5 Personal Finance Moves You Should Take With Your Salary

Getting your salary credited into the account is probably one of the best feelings in the world. It brings along the joy of financial independence, but with freedom comes responsibility. Are you taking the necessary measures to protect your finances, or are you flushing all your funds to afford your expenses. Well, no matter how much your salary is, there are a few things that you must absolutely do to protect your finances.
 
Read on to discover a few smart personal finance moves that you must take with your salary.

How to use your salary wisely?

 

1. Budget creation

   The first step in personal finance is to create a budget. Examine your income and monthly needs. Determine how much money you will require for groceries, fuel, insurance, and other necessities. Put some money aside for an emergency fund; it will come in handy during a crisis.
   There are numerous unplanned but necessary expenses. It is critical to have a financial cushion for them.
    
   Another crucial consideration is growing liabilities. Update your monthly budget sheet to accommodate increased liabilities or a raise in income. After you have created your budget, make an effort to stick to it. Avoid frequent clubbing and switch to home-cooked meals. If you travel frequently, keep track of your expenses and adjust your budget accordingly.
    

2. Build your credit score

   Managing your expenses may be easier when you are young and have few or no responsibilities. However, as you get older, your ambitions will grow as well. You may want to purchase a new car and a home. Do you believe that paying Rs 70-80 lakhs for a luxurious home and Rs 15 lakhs for a new four-wheeler can be met with your five years of savings? But doing so will risk depleting your bank account balance and redeeming all your investments.
    
   Consider a home loan or a loan against property. Both of these loans involve substantial funding and the lenders first check your credit score. If you have never availed a loan or credit then your credit score would be reflected as NA. So, it is wise to opt for a personal loan and improve your credit score before going for a big ticket purchase.
    

Also Read: How to Improve Your Credit Score
 

3. Get an insurance

   Insurance is one of those financial products that everyone, regardless of age or occupation, should have. It protects you financially from tragic events. For example, car insurance pays for repairs if the damage is caused by natural disasters, man-made calamities, fire, or a road accident. If you or a loved one needs medical attention, then a health insurance can take care of the medical bills. If you have availed a loan, then you should get for a loan insurance too.
    
   Life Insurance is another crucial product. They are of various types. If you purchase a life insurance, the insurer will pay a lump sum amount to your family in the event of your death. This protects your family from a financial hit, in case of any unfortunate event. You can also secure your retirement by investing in products like money-back plans.
    

4. Diversify your investment

   You will find countless investment options for salaried people in the market. You can invest in mutual funds, stocks, retirement plans, and debt instruments. Each of these products carries a different level of risk, as well as a varied level of reward. Stocks provide aggressive returns, but the risk associated with them is also high. Mutual funds and debt funds are excellent long-term investments, but their returns are slightly lower due to diversified/minimized risk. In case you want a safe and secure retirement, you should consider an NPS or PPF.
    
   However, before you begin comparing different schemes, consider your long-term objectives. Check to see when you want to retire, what are your marriage plans, and when you have decided to have a baby. Diversify your investments and savings and create a financial road map to secure your future.
    

5. Build an emergency fund

   After the pandemic, one thing is sure- you must have realised the importance of emergency funds. When people lose their jobs and have no other source of income, emergency funds are something that helps them meet their basic needs. An emergency fund can also be used to address medical needs, emergency purchases, urgent travel etc.
   You should try to save 10% of your income for an emergency fund. You can also put them into schemes with high liquidity.
    

Also Read: Top 7 Short-term Investment Plans in India
 

To conclude

 
Managing your salary is simple if you know how to use your money well. Rather than spending every dime, you must save a portion of your money and invest it wisely. This way, you put your hard earned money into work and it will earn you more dimes.
 
Make a budget and eliminating unnecessary expenses. No matter how much your salary is, always make sure to keep one-tenth of your income to yourself. This is one simple and smart financial move that will help you protect your finances.