Money management and Savings is one of the important skills you should master to lead a comfortable and peaceful. There are various ways to save money including fixed deposits, mutual funds, making investments in stocks, real estate etc. Before you start saving money, you should first know certain important things as below,
- Know your Credit Score
It is always important to understand and know your credit score as this is an important factor which determines your financial status and eligibility for any mortgage or other loans you may need in future. Many youngsters are not aware of this which is why they are not good at savings. Have a good credit score helps you to get loans at lower interest rates and you save a lot of money with that. You can also get better insurance premiums, car loan rates and credit card rewards if you have a decent credit history.
- Plan your Monthly Budget
Before you start saving money, you should know to manage your expenses and start planning your budget in advance. You won’t be able to save money if you don’t have any idea of how much you spend every month. You should determine the budget based on your average income so you that avoid overspending. You should factor other expenses which you might not incur every month such as insurance premiums, car maintenance, travel expenses etc. in your monthly budget. You should also allocate some portion for emergency expenses.
- Keep Track of your Expenses
It’s not sufficient to just plan your budget and spend according to your will. You should keep track of all your day to day expenses whether it’s very small like buying a cup of coffee or a big one like the monthly instalment for your home loan or car loan. Ideally, you should keep a record of all the regular expenses like groceries, gas bills, electricity bills, credit card bills etc. You should create a savings category in your budget and try to save at least 20-30% of your monthly income as savings. You should consider savings as your regular expense and plan it in your budget.
- Understanding Tax Planning
Tax planning is very important for any salaried professional as it plays an important role in how much you can take home after paying all the taxes. Individuals, who don’t understand the taxing procedure, end up paying unwanted taxes which they could have saved. Even if you are an entrepreneur, you should understand the various Tax perks you can get and how much you can save from avoiding any unwanted taxes. Tax strategy is very important to meet your financial goals and to save money from your salary.
- Understand different Investments and plan your Financial Goals
You should understand various categories of investments and how much returns you can expect from each of them. There are ways to invest and get decent returns like stocks, mutual funds, fixed deposits, real estate etc. If you don’t want to take any risk, you can put your money in a savings account with very good interest rates. If you want to increase your savings and have some good understanding of markets, you can invest in stocks, ETFs or mutual funds. If you have a huge amount of savings, you can invest in real estate properties like land or apartment. You should understand the risks and rewards of each category of investment so that you can decide which is suitable for you.
You should keep track of your progress every month and make changes in your budget and investment strategy accordingly.