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5 essential tips to manage money that matter most to our personal finance

Everybody wants to manage money for the wealthy generation which is a dream everyone wants to achieve but is it so tough that it remains a dream for maximum people? And this dream seems unrealistic when you encounter any medical or financial emergency like the current pandemic we are going through. Building wealth is not an automatic thing till the time you don’t customise the laws or tips and activate them for your future. Once you went through the basics of the mechanism of wealth building, it will act in an automated way for you.

how to manage money effectively
how to manage money effectively

We should figure out how quickly and effectively we can adapt to those tips to manage money without touching the protection for present finances. Here in this blog, we will discuss those five to six small but effective tips on how to make money and save for the future without fear of shaking current finances.

Backup Buget

We all must have ready use funds anytime in any emergent conditions, and it must be in cash or in the bank. This type of fund is called a conservative fund / Emergency fund / Breathing fund and by other different names, but has the sole objective to save you from financial crunch in any emergency. The importance of the same is discussed in the blog over Personal Finance Basics and how it is to be maintained is explained.

You can ask the question, why have this fund when we have enough budget with our other investment tools? But, the thing we must stress here is that the investment is being done for the long term purposes, and it will bear its fruits in the long term only. But, any emergency like medical, loss of job and others are short term unplanned issues, for them, we must not touch our investment and should not hamper our future while tackling short term issues.

As a general yardstick, you should have fund equals to your three months salary as a Backup budget and it should be lying in your saving accounts or in such another tool from where encashing must be easy enough to meet that emergency. This backup budget is very important to safeguard your finances and essential step in procedures to manage money.

manage money effectively
ways to manage money effectively

Rebalance your portfolio

Your portfolio is a combination of all your financial tools like investments and savings mechanisms. After meeting every medical and financial contingency in which you take out money from your investments, you should revisit your portfolio. Check whether your current portfolio is in the right direction to let you meet your target timely. If not, you should go for a rebalancing of your folio and can go for more diversification if needed. In this way, you can change your investment tools to make money with all new ones or can for adjusting the investment amount in particular tools. Your portfolio can have a mixed combination of Mutual Funds or Equity investments, and you can read all the information regarding investment through the official website of SEBI.

Manage loans to manage money

A loan is a beautiful and effective strategic tool marketed by various financial institutions for the customers to help them in building their future. But the loan is associated with some common must to know basics such as high-interest rates while paying back and the time period for the repayment. After any financial crunch, repayment of the loans become another stress for an individual but it does not change the fact that too has to be paid back timely. So, it is better we must keep these vital things in mind before taking any type of loan. The loan can be of any type out of the personal loan, home loan and many more.

Another popular way to use this tool is Plastic money like credit cards where you have a window period to repay your borrowed money. But here also same terms and conditions are applied like a high rate of interest in case of non-payment. You must have sufficient funds available in your saving to repay these types of loans timely. Additionally, a good credit score of more than 750 is essential to fetch good deals on credit cards.

Readjust your financial goals

Everybody has financial goals and targets wanting to achieve in a specific period of time, but that target must be realistic enough. Readjusting the financial goals after some time and after the market fluctuation is important to manage money. Realistic means, you should be sure enough that your financial investments will help you in achieving those. if not, you must revisit your goals and try to set its rights as per your tools. You must do this exercise after every financial emergency or situation where you spend a large pool of money out of your savings.

You should check your investments and savings which you had made to reach the financial target. Now, look for the best alternative available which can increase your rate of return for your investments depending on the current situation. After this readjustment, if you are satisfied that you will catch the predecided target, you should keep going with the current one. If not, you should lower some of your goals and re-prioritise them accordingly.

Keep investing to make and manage money

This is the most important decision every one of us should make, before going for any type of investment. The volatility of the market and investment tools you choose should not affect your future investment. There is a strong reason behind it, and we should continue with our investments without looking for volatility in the market. Generally, because of fluctuation in the market, customers are exposed to losses and what they do is that they usually quit out of the investment. This financial behaviour comes out of fear of loss of savings.

it is easy to manage money

But we must keep one important thing in our mind, that market is volatile. If you are lost in a downtrend, it is better to wait for the uptrend of the market which will surely come. We should not panic in the downtrend and keep investing in the usual way as before. As an investor, we must focus on long term wealth generation and continuous investment is the key to wealth generation. After going through these steps, I am sure that you would have got some idea about how to manage money. The process to manage money is not at all difficult provided we give due attention to our finances timely.

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