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A 5-step guide to help you manage your finances easily

  • Highlights

  • Catalogue your income by taking all sources into account

  • Create a budget to save in a disciplined way

  • Have a sound investment plan to gain in the long-run

  • List and prioritise debts

Managing your finances helps you to stabilise your spending and secure your future. In order to do so, focus on the basics and create a sound financial strategy. Here are 5 tips for you to learn the basics and work towards acing this task easily.

Step 1: Gain a full understanding of your income

Your income determines your ability to spend. In order to create a monthly budget for yourself, it is essential you understand your income. So, calculate your income by taking all sources of the same into consideration. Be it your job, your own company revenue, income from rent if you own property, etc. Adding up all this can help you arrive at your overall income. Additionally, calculating your overall income can help you determine whether you want to switch jobs, take on a second job or need a promotion to increase your revenue.

Step 2: Create and understand your budget

Having a budget sets a limit to your expenses, saving you from spending more than you have. For example, if you need to buy a laptop next month, your budget can help you decide whether you have the finances to purchase it right away or not. If such a purchase will pinch your pocket, you can start cutting down on your expenses in order to save for it and buy it later when you have the money to do so. This is better than using your credit card today and then getting in debt when you can unable to pay your bill next month. This also helps you avoid getting into debt. Thus, creating a budget at the start and end of a month can help you have a healthy financial lifestyle, cut down on expenses when needed and provide for your needs.

Step 3: Have a sound investment plan

Investing money in the right tools can help you achieve any dreams or wants you have in the future. Buying a property or investing in bonds and shares simply means that your money has been invested in assets which will likely have an increased value in future leading to better returns. In order to do so, save as little as 30% of your income on a monthly basis. You can do this by setting up automatic transfers from your salary account to your savings account. These savings can then be used to invest. Ensure you have a good investment plan in place or get the help of professionals to truly benefit from this strategy.

Step 4: Be thrifty while shopping

Being thrifty does not necessarily mean cutting down your meals just to save some pennies. It simply means placing your needs before your wants and spending wisely. Buying things that will be entirely consumed or used and that won’t be wasted is a smart way to cut expenses. This will save you a lot of money. Additionally, you can shop during mid-season sales, use mobile wallets for cashbacks and rewards or purchase items on EMIs. This can help you save even while you shop, enabling you to shop wisely instead of avoiding shopping completely.

Step 5: Learn to manage your debts

While taking on debt is something you should do to build a good credit history and score, be careful about it. When you are not able to repay a particular debt, you may borrow additional credit to clear the previous debt and find your finances spiralling out of control. The best way to tackle such a problem is to make a list of your outstanding debts, which will help you prioritise your repayments. If you are in a serious debt trap, consult a financial expert. You can also consider taking a personal loan for debt consolidation to save on interest expenses and get debt-free faster.

Financial management is the key to a financially stable future. So, use these 5 tips to manage your financial health with ease and make this task easy on your pocket and your mind.

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