Being good with money is a skill that can benefit you in many ways. It can help you pay for your education, cover your living expenses, and save for your future without depending on anyone else. It can also enable you to pursue your dreams and passions without fear or doubt.
But how can you be good with money? How can you manage your finances effectively and achieve financial independence? In this blog post, I’ll show you how to do that in eight easy steps. These steps are applicable even if you’re not earning money yet. By following these steps, you can take control of your money and make it work for you.
Let’s dive in!
Define your goals
Before you can be good with money, you need to have a clear vision of what you want. What are your dreams and wishes? What do you want to achieve or have in the future?
Your goals can be anything that motivates you and makes you happy. For example, you might want to go to college, travel the world, buy a car, or start a business. You might want to help your family, friends, or a cause you care about. You might just want to have fun and enjoy life.
Writing down your goals and being specific about them can help you focus on what’s most important to you and motivate you to work towards achieving them. Having a clear plan and timeline, such as “I plan to go to Varanasi by July 2024,” can also help you stay on track and make progress towards your goals. Keep up the good work!
Track your money
The next step is to track your money. How much money do you possess and where does it come from? How much do you spend and where does it all go?
Choose to use a tool like a budget app, a spreadsheet, or even a simple pen and paper to record your income and expenses. Your income is the money you receive from sources like allowances, gifts, or part-time jobs. Your expenses are the money you use on things like food, clothes, entertainment, or transportation.
By tracking your money, you can see how much money you save or spend each month. You can also see where your money goes and if you’re living within your means. This will help you make smarter choices with your money.
Manage your finance with purpose
Now that you have a clear understanding of your available funds and how they are being used, it’s time to take control of your finances. In the Indian context, financial planning is an essential aspect of managing your money effectively.
To strategize your finances, start by categorizing your income into three segments: necessities, desires, and savings. Necessities include essential expenses such as food, housing, healthcare, and utilities. Desires refer to non-essential expenses that bring you enjoyment, such as entertainment, hobbies, and treats. Savings represent funds set aside for future goals or unexpected emergencies.
A useful guideline to follow is the 50/30/20 rule. This rule suggests allocating 50% of your income towards necessities, 30% towards desires, and 20% towards savings. For example, if your monthly income is ₹10,000, you would allocate ₹5,000 for necessities, ₹3,000 for desires, and save ₹2,000.
Following this principle ensures that you have sufficient funds to cover your essential needs while preventing excessive spending or inadequate savings. It helps you strike a balance between enjoying the present and securing your financial future, aligning well with the Indian approach to money management.
Prepare for the Emergency situations
Have you ever found yourself in a situation where you urgently needed money but didn’t have any? You’re not alone.
Many people face unexpected financial challenges at some point in their lives. For example, you might fall ill and require medical treatment, your car could be stolen or damaged, or your family may face unexpected expenses such as home repairs.
These unexpected financial situations can be costly and can make it difficult to meet your essential needs or desires. That’s why it’s important to have an emergency fund – a dedicated savings account specifically for unexpected events. An emergency fund acts as a safety net, protecting you from financial hardship during difficult times.
Emergency Fund
To start building an emergency fund, set aside a small amount of money each month until you have enough to cover three to six months’ worth of living expenses. For example, if your monthly expenses are ₹15,000, aim to save ₹45,000 to ₹90,000 in your emergency fund. You can use tools like savings apps or even a physical piggy bank to help you save for emergencies. You might also consider setting up automatic transfers from your main account or allowance into your emergency fund.
Having an emergency fund can give you financial security. It can also reduce stress and anxiety in the face of unexpected events, knowing that you have the resources to handle any situation that may arise.
Grow your money.
Do you aspire to be wealthy and successful? If so, it’s essential to learn how to grow your money. Growing your money means making it work for you, allowing you to earn more over time.
One way to grow your money is through investing. Investing involves putting your money into assets that can appreciate in value over time, such as stocks, bonds, or real estate. By investing wisely, you can accelerate your progress towards your financial goals and prepare for a comfortable retirement.
