Monthly salary just got credited to your account? Find out the top ways on how to utilise your hard-earned money and develop great financial habits. Read on to learn more.
One of the happiest messages you can receive is when your salary is credited to your account. It’s a culmination of the hard work you’ve been putting in for your company, and just keeping your money in the account isn’t a great idea. So how should you spend salary?
It’s also important that you have an effective plan with the money that you make because it’ll help you develop good financial habits over time as well. Good financial habits can serve you well in the long run and ensure that you don’t go bankrupt or on the edge of debt.
Here are seven smart ways to use your salary before you start spending it on things:
Pay off your essentials
The first and most obvious action you must take when you get your salary is to pay off your essentials like rent, electricity, water, mobile bills, and any EMIs that you may have.
This is a no-brainer, but you’d be surprised at the number of people who put this off until the last minute. Your net amount, i.e., the money you can spend, is what’s left after you spend on your fixed expenses, so always ensure that you’ve completed this set of payments first.
One of the best ways to allow yourself to not miss out on these payments is to set up an automatic payment system. This way, your money gets debited at the beginning of a particular month’s date, and you can then proceed to save and use your money for other uses.
Create an effective budget
The next thing to do is make a budget for how much you should save, invest, and spend. Learning how to save and invest money well and how to spend money wisely will help you fulfil your long-term financial goals in life.
Setting up a budget is easy but extremely difficult to stick to. When your salary gets credited, list your regular and optional expenses and set aside some money to save and invest. Keep going, don’t give up; you should soon see the results of your hard work.
A good budget will help you keep your expenses in check and ensure you’re not crossing your spending limit. With time, you’ll understand how important it is to live within a budget, and it can go a long way in helping you truly understand what you should be spending on and what you can ignore.
The money you save and invest now can reap a bountiful amount in the future. If possible, you should save and invest at least 20% of your income.
Choose investments based on your age, income, risk tolerance, and financial goals to make the most of the money you have saved. If it’s hard to save money, you can take a traditional route and set up a recurring deposit (RD) account.
Another smarter alternative is to start a mutual fund SIP to pay for your different life goals so that money in your bank account is automatically put into your chosen fund every month. This money can also act as a cushion for emergencies such as a job loss, financial crisis, or medical urgency.
Don’t delay on purchasing insurance
Most people fail to recognize the significant advantages of having insurance because they do not consider these policies to be tools that might generate profits.
However, insurance is distinct from investments. During times of crisis, the financial security of both you and your family is ensured by the particular financial instrument in question.
Insurance is a form of protection that lowers the likelihood of adverse financial consequences in unexpected events such as illness or death. It’s important that you cover yourself and your family with policies such as life insurance and health insurance to ensure you stay protected from adversities.
Clear off existing debts
When you get your paycheck, one of the most important things you should do is work on getting your debts under control. At the start of each month, put money aside equal to the amount of your debt.
Create a list of all of the debts you currently have. Rank them in order of importance using the interest rate and the due date of each one. You may avoid missing dates and having to pay late payment fees if you automate your payment process.
To avoid paying excessive interest rates and penalties, you should ensure that your credit card bill payment is cleared before the due date. To maintain a good financial situation and credit score, you should practice making repayments on schedule using your earnings.
Upgrade or upskill yourself
While figuring out chalking investments and fixed expenses, try to keep a sliver of your income that can help you upskill yourself in your profession. Save this money to earn an additional degree, a certification, or a course specialisation.
You can also put your newly acquired work capability to generate more revenue and relieve the stress of managing your finances. In this way, you can put your money towards investing in yourself, which will reap excellent benefits.
Saving money for different buckets doesn’t mean you forget to enjoy life and the joys that come with it. Keep aside a portion of your money for engaging in some enjoyable pastimes and maintaining a sound mental state.
The only thing to remember is not to get carried away with the money you spend on your lifestyle and amusement.
Put money aside for emergencies
Lastly, keep some money aside for emergencies once the salary is credited. This way, you’ll always have an immediate chunk of money to fall back on in case something goes wrong.
Apart from your insurance, which takes time to get credited, your emergency fund can go a long way in helping you access funds during critical requirements.
Always keep around 5% of your monthly income in an emergency fund that you can always access. Once you set a target of about 1-2 lakhs just for emergencies, you can slowly reduce the amount you’re putting into it for the future.
People often say that life is short and that you shouldn’t stress too hard about the future; nonetheless, it is better to be prepared for anything that may come your way.
The budgeting, saving, and investing principles may look like they are tough to understand, but in reality, they are not. It is the most efficient strategy for ensuring that your future is secure.
So go ahead and enjoy yourself, but don’t forget to save part of the money you earn for the future. You won’t have to stress finding ways to put money aside from your regular paycheck again.
And, if you want an easy way to start saving without any hassle, then all you have to do is to start your saving journey with the Jar app. Download the app and unlock its auto-save feature to save daily without the burden of saving diligently every day/week/month.