look news india
When the message of salary credit comes on the phone on the first or last date of every month, the peace that comes in the mind often disappears by the first or second week of the month. EMIs, heavy credit card bills, online shopping, weekend parties and unnecessary expenses together drain the salary to such an extent that by the 15th the bank balance comes close to zero. This financial strain has a direct impact on mental peace, future security and important goals.
This problem of losing salary usually does not occur due to low income, but due to poor understanding of financial discipline and cash flow. If you too are living in a paycheck to paycheck situation every month, then 5 basic and practical financial habits can bring your entire money management process back on track.
The first and golden rule of financial planning is that every salary that comes in your hand should have a pre-determined destination. Spending without any planning is the biggest reason for losing money. For this, adopt the worldwide accepted budgeting formula of 50-30-20:
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50% Needs: This portion should be for essential expenses, such as house rent, ration, electricity-water bills, children’s school fees and minimum loan installments.
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30% Wants: This money is for your lifestyle, like eating out, movies, new clothes, subscription plans or weekend outings. Do not spend even a single rupee beyond this limit.
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20% Savings & Investments: This money is for the future, which is mandatory to be set aside first as soon as the salary comes.
When you tie your salary into these three categories, then at the end of the month you do not have to wonder where the money went.
The biggest mistake most salaried people make is that they spend the entire month as per their wish and think that whatever money is saved, they will keep it in their savings account at the end of the month. The reality is that according to human nature, as long as money is visible in the account, it gets spent on one pretext or the other.
Reverse this habit and apply the principle of ‘Pay Yourself First’. As soon as the salary is credited to your account, immediately get at least 15 to 20 percent of your income transferred to your mutual fund SIP (SIP), Public Provident Fund (PPF), or RD (Recurring Deposit) through auto-debit. When this amount will be deducted directly into the investment account within 24 to 48 hours of the date of salary credit, you will be left with only the amount to spend which should actually be spent.
E-commerce platforms, quick-commerce apps that provide delivery within 10 minutes, and social media advertisements have created an addiction among people for ‘impulse buying’ i.e. purchasing without thinking. Ordering unnecessary items after seeing sales, discount coupons or ‘limited time offers’ completely ruins the budget.
To break this habit, adopt the ’24 to 48 hour cooling-off rule’. Whenever you feel like buying something that is not your basic need, instead of immediately hitting ‘Buy Now’, put it in the cart or wishlist and give yourself two days. After 48 hours, in about 80 percent of the cases you realize that the item was not necessary for you. This small pause can prevent wastage of thousands of rupees every month.
Credit card and BNPL services can prove to be the biggest trap for financial indiscipline. This technique allows you to spend money that isn’t actually yours yet. People mortgage their future salaries and buy expensive gadgets and clothes in the present, which impacts the entire budget of the next month.
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Never think of credit cards as ‘free money’; Use it only like a debit card, i.e. swipe only as much money as is available as a backup in your bank account.
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Never fall into the trap of paying ‘Minimum Due’ of your credit card bill every month. On payment of minimum due, 36 to 45 percent annual interest is charged on the outstanding amount.
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Always pay the entire bill (Total Amount Due) before the due date so that the CIBIL Score remains strong and the financial burden does not increase unnecessarily.
Without an emergency fund, the foundation of any financial plan is weak. Many times, a vehicle breaks down in the middle of the month, a sudden illness or some important household task comes up. If you don’t have an emergency fund, you withdraw money from your regular salary or savings, which upsets the entire month’s balance.
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Keep an emergency fund equal to at least 3 to 6 months of essential living expenses in a liquid mutual fund or separate savings account.
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Also, get into the habit of writing down your daily expenses in a budgeting app or simple diary. When you track small items like tea, snacks, cabs and online subscriptions, you understand how ‘micro-leakage’ was draining your salary.
By making these five practical financial habits a part of your lifestyle, you can not only avoid money crunch at the end of the month, but also take steps towards a strong and secure financial future.