Smart ways to manage your salary: Budget, review your last paycheck, pay off your debt

These financial skills will hold you in good stead your entire life. Here’s how to spend your salary wisely.

8 Things to do on your salary day

The biggest favour you can do yourself is to smartly manage your money on the day your salary comes in. We know the temptation to splurge is real. After all, you worked hard for it. But what if you changed your perspective? Should you really be spending the money you toiled for on frivolous things? We are not saying you should deprive yourself. In fact, you should definitely indulge a bit, but with a little bit of planning (and definitely not on your payday).

Your salary day is an opportunity to look at your financial big picture, re-evaluate your habits, and make a positive change. It is the time to build a money routine that will ensure you meet your financial goals and have stability over the long term.

How to spend your salary wisely

1. Budget your money

The first thing to do is manage your money by making a budget so you have a concrete plan of where every rupee will go. This means making a list of your fixed costs such as rent, bills, grocery, and other miscellaneous spending. Give yourself some pocket money to spend on shopping, eating out, etc. Though making a budget for your monthly expenses is important, sticking to it is even more critical.

2. Review last month’s paycheck

Before you set out to spend your new paycheck, it is crucial to review your last paycheck. Sit for a couple of hours and go through your bank and credit card statements to see where you spent money. Use this time to do any course correction if needed. For example, if you ended up Swiggying too many times last month, cut down on it and cook more meals at home. 

3. Pay off your debt

The number one rule of managing your personal finances effectively is to pay off your debts on time. This way you are not crushed by the weight of compounding interest rate. As soon as you get your paycheck, pay your credit card bills in full. Schedule your loan EMIs for the beginning of the month or close to your payday so that you can service them without any stress.

4. Put money aside for emergencies

If there’s anything the last year and a half taught us, it is that life is unpredictable and we need to be ready at all times. So, creating an emergency fund should be a top priority. Put aside a set amount every month to build this fund. It is best to automate this saving. You can start a Recurring Deposit (RD) that deducts a certain amount (say Rs 10,000) from your account the day after your payday. This way, you will not be tempted to spend it. Do not touch this money unless it is an actual emergency. Meanwhile, let it earn interest from the power of compounding.

5. Invest for your future

It is never too early to think about financial security when you are older. There are numerous things you can do. You can start by buying health insurance. This is cheaper when you are younger, so do it in your 20s. If you have dependents, get a term insurance. Start investing in mutual fund SIPs and the stock market. Also think about starting your retirement planning early so you can enjoy the benefits of compounding. Whichever investment tool you choose, plan its payment in the same week as your payday so that you can save before you spend money.

6. Treat yourself from time to time

You need to occasionally pamper yourself too, or money management will become a dreary chore. Use the pocket money you allotted yourself to do things that give you happiness. It could be shopping, eating out, buying a gadget, or pursuing a hobby such as dancing, painting, photography, etc.

7. Track your expenses

It is very easy to miss small living expenses such as your Amazon orders, refuelling the car, or buying a couple of grocery items. Ensure you track every single rupee. It is not as tedious as it sounds. There are many apps available (such as GoodBudget, Monefy, Walnut, or Qykly) that make it very easy to feed in monthly expenses as soon as you make them.

8. Save what’s left

This is not a payday exercise but something to do at the end of the month. Put away any amount of money left into a liquid fund. This way, whether it is Rs 2000 or Rs 20,000, you can transfer it to a liquid fund and actively save money. This will ensure you don’t blow it all. It will also earn far more lucrative returns than from just lying in your savings account.

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