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Money management techniques
How many of us repeatedly experience the phenomenon of surviving on the last few rupees of our salary towards the end of the month? This phenomenon usually occurs in the latter half of every month where expenses exceed expectations. And the chilling thought strikes – Can I make it till the end of the month. Worry and anxiety follow every footstep thereafter till the next salary. And this time you promise to manage your expenses. However, the vicious circle continues. Overcoming cash crunch requires effective money management techniques. Here are a few:
Track Every Expense
When we buy a product or service, we invariably forget to record the transaction for future references. One should keep track of every monetary transaction that comes into or goes out of your life. Through this, an individual will comprehend the pace of expenses. Our generation is blessed with state-of-the-art technology and installing an application to track your expenses on your cell phones will assist you tremendously. For non tech savvy individuals, a notebook can be equally convenient. Whatever method you choose, stick with it. We are always inclined to initiate things but fail to continue. Record the numbers as soon as possible without delay. Most importantly, make it a habit.
Tracking expenses for few weeks or months will generate a data which will then help you develop a budget. Budgeting is one aspect that separates the wealthy from the rest. In most cases when you ask a person if she or he has a budget, the answer will be mostly no for a variety of reasons including its boring or we don’t know how to do it. A budget includes the revenue and the expenses which are mostly forecasted monthly and then annually to predict the pattern of inflow and outflow of money in a course of time.
In comparison to the complex budget formulation of an organisation, the budget of an individual is simpler and convenient given the limited details. It paints a picture of the likelihood of money flow and the same is used to channelise the decision making of future expenses. Budget development requires an individual to be honest and pragmatic. Concealing facts and figures will lead to manipulation of the budget making it look only good on paper.
When you have poor money management technique where you spend everything you earn, a day will come when everything can go horribly wrong. An appreciable amount of money may be required to finance the repair of your car or an expensive medical bill, and this unexpected turn of events can put you into a dilemma on how to finance it. The answer – have an emergency fund in these contingent cases. It is apparent that savings are a popular method for such transactions. But due to extravagant lifestyles, we yield to the temptation of purchasing a product or service to uplift our status in the society without realising that an important expense is right around the corner. Have an emergency fund which will only be called upon urgent situations that call for an immediate response.
Get Out of Debt
For an individual who has just recently paid off a 20-year debt, it feels euphoric to have the weight off your shoulders. While getting into debt may be sometimes uncalled for, for most a dream house or car is the driving thought behind such debt. This necessitates separating a considerable amount of money from your monthly salary to pay off the debt. Thereafter, all expenses are carefully scrutinised. The freedom of such transactions is blocked. Getting out of debt as quick as possible is the only way out to lift the burden off your shoulders.
Multiple Sources of Income
When your expenses continue to surpass your income even after close deliberation, look for other sources of income. A professional will be engaged at work between 10 AM to 6 PM. Hence, the individual can utilise the time in the morning before 10 AM and in the evening after 6 PM to work further to supplement their income. However, one must also take into consideration your physical and mental wellbeing. An individual blessed with multi-talented facets can utilize their gifts to earn extra income. Hobbies including painting, sculpting and music are unique and worth sharing. A friend of mine who has special abilities has three distinct professions. In the morning, he is a lecturer with a reputed college. From 10 AM he works as a Manager in a media company. After 6 PM, he gives guitar lessons. He says, “Being the sole breadwinner of the family and having money management problems initially, I did what I had to. The hard work is paying off now. At first, juggling three professions was difficult but with time I have crafted the art!”
Money management is a technique which can be mastered. It is more than just comprehending the math. The numbers are not difficult but the emotional and psychological hurdles that prevent most individuals from achieving their financial dreams are.