|First Make a budget!
Budget, is normally a word which has negative connotations! If you see saving and investing as “consumption foregone today for consuming at a later date” you might see it in a different light. One of the challenges with proper budgeting is that it has to become habitual to be effective. You can survive without knowing how to budget if you manage to keep more money coming in than flowing out! However, if you are like most of us, you have a purpose for earning money. It is not meant for your great grandchildren to enjoy themselves.
Once you set your goals, you should quickly see from where the moneys required for meeting you goals an come from. People often resort to budgeting after they have already been dealing with expenses. This article is about making that first budget and sticking to it. More importantly start monitoring it for yourself by visiting www.myirisplus.com
When to use this fund?
Here’s where it can get a little trickier. You should only use the emergency money for true emergencies: like a medical emergency, a car breakdown, a house repair, etc. Covering regular purchases like clothes and food do not count, even if you used your credit card to buy them. It may help to keep the amount at a mutual fund which does not allow E-access, where you can’t access the money as easily and where it will get higher growth than a normal savings account.While it’s true that you would save money if you used your emergency fund to eliminate credit card debt, the purpose of the fund is to prevent you from having to use your credit card for paying for the ugly things that life throws at you. With a proper emergency fund, you will not need your credit card to float you when something goes wrong.
Downsize and Substitute
Focus on Rewards
Another trick that will help your budget come together faster is to focus on the rewards. If you are constantly looking at what you have to cut and give up, the very act of budgeting will become distasteful. A mixture of long and short-term goals will help keep you motivated. This can be as simple as saving for new curtains or something bigger like buying a car with cash. Some of your long-term rewards may just be benchmarks on the way to your overall goals. For example, you may want to sock away Rs. 20L in a retirement account before you are 32 or be debt free in five years. Watching these goals slowly but surely become a reality can be very satisfying and provide further motivation to work harder at your budget.
Why isn’t this the first step? If you simply increase your income without a budget to handle the extra cash properly, the gains tend to slip through the cracks and vanish. Once you have your budget in place and have more money coming in than going out (along with the buffer of an emergency fund), you can start investing to create more income. It is better to have no debt before you begin investing. If you are young, however, the rewards of investing in higher-risk, high-return vehicles like stocks can outweigh most low-interest debt over time.
Much like the disclaimers that come with exercise tapes promising to make you look like a body builder in just six minutes a day, it is possible that it will take you more than six months to get your budget balanced out. This all depends on your situation, including how much or what kind of debt you have. On the upside, just like people who begin exercising for the first time tend to see results sooner than regulars, you may find that your improved budget has immediate benefits for you. Even if it does take you longer than six months to get your budget turned around, it is time well spent.
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