How to Manage Your Finances Like a Pro

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I started working when I was in my second year of college with a meagre salary of INR 5,000 ($66.84) per month. After 5 years & 2 full-time jobs later, my income has satisfactorily crossed the mark of 7 figures annually.

Middle-class families in India have a peculiar way of saving money. Even a dime left from the expenses goes to rainy day savings.

Savings have been deeply incorporated in my genes, whether it’s saving daily resources like electricity, water, looking for cheaper options while buying groceries or paying the credit cards in full to avoid piling up of interests.

So let’s cut to the chase. How should we approach managing personal finances? Here are some of the personal advice which has really worked for me.

1. Savings First, Everything Else Later

A few years ago I came across an article by Warren Buffett about the importance of savings first and spending from the leftover amount. This also means that you are paying yourself first.

What to do:

  1. Decide an amount which you need to save every month, divide it into two chunks. One for investments and another one for emergency expenditure.
  2. Emergency funds will always save you from taking credits and will keep you out of trouble when there’s an instant need.

2. Get On The Habit Of Tracking Your Expenses

I started taking this advice seriously when I first moved out of my parent’s place. Along with maintaining an excel for living expenses, I use an application called “Walnut” which instantly reads my expenses and tells me how much I have spent during the month.

The downside of having an app to read your expenses is security and being overly cautious about the spends, which might make you feel anxious.

What to do:

  1. Make a budget sheet (list all your sources of income in this sheet and where do you intend to spend them)
  2. Use a budgeting app like Mint.
  3. Categorize your expenses (Monthly subscriptions, Groceries, Utilities, Parties, etc.)

3. Protect Yourself and Your Loved Ones’ Health

Let’s agree that health expenses are big-time money suckers. Even a normal full-body checkup can cost you anywhere between $100 to $150. To avoid any immediate expenses its best to get yourself and your family on a health plan.

What to do:

  1. Get a family health plan. This will cost you only one premium for your immediate family which saves the hassle of managing multiple premiums.
  2. Don’t just rely on your employer, get a separate plan for yourself, if you can.
  3. Look for health plans which include an annual full-body checkup.

Bonus: To safeguard yourself from accidents and critical illness, get term insurance. I highly recommend this. They also include death payouts, god forbid if anything happens to you then your co-dependents can avail the funds which will cover them for time-being. Term insurances are also less expensive.

4. Get A Credit Card

I know some of the great economic thinkers will advise you against having one but trust me, a credit card is a big-time saviour. When we ran out of money to pay for my mother’s treatment, credit cards came in handy. Although my father was cautious about using it, he paid it off in full within a few months.

What to do:

  1. Only allow yourself a credit limit that you can pay off quickly.
  2. Always pay your credit card bills in full to avoid interest accumulation.
  3. Credit cards are also effective for receiving no-cost EMI offers on e-commerce shopping websites.

5. Don’t follow the 30% rule of house rent.

The 30% cap on housing rent is an outdated concept. It just doesn’t make sense. You may ask why? Well, because everyone’s personal/financial situation is different. Some of us may have student loans, a sick family member, school going kids, house mortgage, etc. Also, let’s say you are making $100k annually in gross income, so does that mean your house rent should be $30k? I am sure you can live a much comfortable life in & under $25k, which leaves you with extra $5k.

What to do:

Follow the 50/30/20 rule. Use 50% of your after-tax income on housing, utilities, groceries, and transportation. 30% of your income should go towards non-essentials like clothing, dining out, entertainment, etc. Use the remaining the 20% to pay off your debt and savings

6. Invest In Yourself

You are your biggest investment, do not forget that. Your wellbeing is of supreme importance in your life. At some point in our lives, we all get stuck in a vicious cycle of chasing clients, making money, paying off debts but we forget that life is best lived in between those struggles.

What to do:

  1. Selfcare is important for your peace. Take breaks in between, do what you love and indulge in hobbies that you really enjoy.
  2. Upskill. You can find super-cheap courses on Udemy.com. It has tons of effective and short courses which can easily be completed over a weekend.
  3. You can also register yourself on sites like peopleperhour.com to make extra income on the side. To handle the projects, you can hire interns from sites like internshala.com.
  4. Follow The 48 Hour Strategy For Any Big Purchase. Sleep over it, before making the final decision.

With everything being said, don’t compromise on your quality of life. The biggest gift that you can give yourself is peace of mind. Treat yourself every now and then.

Financial freedom allows you to take better risks in life. With each small step, you are setting yourself free.

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Ashana Jha

Ashana Jha

Goal Digger |Marketer at Airmeet| SaaS Marketing | Podcast Producer | Avid Reader | Backpacker |