Of the money we earn, we spend some of it on various expenses while earmarking the rest for savings. How much we spend and how much we save depends on how well we manage our money. Most of us put a lot of thought into ways to increase our income, be it arguing our case for a salary hike or opening up new revenue sources in our business ventures.
But that’s only one side of the story. We may have some control over our income but what we can, andmust, manage very well are our expenses. The better we manage our expenses, the more our savings will amount to for the proverbial rainy day.
It is therefore not surprising that financial planning and expense management software/apps are aplenty on the internet. They segregate and aggregate your expenses, track your investments, and manage a bill calendar, among other things. Notwithstanding all these facts, here are some basic calculations and tips that can help you manage your daily expenses better, this National Mathematics Day
- Monthly/weekly budgetinghelps one to spend within predetermined limits. As someone who has been earning for a while, you will have a fair idea how much you tend to spend on various things. So you can draw up major expense heads like food, rent, travel etc. As you approach the limit set for a particular expense, you would automatically slow down the expenditure in that category. You can decide the budgets based on the expenses made over the last few years – or ever since you started working – and then fix the expense budgets.
- Financial stock-takingis the habit of checking the money in hand and the bank, instead of the credit limit on your Credit Cards. Your spending capacity should be the money you have in your wallet and in your bank accounts, post your monthly expenditures, savings or investments. If you have had a regular income for several years you will have a respectable credit limit, but it’s important to use it wisely. By taking stock of the actual finance in hand you can avoid the debt trap.
- Follow the 50:30:20 rule– By spending 50% of your salary on your needs and 30% on your wants, you can make sure you’re not spending too much on things you don’t need – and also ensure that some income is set aside as savings. Needs would include expenses on rent, mortgage, utilities, groceries, clothes etc. While we know that human wants are unlimited, youmustensure you don't spend more than 30% on your wants. You can use HDFC BankNetBankingto invest the remaining 20% in conservative investments like Mutual Funds, trade in derivates, book a Fixed Deposit,Recurring Depositor Dream Deposit, where you can decide your monthly instalment as per your need.
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- The 28/36 debt ruleis not only used for measuring personal expenses but also by Home Loan providers. The rule says that the household expenses should not be more than 28% of the gross income and no more than 36% of all existing debt. Also known as debt-to-income ratio, this rule is useful for housing finance companies to decide whether or not to extend a Housing Loan to an applicant. You too must follow this rule strictly to smartly manage your personal finances.
- Reducing debtsis important as it is difficult to manage expenses and save if you are heavily in debt. Young people today aspire to own a car, buy snazzy electronic gadgets, and vacation abroad. These goals can be easily fulfilled by taking loans. However, you should aim to pay back such debts at the earliest.
- Automating financescan help you manage your expenses better. ViaHDFC Bank NetBankingyou can set standing instructions for payment of recurring expenses such as monthly house rent, telephone bill, and other utility bills. It eases your expense management role as you can concentrate on the remaining variable expenses such as travel and grocery shopping.
- Developing expense-monitoring habitsmay seem like vague advice, but it is a way of life that not only instils financial discipline but also helps improve overall lifestyle habits. Always go to the store with a 'to-buy' list so you don’t indulge in impulse shopping. Don’t spend more money than you have accounted for on something else and end up paying a penalty for your tardiness next month. Log in to your HDFC Bank NetBanking profile to invest your monthly quota of savings in various HDFC Bank investment products. This will leave you with only a limited amount of money to spend.You can also step up standing instructions for EMIs or premiums so that you don’t miss any due dates. In addition to this, you can also set up the standing instructions which limits the deduction of funds up till a specific amount in your account.
These are some of the many habits you can cultivate to keep a firm control over your expenses and ensure that you make regular and steady investments.
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* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circ*mstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action.
