How Can You Make Your Lifestyle Match Your Finances?
You might be living life king-size, but check if your lifestyle is out of sync with your finances.
Jul 2022
3 mins read
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Ask yourself a few tough questions –
- Do you frequently fall short of money?
- Are you left with little or no cash towards the end of the month?
- Are you living off your credit cards?
If you have answered ‘Yes’ to all or most of these questions, your lifestyle is out of synch with your finances. You might be living life king-size, but sadly your income doesn’t seem to match up.
How does lifestyle affect your finances?
A quick assessment of your average monthly expenses would probably show that a major part of your income goes towards funding your lifestyle – rent, fuel, clothing, travel, utility bills, socialising, eating out, etc. Simply put, your lifestyle has a direct bearing on your financial health.
Consider this –
- Mr. A earns a salary of Rs.50,000 per month. He lives within his means and spends his money wisely. Each month, he manages to save Rs.10,000 that he directs towards investments.
- Mr. B, on the other hand, earns a salary of Rs.1 lakh per month. He, however, likes to splurge. Almost every month, he either falls short of money or he manages to save Rs.1000 – Rs.2000.
Though Mr. B’s income is double that of Mr. A, his lifestyle is such that he doesn’t manage to save nearly enough. In fact, he often faces a financial crunch because his income falls short of his expenses. A few simple lifestyle adjustments can help avoid the stress that a situation like this might put on you and your family.
Lifestyle changes to improve your finances
1. Make a budget
This is the first step in any financial journey. Make a budget at the start of the month. List down all sources of income and all your expected expenses. When listing expenses, prioritise necessary items like food, clothing, rent and conveyance. Leave a little room for additional emergency expenses or if you want to splurge once in a while. Balance the aggregate expenses with your income.
Tip: If the expenses regularly overtake your income, you need to take a second look and trim down the discretionary expenses.
2. Look for cost-effective alternatives
One effective way to cut down on unnecessary expenses is to find economical alternatives. For example, if you are travelling a short distance, consider walking instead of hailing a cab, or shop from outlets that give attractive discounts.
Tip: Do a little research and your purse will thank you.
3. Follow the 50:30:20 rule
The 50:30:20 rule is effective for building your savings no matter how much you earn.
a. First save and invest 20% of your income
b. 50% of your income can be spent on important and necessary expenses (food, clothing, shelter, utility bills, travel, etc.)
c. The remaining 30% can be spent on other expenses such as dining out, shopping, entertainment, etc. These are the discretionary spends which you can control to meet your overall household budget.
Tip: By allocating 20% of your income first to savings and moving it into an investment plan, it is easier to avoid impulse purchases.
4. Manage your debts
According to a report by TransUnion CIBIL, 200 million Indians either have a credit card or another type of loan1. So, while debts are common, managing them is the difference between financial health and financial doom.
Try to limit your loans, and avail of one in exceptional circumstances only. Where possible, save in advance for a big ticket purchase. If you have a credit card, make sure you clear the bill within the due date. Do not revolve credit or you might fall into a debt trap.
Tip: Manage your debts and ensure that they are repaid as soon as possible.
5. Start investing
While it is financially savvy to curb expenses and adjust your lifestyle according to your income, it is crucial to invest wisely to create a corpus for your financial goals. As you follow the 50:30:20 rule and save regularly, invest this money in tax-efficient avenues.
Tip: This corpus can then be used to fund your financial goals.
Design your lifestyle around your finances to enjoy financial stability and peace of mind, for yourself and your family.
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PGIM India Asset Management Private Limited
(CIN - U74900MH2008FTC187029)
Toll Free Number: 1800 266 7446
Email: care@pgimindia.co.in
This is an Investor Education and Awareness Initiative by PGIM India Mutual Fund.
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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
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