- Have regular discussions with the family about money matters
- Be understanding, if there is a need to borrow from the bank for meeting certain expenses.
- Discuss your income and expenditure regularly with each other.
- Avoid any blame game if you are facing any financial difficulty. You need to ensure that conversations on money matters are positive and that everyone is committed to saving money and avoiding unnecessary expenses.
Set financial goals for yourself and your family
Assess your family's personal, financial needs and then work out how you would meet them. Identify goals for your family (like children's education, mortgage payments, retirement plans, etc.)
Classify your goals into:
Short - term goals - those that you expect to reach in the next year or two, which could include saving part of your income each week for a holiday, or paying off your credit card outstanding.
Medium - term goals - those that would take anything between 3 and 5 years to achieve, and may include saving towards a down payment on a house or buying new furniture.
Long - term goals - those that will take more than five years to achieve. Saving for your children's education, paying off your mortgage early or building a retirement nest egg are common examples.
Doing this would help allocate your income towards achieving specific goals and to put unnecessary expenses on hold.
Plan your finances
Once you decide what your financial goals are, you need to make an action plan on how you would meet them. Decide what steps you need to take to meet your financial goals Start saving now! The sooner you start saving, the sooner you can achieve your goals.
Record Your Expenses
Knowing how much your family spends helps you understand where the money is going and how you can budget your expenses.
In order to achieve this, all expenses for a month, including interest payments on your loans and payment made by credit or through cheque, need to be recorded. At the end of the month, total your expenses and categorize them into major expenses and daily expenses.
Budget is not a bad word. In fact, a budget can free you to make informed spending decisions, and help you organize your finances - it tells you what money comes in, what money goes out, and where your money goes. Identify sources of your family's income, including your salary and income from investments. Use your expenses record to match your total monthly spending against your total monthly income. Monitor your expenses and budget regularly. Create various expense categories and include the monthly amounts you allocate toward short and long-term goals. Remember to budget for unexpected expenditures such as medical expenses.
A budget can help you be in control of your finances, achieve your financial goals and be a smart consumer.
Pay your bills on time
As soon as you get a bill, always verify if the expenses listed, have been undertaken. Know your credit limit and the bill due date. If you have given 'standing instructions' to your bank to make certain payments, assess those expenses.
Sign up for SMS or E-mail alert facility provided by your billers to know that a bill has been issued and payment is pending towards the same.
Paying your bills on time will help you avoid excessive interest or late payment charges.
Buy only what you can afford. Ensure that your debt costs on personal loans and credit cards does not exceed 15% of your income after paying off taxes.
Apportion a fixed percentage (5-10%) for savings or in some secured investment option every month. Apply for a direct debit facility so that a part of your income gets automatically transferred at the beginning of a month towards your savings / investment option. This way, you can save your precious money before you get a chance to spend it.
When you plan to buy an expensive product (like a car, for instance) save extra money, apart from your regular monthly savings. Try and curb unnecessary expenditure. You would be amazed to see your savings add up. Do not take additional debt to pay off your previous debts.
Remember: Whether you borrow through a personal loan, a line of credit or a credit card, credit should be used to enhance your personal financial management, not become an extension of your income.