You must be doing either job or business to earn money. Every month you get some money as part of earning. If you don’t spend this money than in several years this money will grow to big amount.
But does it really happen? No because you pay taxes, insurance premium, mediclaim, EMI of housing loan may be car loan, household expense, groceries, hotel, entertainment, health care, family vacation, school fees and other expense. Apart from this you must have certain dreams like big house, home theater, luxurious car etc. and you spend money on this like anything.
This type of uncontrolled expense may force you to take loan and you may end up diving deep in debt. So saving less, rising bill of credit card or increasing personal loan are symptoms that you are not controlling your finance but your lifestyle is controlling you. This will make vicious circle of earning and spending.
What can one do to break this vicious circle?
You can adopt different method to break this vicious circle. You can start investment of your money in different asset class.
If you begin at age 24, by age 60, you would have a lumpsum amount, maybe even crores. If you started at age 20, the fortune would be even greater. Small amounts of money, accumulated consistently and earning interest over a long period of time, give handsome returns in the end. That is the power of compounding.
But to do all this, you need to know how and where your money disappears. So you need to track every rupee that you spend. You will be amaze to know your spending habit. Please remember that it is hard to earn money but it is easy to spend it. Here are some pointers in same direction.
- Try to spend money by cash and not by credit card or debit card.
- Why to spend too much on mobile phone and accessories.
- Make list of item before going for shopping & purchase only that item which is in list.
- Avoid brand names when equivalent alternative is available.
- Don’t buy item that you won’t use often.
- Use carpooling facility.
- Try to earn in spare time?
- Reduce hotel expense eat at home regularly.
- For all big ticket items plan before purchase.
Begin slowly but steadily and have the target put up on your cupboard or your personal notice-board. Gradually, you will come across realistic methods of meeting your aspirations. But all this is for the later years when you will graduate and enter the world of business and employment. How is it relevant today? Well, very much. You can make ‘budgeting’ a hobby that will soon turn into a habit…
Believe it or not, you will be addicted to the power of budgeting. Even if you may not be actually incurring expenses or earning income, you can help your family in household financial management. Once you become proficient in making budgets, you can start using user-friendly tools like Microsoft Excel for the same.
As far as possible, before every purchase ask the question “Do I really need it or do I want it?” That will help you buy what’s appropriate.