Five ways to be wise with your money

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A key skill that the education system sorely lacks in honing is that of money-saving and how to increase its value smartly. One's basic income doesn't have to be spectacularly high to make some smart choices about how to budget and save for the future. Aakanksha Bhargava - CEO and President, PMR lists some easy tricks and hacks on earning and using money wisely.

Earning

Before we talk about saving, the directive of 'earning' needs to be discussed. A lot of people apply their whole lives in the pursuit of earning much more than their post. However, the key to earning sustainably is to keep work and personal life balance - those multiple hours of overtime, work trips etc that deprive you of those that are dear to you come at a cost too. Try to find a reasonable arrangement with yourself that align with your career goals and helps in not falling in extreme pitfalls of overworking or under-earning.

Spending

The first rule of thumb is saving - always spend less than you earn. The moment this rule is broken, you enter 'negative margin' or 'deficit' that can stay with you for a while. In most cases, this manifests as credit card debt, where you end up paying compounded interests. The best way to curtain extra spends is to create a monthly budget, with various categories that can include recreation activities too. Make sure to keep a separate category for added income that goes into the next month to make sure you have a buffer. Another way to save in case you are finding online shopping treacherous is to tell yourself to go buy anything from the market - the act of going to buy it makes it seem like a real task which you will evaluate carefully as opposed to a click of a button.

Savings

Enough has been said about this, including financial instruments such as SIP, mutual funds and other such policies. Instead of going into those details here (which are easily available online), ensure that you have savings every month that are planned and regular. Be realistic with what you can save, as overconfident savings figures can often lead to disillusionment. Divide savings into three parts - Short Term, Long Term and Contingency Fund. The first would cover holidays, trips, dinners etc. The second can be used for financial policies, investments, and electronics for you or the house. The final remained untouched that can come in handy in times of medical emergencies.

Investments

While we won't venture into the various policies you can avail, it is important to briefly touch upon investments as a concept. Investing your money wisely is crucial to getting the most return on your time and effort. Speak to a financial advisor and set up a portfolio that is a mix of low, medium and high-risk investments. Make sure to have your goals charted and timeline ready - investments is certainly a moody proposition considering how the marketing fluctuates. However long term goals and growth makes them worth it.

Giving

Finally, the last way of using your money effectively is when you think carefully about how you give. Many may not realise, but one of the biggest ways you give your money away is to friends and family who ask for loans. One rule of thumb is to be aware of the creditworthiness of the person you are loaning the money to - this is not to discourage you from giving. But rather it sets your expectations right in terms of when you can see the funds recovered. Another way to give is to identify charities and causes that you hold dear, which you know make your hard-earned money reach the people or causes you care about. Not only is this good for giving back, but also a lot of charities are tax-free, hence there are savings to be made there too.

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