Do you also wonder where the mishap happened when you were spending so carefully? Follow these simple tips to manage your finances better.

Efficient and effective financial planning is very important to managing your daily expenses, achieving financial stability to meet your short-term and long-term goals. Whether you are saving for a house, education, a vacation or for retirement, sound financial habits will go a long way in helping you achieve it.

Do’s:

1. Track your expenses: One of the most effective habits one can build. Create an expense sheet or download a template, add spend headers customized to you and update it daily or weekly. This way, you can identify areas where you may be overspending and make adjustments accordingly. It helps you stay aligned with your financial goals, avoid unnecessary purchases, and ensure you’re saving enough.

2. Budget Planning: It involves formulating a budget plan for your monthly expenses which will include your rent, food cost, insurance, EMIs, etc. Formulate a spending plan that includes your monthly income and outgoing cash and also includes savings/investment opportunities that are available to you. To make a resourceful budget plan, you can use budgeting tools and apps like Good Budget, Money Planner, Money, etc. 

3. Emergency Fund: Keep a minimum amount that can supply you with at least a 6 months allowance in case your income sources deter or any other unpredictable scenarios.

4. Early & Diversified Investment: Starting early to start strong is a good motto to acquire. A monthly SIP of INR 2000 with a 10% return rate would amount to 2 Cr in 30 years. Go for low-risk investment plans like Mutual funds to ensure stable earnings. Investments in stocks are riskier and require sound knowledge of the stock market. It’s never wise to put all your eggs in one basket. A diverse portfolio, which includes a range of asset types such as bonds, real estate, and stocks, reduces risk and raises the possibility of positive returns.

5. Stay Updated: The world of finance is a big ocean, and you are a fish in that; if you want to achieve good opportunities, then you should be updated with the finance news. You can read books, magazines, newspapers, blogs and also attend financial workshops which will help you improve your knowledge about markets and will keep you up to date with what is happening in the finance world. It will also help you to choose better investment opportunities.

Don’ts:

1. Avoid Overspending: Follow the 50-30-20 rule for using your post-tax income – 50% for your needs, 30% for wants and 20% for savings. Savings could be in the form of cash or assets. Spending beyond your monthly budget can lead to financial stress. You should be prudent with your monthly budget and be able to bifurcate between your wants and needs to maintain a healthy financial balance.

2. Don’t ignore Debt: If you have a debt, then you should not ignore it. It may lead to defaulting on payments, which will affect your credit score. Always prioritize paying off your debts first, such as credit cards and personal loans.

3. Don’t delay Credit Card bills: Avoid overspending owing to credit card benefits. Ideally, you should spend around 30% of your credit limit which also adds to a healthy credit score. Pay credit card bills on time and in full because the interest can accumulate quickly which can lead to debt.

4. Don’t Invest excessively: Investments are a good source of earning money, but they come with their risks. Investing too much without proper knowledge and experience or investing too much can expose you to higher market risks. Never use your emergency fund or other savings for extra investment returns.

Thus, while maintaining your finances will require you to pay attention to some of the aforementioned points, keep space for leisure in your budget. Additionally, you should avoid falling for any scams or misleading advertisements that promise big returns on investments.