Saving money and managing finances can be a task for people with a fixed
salary every month. Anuj Kacker, chief operating officer and co-founder of MoneyTap, a fintech startup, said maintaining a budget is key for surviving the month. Here is Q&A of the interview with Kacker (verbatim): Q: Could you suggest tips on how to save money towards the end of the month? Remember your budget is your friend
Many of these problems can be solved by having a solid budget in place. The spending plan you create each month will stop you from spending too much on those shoes you don’t need so that you do not have to eat Ramen noodles in the last week of the month. If you’re tracking your spending and sticking to your plan, the last few days of the month should feel the same as the first few days of the month. If you are switching jobs and pay cycles, you may have a bit of an adjustment period as you get used to a new schedule.
However, if you have saved up your month’s salary and are sticking to your budget limits, you should be okay. Additionally, remember the following points to plan your finances effectively:
Don’t forget your emergency fund
We talk about emergency fund all the time because it helps you stick to your budget during unexpected expenses. But you need to be careful that you are not continuously dipping into your emergency fund because you overspent on shoes or groceries. It needs to be there for real emergencies like an emergency car repair or an unexpected trip to the hospital. This allows you to absorb those costs without adversely affecting your usual budget. Also, when you use your emergency fund, it is important to replenish it as quickly as you can.
Saving up a month’s income
Another solution is to save up a month’s worth of income and to use that to cover the bills for the next month. This makes it easier to divide your spending on a weekly basis so that your savings don’t end up being stretched too thin.
Q: What could be an easy way to maintain the budget?
The best method to save money is to create a spending plan. Once you have the plan ready, you can figure out what your expenses are viz-a-viz your income. Once you know this, you can look for ways to reduce your expenses or increase your income to allocate a sum of money that you can afford to save. This is how the world’s largest corporations do it and this is how most of the world’s successful people do it, too. This method takes a little bit of work in the beginning, but it works.
The secret to this method (if you want to call it that) is to identify what you are spending money on so that you can plan your expenses more closely and gain better control over your savings. In other words, you will plan better to put money into your savings account. Many people don’t like to plan their spending because it involves a little bit of work every month. Of course, no one’s claiming here that success will come quickly or easily, but this little bit of work will pay off big time in many areas of your finances.
Q: What financial mistakes should one stay away from?
Each one of us aspires to smartly manage our finances. But we often end up making some extremely common financial mistakes that can be easily avoided. Sometimes it is due to a lack of knowledge that leads to such mistakes, while the other times it is pure carelessness.
Not investing money
Another common financial mistake is to not make timely investments. If you're looking for a safe investment, you can choose an investment in government-backed schemes like Public Provident Fund or bank deposits. However, if you can take higher risks for higher returns, investing in the stock market or mutual funds is suitable. But it is imperative to know the risks involved before going ahead with any of these instruments.
Putting all investments in one basket
The other common financial mistake is to put all your investments in one basket, i.e. investing all your money in a single or similar type of investment instruments. For instance, one can avoid the inherent risk associated with mutual funds by also investing in secured government-backed schemes like the National Pension Scheme. If required, you should seek the advice of a financial adviser for better diversification of investments.
Not reviewing investments periodically
Just choosing a few investment instruments and investing in them do not guarantee that one will earn the desired returns. A periodic review of the investments is an extremely crucial step to managing them more efficiently and keeping a track of gains and losses diligently.
Focusing on tax saving than on wealth generation
In a bid to avail tax-saving benefits, people often get attracted to investments which do not offer good returns. For example, an investment in different pension plans offered by insurance companies with the motive of saving tax may not turn out to be a smart decision due to the high charges and low returns.
Q: How can one manage finances at the time of emergencies?
There are unavoidable situations where an individual is blindsided by an unexpected financial emergency and doesn’t know what to do. Whether it’s a job loss, medical expenses, or an emergency home repair, an unexpected change in one’s financial situation can be incredibly stressful.
Here are some of the tips that you should keep in mind during a financial emergency
Evaluate the situation
Take a moment to carefully evaluate your financial situation. Understandably, you probably have a million things running through your head during an emergency, and being cool and collected is the last thing to expect. But the ability to carefully evaluate your situation will ensure you make the right choices.
Carefully examine all of your expenses and determine which are the most important ones. It isn’t worth spending on something which will end up making you unable to pay for a necessity. Once you’ve established which bills are the most important, you can begin looking for expenses to cut out of your budget.
Find extra money
You can always try to get a personal loan or use credit cards to gain quick access to cash. Many Fintech companies are now providing collateral-free instant credit lines with flexible repayment options. Check them out and choose the one that meets your requirements.Another option is to check with friends and family for credit. Nobody likes to ask for money, but a little bit of help from a loved one might be all that you need to get through a rough patch. Also, check if you may have some existing investments or assets that you can liquidate.