If you feel you are not financially stable and want to get that stability but you don’t know how? most of us can’t answer these questions, we go clueless and that is the reason why most of us are struggling to manage our finances. but today in this article we will discuss about 7 simple steps which will change your life and these are the simplest changes which you can apply in your life immediately, and it will definitely work for you.
1.Budgeting
Budgeting is a very simple but we don’t do it maybe because we feel lazy or we don’t believe in that but if you use this formula it’s going to be very simple for you 50:30:20 rule of budgeting. With 50 percentages of your salary, all your necessities should be met, which includes your house rent your food your groceries electricity bill, transportation, and all of that, a 30 percent which you can use the way you want you might invest it or you might spend it for luxuries that are completely up to you, and then 20percent should directly go into your savings, so the formula or the secret of budgeting is 50:30:20 make sure you apply this in your life.
2.Spend less Than you earn
This is a very common thing we all know that but we miss doing it that is to spend within the earnings, so if we are earning 35,000 we should spend within it so now you will think obviously if I get 35 Thousand I can only spend 35 but if we recap we might have a credit card so we keep swiping we keep paying interest and the amount or we might take thousand or two thousand from our colleagues or maybe from a neighbour or from anyone saying that I’ll give it to you next month so what happens we have spent 35 plus that 2000 and next month again we have to repay that 2000 so this becomes a cycle, so if you are a person who spends more than your income cut down your unnecessary expenditures and spend within the income what you receive.
3.Saving Habit
Savings is a priority and you must develop the habit of saving for your future or emergencies in life, and you can do it simply by transferring some amount every month from your salary account. Suppose your salary is 35,000 and you’re transferring 5,000 from your salary account to a savings account which actually doesn’t have any card access and you have to go and withdraw the money from banks you won’t go there and whenever you open your salary account you only see 30,000, so you psychologically will plan according to it. but if you are not following this and you have all the 35,000 in your salary account whenever it flashes in your eyes you are like okay fine I have 35,000 so I can go out for shopping or maybe I can spend on something else. So to do that you can even go for auto deduction so whenever your salary got credited in your account five thousand or four thousand how much you want directly goes into your savings account, or you can start a Mutual Fund SIP which will give you more return than Savings account in the longer term.
4.Emergency fund
An emergency fund is like having a minimum of six months’ expenditure which you can meet even if you lose your job or if you don’t have any income. there is a complete difference between an emergency fund and a savings account. An emergency fund is something that is going to give you hands and lift you when you lose your job or you have any medical conditions or any emergencies in life. We should always understand having hope that nothing is going to be wrong is a good thing but then being prepared for uncertain things in life is very important, so this thing should always be there for you. if you don’t have an emergency fund till now go ahead and start putting in at least a little bit of amount so that in due course of time it will become a good amount in which you can survive even if you lose your job or any uncertainty in your life.
5.Financial goals
Everyone has goals in our lives and we are running towards it, the same thing applies to financial goals it might be anything like buying a house, child’s education, or planning for own retirement. There are both, Short term as well as Long term goals in everyone’s life and to accomplish these goals, one needs to plan accordingly. It is not mandatory that you have to set a goal for five years, ten years, or fifteen years you can start it from three months, six months because shorter goals give you a boost, you will achieve it immediately once you have achieved it you will get that push and you will be motivated to plan for long-term goals as well.
6.Debt Management
Understanding the difference between good debt and bad debt is good for your financial journey. never go behind bad debts an example for that is a credit card, the reason is that a credit card is no free money we swipe it and take the loan we give more interest and paid back, so bad debt is something which doesn’t generate any revenue. Good debts an example of good debt is education loan here as well we are borrowing money giving interest and we are paying it back but one difference within both is bad debt has a higher interest rate and good debt has a lower interest rate, and in good debt, we get some value because education loan helped one to complete an education in which we got a job so we got our income and after we started earning we have started repaying it. So you should always know the difference between bad debt and good debt and go for good debts and in case of emergencies and you don’t have any other options you can choose bad debts but cleverly.
7.Investing
Saving your amount in a savings account is good but we forget that we have something called inflation if we compare the prices for which even vegetables were sold one year ago and now is a complete difference so if we invest we are going to get returns, which will match the inflation because we have the number of instruments in which we can invest. unfortunately, a savings account will only lower the value or the purchasing power of the money so make sure you don’t make your money rest in savings account make your money to work more so that you can beat the inflation in the future. You can invest your money into Mutual funds, ULIP Schemes, or equity stocks for better returns in the longer-term.
These simple practices will make a big difference in your life so start implementing immediately, don’t postpone for tomorrow these are very simple things you can start by spending within your earnings can start budgeting and one by one all will fall in place and within a very short period, your financial status will change completely.
Happy Investing!!
