Once a month, when your paycheck arrives in the bank, there’s nothing better. However, the decisions you make with this money will significantly impact your financial future. Using your salary most efficiently is possible with the following advice.
1. Make a Cash Reserve for Emergencies
It’s critical to set aside a portion of your monthly income for savings. Besides that, you need a safety net that extends beyond your usual bank account. These basic methods can help you develop an emergency fund:
- To begin, figure out what you spend each month. For example, your monthly bills would include your electricity and house rent and your grocery and phone bills. You can also include lifestyle expenses like salon appointments, dining out, shopping, and the likes in your expenses.
- Add 6 to this number. In other words, your emergency fund should have enough money to cover your costs for at least six months if something happens to your source of income.
- Short-term investments like Liquid Funds, which are flexible and offer higher returns in the short term, are a good place to put this money.
- Creating an emergency fund is easy with Paytm Money’s instant-redemption feature.
2. Aim to Reach a Purpose When Investing
It’s a good idea to invest in your long-term financial goals once you’ve taken care of your immediate demands and expenses.
Decide on your long-term objectives and the amount of time you’ll need to achieve them. For example, saving for a child’s future schooling (say, three years from now), preparing for an upcoming retirement (30 years from now), or booking a dream vacation are examples of such goals (2 years from now).
Over five years or more, you can begin a SIP in equity funds with the potential to create better returns and build wealth. Avoid missing out on your investment by scheduling the SIP around the time when you are likely to get paid.
3. Be Constantly Aware of Your Spending
In addition to putting money aside for unforeseen circumstances, you should keep a close eye on your spending. As a result, this helps to ensure that you don’t overspend. To keep track of your spending, you can divide them into two categories: fixed and variable.
Make a note of all your recurring monthly bills, such as rent and energy. Automating them is an option after that. Then, when you have enough money in your bank account to cover the monthly expense, it will automatically be debited from your account. You’ll be able to avoid late payment fees this way.
Assuming your set expenses have been taken care of, you can create a budget for your non-essential but still important variable spending. Attempt to stick to this budget at all costs.
4. Make a Difference in the Community
You’ve only ever taken care of your wants and desires thus far. It’s a good idea to donate to a good cause. It’s possible to learn about the organizations that cater to society’s unique needs. Make a monthly donation to a cause that you care about.
There is no doubt in my mind that you will be happier and more satisfied with yourself. Under Section 80G of the Income Tax Act, 1961, you can also claim tax benefits for charitable donations made to recognized organizations. It would be beneficial to both parties.