Complaints about one’s salary are universal. No matter where you look, on social media or in real life, you will see endless posts, stories and memes about how one’s salary is insufficient when compared to expenses or how quickly it gets spent. At the same time, the number of people your age (or even younger) seemingly living their best lives is also astonishingly high. Do they come from generational wealth? Have they built their own business empires? Do they earn very large salaries? More often than not, the answer to these questions is no. These young people are either living on credit (credit cards, salary advances etc.) or simply practice good personal financial management.
Money is at the heart of everything we do in life. Family, entertainment, traveling, health and hobbies are all completely funded by money. While it is not the root of happiness, it does make things a lot easier. However, money is very fickle. Even if you earn a large salary, if you don’t know how to manage your salary, you will not only be unable to cover your expenses but you won’t be able to grow your savings and build an emergency fund. Relying on credit can only get you so far if you practice poor money management. Unless you come from a very wealthy background, it’s likely that you would need to build your life entirely on an earned salary and any life advancements would have to be managed with your paycheck.
Here are some ways you too can manage your salary to not only cover all your expenses, but also pocket away some into your savings.
Pay your most essential bills
The first thing you should do when your salary comes in is to pay off your most essential bills, most often credit card bills (in full) and utility bills. Your essential bills will be made up of only those bills that, if you neglect payment, will end up costing you more money or hassles in future e.g. compound interest on credit cards, disconnected power or water lines with reconnection fees. Complete monthly payments on these as much as possible or else you might find yourself looking to get salary advances to settle the arrears.
Allocate money to your savings and emergency fund
Try and allocate around 30% of your salary towards your savings and emergency fund. While this might seem impossible considering your expenses, this will actually help you in the long run when you find yourself needing cash urgently and you can use your emergency fund rather than take out salary advances and loans. Automate an amount to be credited to your savings account each month so that you don’t need to put any conscious effort.
Budget your other expenses
After you have paid your essential bills and topped up your savings account and emergency fund, you are now left with your spending money. At the beginning of the month itself, you should prepare a budget as to where this portion of your salary should go, such as for food, traveling, medical, social outings, clothes etc. Every single purchase you make (apart from groceries) should be pre-planned according to necessity.
Try to stay away from credit cards
Credit cards are extremely tempting. However, unless you are using it to save money or to plan out larger purchases, stay away from credit cards as it is a slippery slope towards unrelentless credit card debt. Credit cards are not a supplement to your salary and should not be relied on to make purchases as you are under an illusion of a large fund but in reality, are simply spending money that you don’t have.
With the availability of digital services increasing rapidly, you might have subscribed to at least a few monthly services, such as Netflix, Spotify, Apple Music or even Google Drive or iCloud storage. Think about whether you really need these services and how much you actually use them. If you can afford to cancel them for just a few months, do it. The savings you accrue over the course of a few months or a year will help you get more use out of your salary.
Invest your Money
Finally, set aside a few thousand rupees each month to try your hand at various investments. There are a number of investment options available. If you are a first-time investor, look at investing a part of your salary into mutual funds and bonds. After a while, and if you are more of a risk-taker, take your first foray into the stock market and aim for either short-term or long-term gains. More than a few will probably fail but as long as you learn something from every investment, you can top-up your salary with the extra income you make on the side.
Even if you follow all the above religiously, personal finance is unique to everyone, their lifestyles and spending habits. As you try and figure out the best course of action for yourself, you might even need to take out a salary advance or two of your own which is completely okay, provided you don’t get sucked into a vicious debt cycle. Further, don’t sacrifice your current happiness in the name of future security. After all, life is short and your salary is meant to be spent.