Did you ever try taking out a notepad and a pen to plan your spendings for the month? If you can do it to make a grocery list for the coming week, you can do it to plan and list down your expenses right after you get your salary. Believe me, it will not take more time and effort than making a grocery list. A little planning will help you save money, tax and build wealth.
Make a list of your expenses
Fixed Expenses: Rent, grocery, electricity, phone, Wi-Fi, maid, auto, cab, bus, metro, petrol, LPG, Netflix – list down all the basic expenses.
Variable Expenses: Include other lifestyle expenses like shopping, eating out, ordering food, etc. Allocate a budget for your variable expenses. Try not to exceed.
Build Emergency Fund
There is always an extra tube of toothpaste that you buy for emergency, right? The same way, you have to keep some money aside for any emergency. And emergency doesn’t mean a weekend trip to Kasol. Once you have calculated your monthly expenses, multiply it by 6, which should your goal amount for Emergency Fund. Liquid funds are the best way to build Emergency Funds that allow flexible withdrawal, are low in risk and give you better returns than your savings account.
Long term and short-term goals
Once you have built your emergency funds, start investing in your goals. It would be even better if you can do that simultaneously. List down your goals. For example, car or a luxury trip 2-3 years from now. A house 4-5 years from now. Or retirement 20 years from now. Ideally, you must start an SIP in any equity mutual fund schemes. Keep investing until you have what it takes to fulfill your dreams.
You will save tax. Proof that karma is real. Donate to charity and you will save up to 10% tax. Just spend half an hour every month planning how to spend your salary. And you will build wealth and become a happier person.
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*Mutual fund investments are subject to market risks, read all scheme related documents carefully.