Follow these helpful rules once your salary gets credited
It’s always a great feeling to see your bank account credited every month with the fruits of your hard work. But where you spend this money can determine how your future shapes up. Here are some tips that can help you manage your salary better.
#1. Create an Emergency Fund
Having savings in your bank account is not enough. Every one must have a safety net beyond their savings. To create this, we recommend you start by:
- Calculating your monthly expenses. Your monthly expenses include:
Rent, Electricity, Wi-Fi, groceries, phone bills, etc.
You can include other expenses pertaining to your lifestyle, such as visits to a salon, shopping trips etc.
- Multiplying it by 6 (6 months), this is your goal amount for an Emergency Fund
- Start saving towards this Emergency Fund by investing periodically in liquid funds.
- Liquid funds not only help you with better returns than savings bank account but also allow flexible withdrawal and are low in risk. Explore liquid funds with instant-redemption facility.
#2. Keep a tab on your expenses
Once you have made your investments towards an Emergency Fund, your next priority should be to keep a tab on your expenses, so that they do not exceed your income.
Fixed Expenses: You already made a list of your fixed expenses per month, now try to automate them. This will help you maintain enough balance in your bank account for auto-debiting of the amount & keep you from paying any late payment penalties.
Variable Expenses: Once your fixed expenses are taken care of, you must allocate a budget for your variable expenses, such as shopping, travel, eating out. Try not to exceed this budget.
#3. Investing towards a Long-term Goal
Once you have catered to your immediate needs, it is good sense to also plan your future, money-wise.
You can start by allocating some amount to long term goals, such as retirement which could be 20–30 years from now, (depending upon when you start), buying a house (5 to 7 years from now) or a luxury trip (2–3 years from now).
Invest in equity mutual funds, since you are certain that you will need this money only after 3 to 5 years from now.
Equity will give your money the right kind of exposure & superior returns. Make sure you make this investment in the first week of the month, before your salary gets absorbed elsewhere.
The ideal way to go about this is by starting an SIP in any equity mutual fund scheme, keep investing towards your goals, to reap the benefits of compounding.
#4. Donate towards a Cause
So far, you have paid yourself, your needs & your dreams too. It is now a good idea to give back to the society. Do some research towards organisations which work towards a cause that’s close to your heart. Make contributions, month after month.
You will definitely feel more satisfied & happier with yourself. Many such charitable organizations are listed under tax exemption under Sec 80G of the Income Tax Act, 1961. You could claim tax rebate on these donations. It’s an absolute win-win!
Let us know in the comments below what are your priorities with your salary, we love hearing from you 🙂