30 October 2024
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Every year, Teachers Day is celebrated to recognize the invaluable contributions and the profound impact of teachers on our lives. Apart from schoolteachers, we gather many lessons from other individuals in our lives, and a lot of these lessons are about how to handle money. Here are five such lessons that you may have heard about and could really come in handy if you start implementing them in your lives.
Save A Part Of Your Income
Several of us may feel that we don’t earn enough to start saving. This could happen to people who have just started their jobs and do not have a big pay packet or those who end up spending a chunk on their liabilities or dependents.
But that is a misconception. Even if you are able to save only a miniscule amount at the beginning, start doing so. It will help build the discipline of saving and you will be able to jack up the amount as your income increases and circumstances improve.
Creating a budget can helps you track your income and expenses and provide a clear snapshot of where your money goes each month. Once you have done that, you can prioritise expenses, identify areas where you may be overspending, and find opportunities for savings.
Spend Less Than You Earn
It is always tempting to spend your entire salary and borrow a little if you fall short, especially when you do not have liabilities or dependents. But that may not always be the best strategy as it can lead you into a debt trap. The borrowing in the first month will add to the bills of the second month. If you repeat the pattern in the second month, the bills in the third month will become even larger.
Spending less than what you earn can be a strategy that will ensure you never land in a dent trap. When you are conscious about this aspect, you will even make sure that your borrowing is within limits and in sync with your repayment capacity.
Stash Some Cash For Emergencies
Saving for a rainy day is an adage that all of us would have read at some time or the other.
Unexpected situations can arise at any time and having enough savings to handle them is important. It could be an unforeseen medical expense, job loss, or a global pandemic, having a financial safety net is crucial to weathering these storms. Saving money regularly builds a cushion that provides security and peace of mind during times of uncertainty. It equips us to handle emergencies without jeopardizing our financial stability or resorting to desperate measures.
You should have at least three to six months’ worth of living expenses in an emergency fund. You could park it in partly in bank deposits and debt mutual funds that promise safety of capital.
Make Your Money Work For You
Parking all your savings in a low-interest instrument like bank deposits does not make sense. If you want to see your money grow so that it is able to fund all your financial goals, you will have to make your money work for you. That will only happen if you invest your money wisely in high-growth instruments.
However, while doing this factor in risk management and diversification. Investing is a fine art where you need to balance risk and returns in a way that you get the right result.
By investing wisely, you can build wealth, secure your retirement, and maximize your financial potential.
Learn and Adapt
The financial landscape is always subject to change. It is possible that the economic situation of the country changes and new investment opportunities arise, or things turn for the worse. It is essential to stay informed and adapt your financial strategy to changing times and circumstances.
Commit to continuously educating yourself about personal finance topics, including tax planning, retirement strategies, and estate planning. Attend seminars, read books, or follow credible financial websites to stay up to date. Understanding financial concepts and staying informed empowers you to make well-informed decisions and take control of your financial future.
Disclaimer
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
K S Rao, Head - Investor Education & Distribution Development, Aditya Birla Sun Life Asset Management Company Ltd
