How To Manage Your Money?

Ever imagined yourself at 50. How will life be?

Will you have money to travel, spend your retired life in leisure

Or will you live in anxiety and be dependent on others for money?

The answer is very simple, it depends on what you do with your money today

You need to manage your money proactively so as to have a standard of living that you desire

Before, we get to how you should manage your money, let us look at how the poor manage money,

It may be very surprising to you that even you may be walking that path

30+ years of hardwork to be dependent?

How Poor Manage Money?

Suppose, the client or employer gives a paycheque of Rs 50,000 and it goes to their personal account

The moment money enters their bank account, the not well to do have this urge to spend voraciously.

Most of it is mindless and not much of thought has gone into saving and planning




The Result is :
  • Such people are all the time dependent for money
  • They are anxious at 50 and life is not what they had envisaged

Observe your surroundings, there will be many who are anxious, dependent on government subsidies, or dependent on their own children for money.

To avoid this pitfall, I have a suggestion:-
  • Act with discipline and be prudent with Vitamin M (Money)
Does this mean you have to live your life as a pauper, no not at all

You have to live frugally but at the same time enjoy your life. Does this sound like an oxymoron?

It isn't, Let's begin

How you should manage your money?

Suppose your client/ Employer gives you a paycheque of Rs 50,000  and it goes to your personal account

You should start planning and segregating the money either on an excel spreadsheet or mentally or have separate actual accounts

Out of the 50K, 10%, i.e = Rs 5,000 goes to the Tax a/c immediately, this is so that you pay your taxes on time and without any hassle, there are plenty of Tax-saving strategies as well but let us not divulge from the topic

30% of Rs 50,000 = Rs 15,000 goes to your Expenses a/c, it is your monthly expenses, it includes household expenses like electricity, gas, groceries, etc. 

It is here that you have to be frugal so as to not take this percentage above 30% of your monthly income because even a small leak can sink a great ship

The remaining is 60% after taxes and expenses:
60% of Rs 50,000 = Rs 30, 000 which goes to your Finacial Freedom a/c

You can call this a/c anything you like but I like to call it the financial freedom a/c as that is what it is meant to do





 The Financial Freedom a/c is further broken down into other components, note that we have Rs 30,000 (60% of your monthly income)

1) Stock Market a/c = 45% of Rs 30,000 = Rs 13,500 

Invest in Index Funds, SIP'S, Mutual Funds or if you have some sound knowledge of the markets you can also invest on your own, but I am a big fan of Index Funds

Investing in the stock market will be according to your Risk Profile, so if you are not a risk-taker the 45% can be tweaked to something else, there is no hard and fast rule that it should be Fixed 45%


2) Cash a/c or Real Estate a/c = 20% of Rs 30,000 = Rs 6,000

Always have some cash with you, this account can act as an emergency account as well. If you are lucky and there are no emergencies that you encounter, then in 3 years time this account will be big enough to pay a down payment of a real estate property

3) Fixed Income a/c  = 25% of Rs 30,000 = Rs 7,500

To be invested in Fixed Deposits, Recurring Deposits, Bonds, etc or even Gold 
This would assure some safety and security for the future

4) Fun a/c = 10% of Rs 30,000 = Rs 3,000

As the name suggests you need not live like a pauper, you can spend money on the things you need or even want. You can have all of your Netflix subscriptions, shopping lists purchased from this account only 

For example:- I desire a new phone of Rs 15,000, all I have to do is grow this account to that amount and only then spend 

One more tip - Spend on Experiences rather than on products. Go to a restaurant with your family or to watch a movie or on a trip after you have grown this account, it will give you greater satisfaction and happiness
 

Finally, I would say that these are the steps you need to take with your money today to make sure you are independent and attain financial freedom well before 50

Disclaimer: I am not a Financial Planner, but The F.P wouldn't say much different from what I have just mentioned, but still, if  you feel that you need help with your money, don't hesitate and consult a financial planner

Cheers!




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