Another way to grow your money is by starting a business. Entrepreneurship allows you to leverage your passion and skills to create a product or service that generates income. Starting a business can be incredibly rewarding, both financially and personally, as you make a positive impact on the world.
Before investing or starting a business, it’s important to conduct thorough research and understand the risks and potential rewards involved. Patience and persistence are also crucial, as it can take time and effort to see results.
By growing your money through investing and entrepreneurship, you can increase your wealth and expand your opportunities. You’ll also enjoy the benefits of having more money and the satisfaction of creating something valuable.
Earn more money.
Who doesn’t want to earn more money? Having additional income can help you achieve your goals, live your dreams, and enjoy greater freedom and happiness.
One way to increase your earnings is by taking on a part-time job or freelancing gig. These opportunities allow you to work for a few hours per week or month and earn extra money. For example, you could work as a babysitter, tutor, dog walker, or graphic designer.
Another way to boost your income is by monetizing your hobbies or skills. If you have a talent or passion for something, such as playing the guitar, writing, drawing, or coding, you can turn it into a source of income by selling your products or services.
To find part-time work, freelancing gigs, or ways to monetize your hobbies or skills, look for opportunities both online and offline. Market yourself effectively by showcasing your value and the quality of your work.
By earning more money, you’ll have additional income to save, spend, and invest. You’ll also have the satisfaction of using your talents and passions to create something valuable while enjoying the benefits of increased financial security.
Learn new things.
Did you know that according to a PwC survey, 63% of Indian consumers are cutting back on non-essential spending altogether?
That’s a substantial sum that could be saved or invested wisely. How can you avoid unnecessary expenses and optimize your funds? By enriching your understanding of financial concepts.
One way to avoid unnecessary expenses and optimize your funds is by expanding your financial knowledge. This means staying informed about important financial concepts such as budgeting, investing, and tax filing. By increasing your understanding of these topics, you can make smarter financial decisions and avoid potential mistakes.
There are some good resources that are available to help you for improve your financial literacy. You can read books like “Rich Dad Poor Dad” or “The Total Money Makeover,” explore informative blogs like “The Economic Times” or “MoneyControl,” watch educational videos from TED Talks or Indian financial experts, listen to podcasts like “Paisa Vaisa” or “The Moneycontrol Podcast,” enroll in online courses through platforms like Udemy, Edupandas or UpGrad, or seek guidance from financial experts.
By enhancing your financial knowledge, you can improve your money management skills and deepen your understanding of financial dynamics. This will equip you to make more informed, prudent, and knowledgeable decisions when it comes to handling your finances, aligning well with the Indian context.
Have fun with money.
Money can’t buy happiness, but it can make you happy. How? By having fun with it.
Being good with money can help us live happier and healthier lives. We can afford the things we need and want without worrying about debt or financial stress. We can pursue our dreams and passions without fear or doubt.
It’s important to have fun with money and treat ourselves once in a while. This could mean indulging in something nice or special like a massage, a concert ticket, or a new outfit. We can also share our wealth and happiness with others who need or deserve it, such as by donating to a charity or helping out a friend or family member. Celebrating our milestones and successes with gratitude and pride is also important.
By having fun with money, we can appreciate the value and joy of being financially responsible. We can feel happy and excited about our financial situation and proud and grateful for our achievements.
Conclusion
Mastering financial management isn’t complex; it can be quite achievable by adhering to these eight steps:
- Define your aspirations.
- Monitor your finances closely.
- Strategize your financial allocation.
- Set aside funds for unforeseen contingencies.
- Foster the growth of your finances.
- Enhance your earnings.
- Pursue ongoing financial education.
- Enjoy your financial journey.
By embracing these guidelines, you can harness control over your finances and work towards financial autonomy. This path entails settling debts, securing retirement savings, and living within your means. Remember, every small stride you take today propels you towards a promising and brighter future where you can realize your dream home, explore global destinations, or establish your entrepreneurial venture.
We invite you to share your experiences, challenges, and accomplishments in managing finances. Drop your insights in the comments below; we’re eager to hear from you!
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