How to realistically manage money if you have a spending problem

“The first six months of the year were great in terms of my workflow and income. I’ve been working as a freelancer for almost two years. however, my bad spending habits remain a point of pain, and ironically, despite getting higher pay than ever before, my financial health has been a cause for concern, “said Angad Singh, 30.

Singh believes that the mentality that he has more than enough space to spend on his indulgences because his income stream has been sprouting has led him to spend much more than his budget normally allows. “I agree with the fact that the best income is like double-edged sword: it’s just not enough to make money, but managing money and using it wisely is an equally important task. A higher income stream means nothing if the highest part is spent on your vices and temptations, “says Singh.

Millennials have been unfairly stifled with the reputation of being absolutely terrible at managing money, with parallels with older generations. Their spending habits are fundamentally different from their parents’, and short-term goals and experiences take precedence over long-term goals. They are not particularly driven by the virtues of austerity and simplicity when it comes to their lifestyles, as opposed to the older generations who have always prioritized saving for the future. The penchant for short-term gratification, new experiences, and pursuing a passion has made money management a challenge for many millennials. In addition, in the face of the deluge of distractions and peer pressure that this generation is subjected to, thanks to social media, it is much more difficult for this generation to follow a stricter budget routine.

Singh says that in order to change his habit of buying impulsively, he is working to adjust his access to monetary resources so that wasteful purchases are reduced to a drip. “Yes, the budget is important, but even the most carefully drafted budget can fall apart if you don’t have enough willpower. having some degree of control over my spending, ”Singh shares.

Singh, a bicycle enthusiast and food connoisseur, says improving his income levels has led him to buy an expensive bicycle for which he has applied for a loan. However, after a few months, the awareness that he could buy a cheaper bike and that his current bike did not really fulfill the purpose that justified such a significant financial burden. “Every EMI payment feels like a puncture, and that’s when I realized the need for strong discipline. I made a point of investing in mutual funds through SIP every month as soon as I received my payments; otherwise, it would be wasted on frivolous purchases. And depending on my income and exit scenario in a particular month, I would also transfer some amount to another account that I am using as an emergency reserve, ”says Singh.

If buying bikes for Singh may have been the result of the welfare factor stemming from increased income levels, daily impulses may be harder to master. Older generations whose definition of buying or buying was incomplete without a trip to the market were spared from having to mentally play pull and loose with their desires. The millennial, thanks to the advent of e-commerce and social media, has to fight that battle 24X7 because ads are a ubiquitous feature of our online lives. Singh says: “I bought so many clothes and shoes without needing it and just because I found an ad on Instagram while scrolling at random and liked the product too much to control my desire. This issue is not unique to me: All of my friends and family shared similar issues about not being able to meet a budget because they saw something online that they couldn’t resist buying. it would help him to keep his money on track where he could not simply spend on unwarranted expenses.

For Singh, the path of mutual funds worked because it helped him evade the turmoil of stocks and slow yields and the inflexibility of fixed income instruments. “The biggest advantage of mutual funds is that you don’t need a lump sum to invest and the SIP route allows you to invest at different points in the market cycles and so you can get the benefit of the average cost in rupees. Now I can plan my finances in so even though I’m interested in pleasing myself, I choose to accumulate the corpus through short-term liquid funds instead of just passing my credit card or using the funds in my bank account.

Shalab Gupta Bubhab, founder of Bibhab Capital, says: “There is an instant kick that can be derived by driving imported new cars or an expanding apartment that has been bought on high. Your materialistic getaways should not be at the expense of your future needs and goals. , especially if you are channeling money to depreciate assets.As a general rule, you should be very insured and make sure that 40% of your income goes to long-term capital SIP.

The keys to carry

– As rude as it may seem, you need to have a plan in place for your child’s well-being in the event of a premature death. A solid term insurance policy is absolutely essential if you are having an unpleasant incident.

– Once your children reach the right age, it is wise for children to be aware of financial matters and provide them with basic financial literacy. This way, they can be better prepared for emergencies and also have good financial habits as adults.

– It is clear that investors give priority to wealth creation over debt management. But if you don’t keep your debt under control, it can have a big impact on your long-term wealth creation policy.

– You can simply repay that loan monthly with your savings to get rid of it. If repayment is not allowed immediately due to a certain blockage, you can use a simple RD to accumulate a corpus to repay the loan as a lump sum. You can also use an arbitration fund to accumulate the amount. This option is more tax-friendly.

-Although actions for long-term goals are an absolute must, no investment should be made in the hope of winning a pot.

This article is part of the HT Friday Finance series published in partnership with Aditya Birla Sun Life Mutual Fund.

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