you’re borrowing credit because you’re in need of it in the short term so, once you start earning steadily, make it a priority to pay these off first and not just the minimum amount.

  • Alternatively, it might also be a good idea to explore your options and find credit lines that aren’t as risky to borrow.


Indulge yourself… sometimes

There’s a reason why even the strictest diets recommend a cheat day; without this momentary relief, it’s very likely that you break the diet altogether. The same principle applies to saving and budgeting.

  • Just because you’re planning for the future doesn’t mean you have to sacrifice your happiness in the present.

  • Take a weekend getaway or buy something you’ve had your eye on every now and then.

  • As long as you’re not splurging regularly, these rewards help you realize how satisfying it can be to reach your financial goals.


Invest what you can in the best way for you

Investment can be scary for beginners but there’s a wealth of information on the internet about where to get started.

  • The important thing is to actually get started.

  • Start small, with something like an Systematic Investment Plan (SIP), which is both simple and affordable, while you figure out how much risk you want to take on when you’re investing and what kind of options you want to invest in.

  • If you’re truly feeling lost, it’s best to consult a financial advisor to help you go through your choices and help you figure out what you’ll be most comfortable investing in.


Tips To Prioritize Your Spending

While you’re doing the above, we also have a few tips that may help you prioritize your spending:


Build yourself an emergency fund

You might not think you need it but build yourself an emergency fund for a rainy day. It’s okay to start small by putting even INR 20 aside every day; you never know when you’ll be strapped for money and, at a time like that, you’ll be surprised by how much you can stretch money to cover your needs.


Get insurance

Insurance, especially medical insurance, is not a luxury, it’s a basic need and you should start thinking of it that way. A sudden medical emergency is the easiest way to fall into a debt cycle and getting yourself insurance protects you from that risk.


Study your account statements

Every couple of months, go through your account statements to spot patterns in your spending. Not only does it help you realize if you’ve been paying more than you should for bills, but it also helps you think about finding more cost effective ways to do something, like cooking at home instead of ordering in.


Have clear distinction between needs and wants

We live in the age of social media where appearances count for a lot but try not to confuse what you want with what you need. It’s okay to want something expensive, and even buy it every now and then, but that doesn’t mean you need it. Food, for example, is a need, while food from a Michelin star restaurant is a want. Take a moment every now and then to draw the line between the two. It’s amazing how much you can save when you do.



Source: www.forbes.com

Comments


bottom of page