How to Split your Salary to Cover your Expenses?

As you begin earning, you have a whole new set of responsibilities to handle. Among these responsibilities, the one with the utmost significance is to learn how to manage your money. While some are likely to manage their money efficiently, there are many who find it nearly impossible to organize their finances, especially when they are in the initial phase of employment.

To help you attain a smooth financial graph, here are some money management tips and some guidelines on how to budget your money in the smartest way possible.

How To Manage Your Salary And Expenses?

#1. Make A Budget 

An important money management skill is to know how to make a budget for your personal expenses. All you need to do is to list down your total expenditure, total earning, and current savings to determine your exact financial position. By doing this, not only do you get to know your net worth, but you also have an idea about the efforts and savings you are required to make to reach your financial targets.

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#2. Start Investing

If you are likely to have an unorganized and scattered spending, it is important to start investing your money. Not only will this limit the amount of money you will be left with, but it will also help you to increase your savings. It is important to begin investing right at the initial stage of your first job. After all, there is no right time for investment.

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#3. Plan Around Your Goals

If you wish to make personal finance management a part of your lifestyle, it is always important to plan your schedule and work around your long-term financial targets. While this will help you focus on managing your salary and personal expenses, you will also begin to think long-term and save up more money for your future.

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#4. Cut Out On The Extra

Who doesn’t like to splurge, every now and then? Well, unfortunately, it will only harm your financial graph in the long-term. While you feel fulfilled with the short-term extravagant lifestyle, you will eventually be left with zero savings after a certain point of time. To avoid the situation, it is wise to cut down on that unnecessary and extra expenditure that you make without thinking.

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#5. Know How To Split Your Money

It may sound tempting to drop in a large amount of money into your savings account every month. However, the idea is too far-fetched and loses practicability in the long run. While you save more than you ideally should, you are just exhausting your budget for total expenditure and are likely to give up on saving pretty soon.

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The 50-20-30 Rule

A popular money management tip is to divide your money into a ratio of 50-20-30. While 50% of your income should go to the fixed cost and 20% should be kept aside for financial goals, it is ideal to keep 30% for the flexible spending.

#1. Fixed Cost- 50%

50% of your income is usually sufficient to pay your fixed costs. The fixed cost includes all your bills, rents, and payments which are less likely to vary. For instance, house rent, phone bill, television and newspaper bill, or installment of a car loan.

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#2. Financial Goals- 20%

Instead of going up for large amounts, it is appropriate to keep 20% of your income for your financial targets like buying a new house, buying a car, or your children’s education. This will keep your savings pattern regular and steady.

#3. Flexible Spending- 30%

The flexible spending includes all your unforeseen and varied expenses. These may include an unplanned trip, a fluctuation in market prices, or an emergency expense. A 30% of your income would suffice for your flexible spending.

We would love to hear from you. Feel free to drop in more money management tips. Kindly use the comment box to share your thoughts and opinions with us.

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