Managing your finances can always be a massive challenge. If you do not have sufficient funds, it is challenging to build it up to meet financial emergencies. Simultaneously, it isn’t easy to manage things, even if you have more money on your hands than you need. So, the key to manage finances is to have the right mix of savings and investment. This blog looks at the various options available to you to help you manage your finances better.
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Know the difference between savings and investment.
Generally, people think that savings and investment are the same. But, it is not so because there would be no need to have two different terminologies if they were the same. So, let us comprehend the difference between the two that can prove to be the key to better managing your finances.
Savings is a concept that can help you access your funds whenever you need them, even in an emergency. Investment, on the other hand, is more geared towards generating returns. For example, having a savings or a deposit account in a bank or a post office is savings, whereas purchasing shares, insurance policies, gold, real estate, etc., are considered investments. So, the primary objective of savings is sustenance, whereas investment is returns-oriented.
How to manage finances better?
Generally, people feel that bank deposits are the best savings instruments. Yes, they are right because bank deposits guarantee the safety of funds, are liquid and are easily accessible. However, the bank deposits do not give good returns. Usually, the inflation rate is higher than what banks offer as the deposit interest rate. So, we can say that you lose money in the long run.
For example, a bank deposit of Rs 1 lakhs at 6% interest will translate into around Rs 1.06 lakhs at the end of the year. However, if the inflation rate is 8%, the Rs 1.06 lakhs does not have the same purchasing power that Rs 1 lakh had one year ago.
So, we recommend everyone have the right mix of savings and investment. You can plan your finances to have enough money in the savings account to run the family and take care of the emergencies. At the same time, you can invest surplus funds in assets like stocks, mutual funds, chit funds, etc. If you are looking for long-term investment goals, you can go for real estate, gold, etc.
You can search for investments near me on the Google search bar to locate the best investment companies that generate good returns on your investments. If you need cash fast, you can try investing in registered chit funds platforms like Money Club, which gives excellent returns.
Pay your credit card bills on time.
A credit card can prove one of your best friends in an emergency. But, at the same time, it is your worst enemy because the interest rates are exceedingly high. However, you can pay your credit card bills fully on time to benefit from the interest-free period available on all credit cards.
Even if you need cash fast, it is advisable not to use the cash advance facility available on the credit card. The bank charges interest on the cash advance amount from the advance date to the repayment date. Besides, you incur a cash advance fee on every such usage. Instead, you can use your debit card and withdraw cash from your savings account.
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Repay your loan installments properly.
A default in the loan installment repayment can have a double effect on your finances. One is that you end up paying penal interest on the overdue installments. Secondly, the delay or default in repaying the installments affects your CIBIL score. As a result, you lose various benefits given by banks to people with good CIBIL scores. It includes access to multiple loans, concession in interest rates, etc.
Keep adequate funds in your savings bank account.
One of the fundamental principles to manage finances is to have adequate liquidity on your hands. Therefore, we advise maintaining sufficient balances in your savings accounts. You might need the funds in an emergency.
Have adequate insurance
Please make it a point to take health insurance coverage for each family member. It can come in handy during a medical crisis. Also, having adequate health insurance makes sense with the COVID threat hanging over our heads.
We have discussed various measures you can take to manage finances better. However, while savings is crucial, it is better to have adequate investments to take care of your finances in the long term. Therefore, we advise you to exercise care and choose the right investment companies to safeguard your hard-earned money.