You might be starting off on a new job, or applying to a job or internship. In any of these cases, a life skill that is great to have is Money Management. Don't worry, we're not going to bore you with long complex explanations of how money and savings and stock markets work. This post covers 5 simple tips for you to manage your money well.
Step 1: Decide what your savings goals are
Remember that the earlier you start saving, the more your money will compound over time due to reinvestment and you can earn more in the long term.
For example, if you are staying with your family, there is likely to be no rent expense. However you may be contributing to family and household expenses, as well as planning to spend time on outings with friends. In this situation, you may be able to save more of your salary.
Try to keep a yearly savings goal - i.e. by the end of 2021, I should have Rs. X saved in my accounts.
Step 2: Set up mechanisms to prevent you from missing your goals
It is easy to set a savings goal and miss it due to sudden household expenses, outings with friends, etc. Use these actions to prevent yourself from missing your goals. Remember that there may be situations in which you have no choice but to withdraw and use the money. The aim of this step is to prevent you from using this money for frivolous expenses and keep it for a rainy day.
(1) Set up 2 bank accounts. One account can be used for your daily expenses. The other should never be used, except to deposit money for investment purposes. Let's call this your "Piggybank account".
(2) At the beginning of every month, transfer a set amount (your savings) into the Piggybank account. This will slowly start accumulating. To generate additional income from this (remember most savings account have ~3.25 interest rate), you can open a Fixed Deposit (FD) with your savings through netbanking at a slightly higher interest rate.
Step 3: Strengthening your plan
As you keep saving money slowly, it may not look like you are accumulating much. But remember, it adds up over time. If you want to save more, try to look for a promotion, a job that pays more, take up additional part time work, or cut down on your expenses. If you choose to cut down on your expenses, you can use a simple expense tracker to see what your current expenditure is and where you can cut down.
These are the absolute basics of money management. Remember to start saving in your first job. If you have several years of experience, it's still not too late to start!
Read our other 'Skills you need to have' posts in this series:
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