How to make your money work for you
Financial discipline at a young age, when most make mistakes, pays off in long run
Readers Interactivity Journalist
In their first year on the job, many young adults think they have everything figured out. However, most make mistakes and a lot of it has to do with managing finances. Here’s a list of ways to make your money work for you:
Open a savings account
Having a bank account is a must when you start earning. Keeping some money aside every month not only lets you have cash on hand in emergencies, but it also limits wasteful spending.
Dubai resident and investment manager Saumya Bhalla, 27, says, “It is important to start small. Over time you can grow that money. It is good to move funds every month because you never know when you might just need them.”
Diksha Chadha, account manager in a public relations firm, agrees. “I recommend that young people who are just starting out in their careers to get advice from their parents on how to save from an early age,” she says.
Budget your salary
When you first start working, put aside 10 per cent of your earnings. As you continue to figure out what your spending habits are, you can build this up. The best you can do is put aside 30 per cent of your salary and not touch it at all.
Set financial targets
Before creating a budget, ask yourself how much you want to have in one, five and 10 years. Do you have a specific cause you want to save for? Budget accordingly.
Plan expenses
Allocate funds to big essential ■ expenses like rent, electricity and water, food and transportation. Bhalla says, “One should plan for mandatory expenses first and then move to general expenses. Try to not let the ‘general investment bucket’ eat into the ‘savings bucket’ as often as you can.”
Keeping a record of your spending helps track where your money is going.
Review bank statements
Keeping a copy and reviewing your bank or credit card statements can keep track of your money and highlight wasteful expenses.
Avoid credit card trap
Credit cards are not magic plastic cards that make money out of nowhere. The interest rates are very high.
You do not need more than one credit card. Also, paying the minimum balance can mean almost 70-80 per cent in service fees charged by the banks, bringing no reduction in the principal. Pay your credit card dues in full.
If you use a credit card solely for regular shopping like groceries, automate complete repayment in the same month. Get a card with no annual renewal fees.
Have a backup plan
Having an emergency fund makes the future a little less ambiguous. For example, say an individual withdraws Dh2,000 monthly. At the end of the month if Dh200 is left, keep it aside in a separate fund, which can be used when certain months get more expensive than others.
Be realistic
This is the most fundamental rule in creating a budget especially if you know your expenses could spike in a specific month. If you are on a lower salary, do not set unrealistic targets. Chances are, you will be spending most of your earnings on regular utilities. Don’t set a budget that won’t work for you.
Scare yourself
If you find yourself straying from your budget more often, it’s time for a reality check. In a market where professionals are replaced daily, you could find yourself without a job. Think of a situation where you might not be able to pay your rent or have trouble making ends meet while finding a new job.
Remember, when you are financially independent you are in control. You can help loved ones and even pamper yourself without being answerable to anyone. This sense of power should be enough to get you on a budget today.