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Managing money is not easy
May 26, 2013 by:
ushakiran Points: 12
Managing money is not at all easy, it has to be done in a planned manner
Those who have lots of it still need to manage it so that they are able to hold on to it without having to give it away in taxes and those who don't have enough have to make it last that much more by clever management. Either way, it is not easy to manage money unless one plans carefully .
Taking into account a salaried person who has to manage within the given income and also plan for future, it is essential to have a steady hold on expenditure and also make allowances for any unexpected expenses that may come up.
What is important here is to find a balance between your future returns and risks and provides a steady return on your investments, thus insulating you from a spectacular fall or steep rise of your fortunes. How does one do that?
Here are a few tips to make it possible
1, First and foremost - the golden rule, make a list of all your expenditures and allocate money for each one of them. Make sure that you stick with your list. In case you have a tendency for impulsive buying make some allowance for that too, so that your budget does not go haywire !
2, Once you have decided to save a part of your income, make sure that you do it every month without fail. Most money management schemes get stuck because the individual concerned is not regular in his or her saving habit. There is simply no excuse for not saving if your budget t has taken into account all the details including unexpected expenses.
3, Once your saving accumulates to a sizeable amount, invest it wisely instead of spending it away on material things. It could be a fixed deposit or gold or land - anything that gives you a lasting income and also increases in value over a period of time. I know of a couple who saved Rs 5 lakhs and bought a car with it. They had an accident within a month and although the insurance covered it, not all parts are covered which meant that they had to spend Rs 25,000 from their pocket..They later felt that they could have gone in for a second hand car and saved the rest of the money instead of buying a brand new car. One has to see what is important and what are the priorities at that period of time and spend accordingly.
4, We should also remember that an intelligent and practical portfolio would ensure a mix of various investments and prevents all your money from being poured into a single form of investment. Every investment carries some inherent risk or the other and this is a fact you have to bear in mind while investing. If, for example tomorrow Gold prices were to suddenly come down, a mixed portfolio would prevent your savings from dwindling away along with the falling price of gold. Only that part of your saving that is invested in gold will suffer a loss.
Similarly, when property prices soar you would gain to the extent that your money is invested in property. So here, the wise quote 'Don't put all your eggs in a single basket' really makes sense.
5, Make sure that you are aware of all your investments and are keeping a check on it from time to time so that you are able to switch when necessary. Like for example :- If you have some shares that have gone up considerably in price and showing signs of stagnating it is better to sell and invest in shares that have come down, or invest the money elsewhere. If you have a piece of land or apartment which has been bought just for investment, sell it when the price goes up considerably and make some profit. You can invest some of your profit on another property in an area which is still not fully developed, so that you have a huge profit in a few years time when the area is developed with houses being constructed .
6, When you have children, make sure that you put away some amount each month in their names so that it comes in handy when they grow up and want to go for higher studies or get married or want to start their own independent dwelling . This makes them feel happy and secure and respect you more , that as parents you have been very thoughtful and considerate .
7, Finally, make sure that you have made enough provisions for your old age so that you don't need to depend on anyone for your day today expenses .I remember a film called Bhagban where parents are forced to depend on their sons and the sons having got the best of everything don't care for their parents. It might have been an extreme case which may not always happen, but it is always better to be prepared for the worst scenario and make provision when you have the time and opportunity while you are still young and earning!
So, basically money management is all about planning and prioritising according to your income and needs. Once you are able to manage your funds well there is no need to worry since a clever and well planned investment is bound to give positive results in the future and make you feel secure for life.
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