4 Smart Tips To Manage Your Salary
It always feels great when your salary gets credited in your bank account every month. But how you spend this money shapes up the future course of your financial freedom. Here are a few tips that can help you to put your salary to the best use.
1. Create an Emergency Fund
Saving some part of your salary every month is important. In addition to this, you need to create a safety net that goes beyond your regular savings bank account. To build an emergency fund, you can follow these simple steps:
- To start with, calculate your monthly expenses. Your monthly expenses would consist of utility bills, house rent, groceries, phone bills, and others. You can also include lifestyle expenses like salon visits, eating at a restaurant, shopping trips, and the likes.
- Multiply this number with 6. It means that the emergency fund should hold an amount that is adequate to take care of your personal expenses at least for 6 months in case your income stream gets affected.
- Invest this amount in a short-term avenue like Liquid Funds that are flexible and offer relatively higher returns in the short run.
On Paytm Money, you can explore liquid funds with the instant-redemption facility to create an emergency fund.
2. Keep a Track of Your Expenses
Apart from building an emergency fund, you also need to keep a check on your expenses. This helps to ensure that you don’t spend beyond your income. You may classify your expenses into fixed and variable categories to easily track them.
Fixed Expenses: Create a list of your fixed expenses like rent, electricity charges that you incur every month. After that, you can try to automate them. This enables you to keep adequate balance in your bank account so that the said expense gets automatically debited from the bank account every month. In this way, you can avoid penalties related to late payment.
Variable Expenses: Once you have provided for your fixed expenses, you may now make a budget for your variable expenses, like travel, eating out, shopping, grooming, and others. Try to stay within this budget.
3. Invest With a Goal in the Mind
Once you have taken care of your immediate needs and variable expenses, it would be wise to invest in your bigger financial goals.
Identify your goals along with the time period for which you need to stay invested for them. These can be like saving for higher education (say 3 years from now), planning for retirement (30 years from now) and an exotic vacation (2 years from now).
You may start an SIP in Equity Funds that have the potential to generate higher returns and accumulate wealth over a period of 5 years and more. Try to schedule the SIP around the date when you are likely to receive your salary so that you don’t miss on your investment.
4. Give Back to the Society
So far, you have taken care of only your needs and your dreams. It would be a great idea to donate for a cause. You can research a bit about the organisations that work to serve the special needs of society. Pick the cause that is close to your heart and make monthly contributions.
You will definitely feel more content and happier with yourself. You can also claim tax benefits towards such donations made in charitable organizations that are recognised under Sec 80G of the Income Tax Act, 1961. It would be a win-win situation!