Consumers in the 21st century are bombarded with advertisements that create a false imprint of happiness. Living in a fancy apartment or driving a swanky car may provide great joy, but the feeling may only be short lived. To relive this feeling, you will be forced to repeat the purchases.If you resemble the above buying behavior then one thing is certain - you need to plan your expenditure better.
Don't splurge more than you can afford. Millennials are consistently showing a pattern of increased spending. Splurging on dine-outs, travel, shopping is the new normal. Occasional splurging is fine, but frequent high-value purchases can hurt your finances. Especially, if you haven't planned for important financial goals such as funding child's education and retirement.
Here are a few financial tips for those who splurge:1. Do not owe more than what you can't pay
Do not rely on credit card for all purchases. This gives you a false sense of being rich. Also, try to repay the availed credit in full at the end of the billing cycle. You will save paying huge sums in interest to credit card companies.
2. Invest saved money, as only investing has the power to grow your money
Develop a habit of saving, and more importantly invest the saved money. You will be pretty surprised to know that only Rs 1500 invested every month in equity funds through SIP can make you upwards of 1 crore in the long term!
3. Do not withdraw money from your retirement fund (EPF and PPF)
EPF and PPF are meant to secure your future, let it grow. It's like a planted seed that will grow into a big tree and provide you shade when you retire.
4. Buy term insurance
Term insurance is insurance in the purest sense. Buying a term insurance in younger age is cost-efficient and provides a decent cover. For a 30-year-old non-smoker, a cover of Rs 1 crore is available for as low as Rs 750 per month.
5. Repay your debt
If you have availed debt such as personal loan, try to repay it as early as you can. You pay less money as interest. Especially, pay up the ones with the highest interest rates.
6. Focus buying behaviour towards creating assets, not liabilities
Create assets that will provide returns in future and increase your net worth. Do not spend on things that require high maintenance as they will drain your finances.
7. With subsequent increase in income, increase investments too
With career progression your income will also increase. Instead of diverting the surplus income toward consumption, invest it. This will help you realise your financial goals faster.
You do not need to be an expert to manage your finances well. If you become 'money smart' you will be ready to face all financial challenges. The key to this is to plan, diversify and stay invested for long term.