All of us have a few dreams that we work hard to achieve. But, in today’s world, these dreams come with a price. A car worth Rs.50 lakh, a trip to the most picturesque location, or a villa all of them require years of savings and financial planning. “How to manage your salary?” is a question that most adults struggle with. You don’t have to be a financial expert to figure out how to spend your salary in a manner that yields future benefits.
To fulfill your dreams, you have to have either a high income or a well-planned financial portfolio. While the former is not in your control, planning your finances and putting thoughts into how to spend your salary can lead to a considerable amount of savings in a few years.
In today’s article, we will have a look at a few ways that can tell you how to manage your salary and optimize your savings.
1. Make a Monthly Budget
Most people do not plan their expenses. They think of it as a tedious process that would involve a lot of calculations. But, this exercise is the simplest way of calculating your costs for a month. Your spendings can be divided into three major categories, i.e., essentials, discretionary expenditures, and entertainment.
Essentials include rent, food, and electricity and insurance bills. Discretionary can consist of the services you choose to take up, like gym subscriptions, spas, OTT platform subscriptions, etc. Entertainment would include the money spent at movie theatres, discotheques, fancy restaurants, etc.
Making an Excel sheet of the budget would help you identify how to manage your salary wisely. After a few months of this exercise, you can quickly identify what spendings you could have minimized. Also, before you figure out how to spend your salary, you can put a part of it into savings. This will ensure that you prepare yourself for the financial liabilities coming your way.
2. Refer to the Budget Before any Financial Decision
It will be of no use making a budget if you don’t refer to it often. Before committing to a purchase of higher value, make sure it is accounted for in the budget. If you are using a credit card to purchase something, don’t let the bills pile up.
This will hamper not only your credit score but also your monthly budget. Therefore, it is important to note your spendings and refer to them time and again.
You have to stick to this exercise for long to be able to figure out how to spend your salary wisely. To be able to do this, you have to give yourself a bit of break every once a while. You can give yourself indulgences every now and then. This will not only allow you to enjoy your earnings, but it will also encourage you to save for such indulgences.
3. Lookout for Best Deals Before Making a Big Purchase
There are a lot of promotional campaigns which companies run to attract new customers. Make use of these promotional offers and save a few bucks here and there. The little amounts you save from each purchase total up to save you a chunk of the money spent. Always look out for better deals, cheaper alternatives, or discount coupons.
4. Make a Note of Your Ambitions
You want to be able to buy your dream car in the next five years. And, the sea-facing villa that you have been planning for within a span of 15 years. But, to be able to do that, you have to plan meticulously. Blindly saving money and putting it in high-returns investments would not help your cause.
Divide your goals into a short-term and long-term basis. Write each detail of your goal, including its cost and the number of years you want to achieve it. Don’t forget to consider the inflation factor. This will allow you to think about how to spend your salary and make it grow.
5. Use Your Credit Card Wisely
A credit card is a convenient payment method. Many banks provide credit cards with added benefits that allow you cashbacks on some of your purchases. But, make sure all credit card bills are paid on time.
The credit card companies charge a high interest on the transaction amount if you don’t pay on time. The interest quickly spirals up. Also, credit cards make you spend more money than you earn. So, before using your credit cards, make sure you would be able to pay off the bills.
6. Maximize the Tax Savings on Your Earnings
Continuing our discussion on how to manage your salary, we come to one of the most important points. Saving tax might not be important for people with lower salaries, as the tax deductions are minimal. However, it is important to know about the ways to save tax deductions.
PPFs, EPFs, NPS, and Tax-Saving Deposits are the ideal ways to start investing in order to save tax. Some insurances and healthcare plans also allow you to save your tax. With some research, you can easily find lots of ways to save a bit on your tax deductions.
To know more about saving taxes on salaried income in India, click here.
Check out: Top 10 Highest Paying Jobs in India
The world of finance is full of complicated bits. You have to keep re-discovering how to manage your salary better. In the beginning, it is going to be a tough time limiting your spendings. However, you will realize its worth it when you see a fat savings amount in due course of time.
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Why is it important to check substitutes before making a big purchase?
Checking multiple options before making a big purchase will give you the opportunity to find the best deal, which can save you a lot of money in the long run. Knowing your financial limits can help you avoid making big purchases that will negatively affect your finances. Instead of immediately purchasing the newest phone or pair of shoes when you get the cash, it is often better to wait and see what else is available in the market. It will also give you a chance to appreciate what’s already in your possession, which will keep your finances balanced.
Why does a long term plan have a major role in managing finances?
A long-term plan gives you the ability to look ahead at what lies ahead and plan accordingly. This allows you to escape the uncertainties of the future or any one future event and focus on the now. Having a long-term plan is important for any long-term goal, whether it is getting your first job or gearing up for your first child. By taking the time to plan ahead, you can save yourself a lot of time and frustration later on. It is important to have long term plans for your financial goals and to save for uncertainties. By setting and achieving goals, you can get a better idea of what you need to save, how much you need to save, and when you need to save it.
Is it good to have a credit card?
When you have a credit card, you will be able to make tax-free purchases. This can allow you to save money on your taxes, which is always nice. Having a credit card can be a great way to manage your finances. It allows you to make purchases without needing to have cash on hand. However, having a credit card also comes with a lot of responsibility. It also lets you build a good credit history, which can help you get approved for an array of loans and other financial products.