Have you been spending more than you should have?
If you spend more than you earn every month, or regularly use your credit card, you need to rethink your finances.
The lockdown has brought dramatic changes to our lives. As we live a minimalistic life confined to our homes and as doubts about jobs, incomes and investments are raised, a question arises naturally...have you been spending more than should have? No matter what your earnings, savings and expenses are, most people will agree in today’s scenario that we have been spending way too much on things that we can do without.
Some people base their spending on their earnings. They tend to increase their expenses with their income growth. They often spend on things that are not needed or can be managed with what they own. There are also those who spend based on their estimated earnings, say likely gains in stock exchange, bonus, etc. Many suffer from the need to match up with their friends and neighbors without much thought to their own needs and financial circumstances. If you spend more than you earn every month, or regularly use your credit card, you need to rethink your finances.
Make a list of essential expenses, lifestyle expenses and luxury spends, and start cutting down on the ones that you can. This could include eating out at fancy restaurant every weekend, paying exorbitant gym fees, splurging on branded clothes, gadgets, etc. Make every effort to save more. A penny saved is a penny earned. Take baby steps towards saving.
You could start budgeting regularly to keep a check on your income, savings and spends. You can use the 50/30/20 rule to help you budget. The 50-30-20 rule puts 50% of your income toward necessities like housing and bills. Twenty percent should then go toward financial goals, like paying off debt or saving for retirement. Finally, 30% of your income can be allocated to wants like dining or entertainment. You can also use budgeting apps available online to get a better control over your expenses.
Now, you could save a good part of your money but still end up losing by keeping your savings idle. The easiest thing for you to do would be to start a mutual fund SIP. An SIP will take away a good part of your income and invest it every month for you, thereby building an efficient and disciplined approach to managing your savings and growing them. You could even call it a friendly EMI that is building your investment portfolio and reducing the income available to spend. This will help you prioritise your spends and probably drop many unnecessary ones.
We have to realize that building a comfortable life needs a responsible approach. Spending doesn’t equal to happiness. But knowing that you have enough investments to tide over emergencies and future expenses such as child’s education, their marriage and your life post retirement will definitely give you peace of mind. So, start cutting down on those useless expenses and say yes to investing responsibly.