Money Management: Best way to manage debt and save money


Money management is an important rule for debt debt-free and financial freedom-free life. In this article, we will discuss the best way to manage our hard-earned money. For a better way of growing financially in life follow some thumb rules like creating an emergency fund, budget planning, short-term and long-term financial goals, investing some part of your money at an early age, and managing your debt wisely. In this article, you will get an idea of how to set goals, and how to budget. We will discuss this in simple and easy language.

Here are some ways of  Money Management:

1. Plan your budget

Creating a budget is the fundamental and most crucial step in managing your money. There’s a timeless approach that’s been around for ages: take your monthly income and divide it into three parts. Assign 50% for your basic needs, 30% for things you want, and reserve 20% for savings and tackling any debts. To craft a solid budget, figure out the amount you realistically need to cover your monthly expenses based on your income and lifestyle. This estimate gives you a better grip on your finances, helping you organize your spending and savings more effectively. With a heightened awareness of your spending habits, you can track and achieve your financial goals without sacrificing your lifestyle.

2. Saving first, spending later

As we mentioned earlier, everyone needs to save some part of their monthly income to invest in various savings schemes and then start spending their money on regular essentials like groceries, rent, electricity, loan repayments, insurance premiums, etc. A good saving will help you in any future contingency.

3. Set a financial goal

Having a financial goal always motivates you to save more for that goal, so that will help you in avoid overspending. So, plan what you want to do with your money in the short as well as long term. Always consult with your financial adviser before investing in any scheme. Set a realistic goal with set timelines.

4. Invest in early age

It is always advisable to start saving money as early in life as you can. This gives you more time to grow your money, as compounding interest gives you more return in the long term.

You can refer to the below table for more insight into early investing benefits.

  Mr. Sam Mr. John
Start Age 30 Yr. 45 Yr.
End Age 60 Yr. 60 Yr.
Saving amount per year 120000 240000
Annual rate of return 8% 8%
Total amount 3600000  36,00,000
Saving Amount 14681504 7037828
Time Period and Return

5. Track your spending

Everyone needs to track their expenses; it will help you in finding out your spending behaviors. Which will help you control spending in unnecessary areas. You can use a spending tracker tool to manage your money in a better way.

6. Building an Emergency Fund

Everyone should create an emergency fund, In general, you should save around three to six months’ salary amount in a scheme like a fixed deposit for unexpected situations. However, unexpected expenses happen to everyone, no matter their income. Having a few hundred dollars in an emergency fund can help cover those sudden costs without messing up your budget or putting you in a tight spot. 

7. Debt management

Prioritize and pay the high-interest loan first and cultivate responsible credit card use. The high interest can eat into your savings. Taking on multiple loans also affects your credit score, thereby making it harder for you to avail credit when absolutely necessary or in some cases, even a job. 

Conclusion: Charting your financial course

Considering your overall financial situation is crucial when deciding between saving or paying off debts. Assess factors like whether you have a support system in case of unexpected expenses. If ambiguous, splitting your disposable income between saving and debt repayment could offer a balanced approach. Looking for guidance from a financial planner can provide a complete solution personalized to your needs

Money Management FAQ:

Que 1: How do I start setting financial goals?

Ans: Begin by defining clear and realistic short-term and long-term objectives. Ensure your goals line up with your values and ambitions.

Que2: What are the 50,30,20 Rules of budget planning?

Ans: It’s advice that proposes allocating 50% of income to needs, 30% to wants, and 20% to savings and debt repayment.

Que3: Why is an emergency fund important?

Ans: An emergency fund acts as a financial safety net, providing a cushion in unexpected situations, such as job loss or medical emergencies.

Que4: How can I start investing for long-term growth?

Ans: Understand your risk tolerance, diversify your investments, and consider consulting a financial advisor to create a personalized investment plan.

Que5: What steps can I take to improve my credit score?

 Ans: Pay bills on time, manage your credit card responsibly, and periodically check your credit score for inaccuracies.

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