Want to feel better about your finances? Do these 5 things right now!

• Have clarity on how much you want to spend, under what heads, and how much you want to invest
  
• Make it a point to pay your credit card dues on time and never make just the minimum payment
  
• Avoid going for personal loans for product or travel expenses and stay away from credit card EMI as much as possible
  

Whether it is health, relationships or finances, each of these plays a very important role in our lives. And, at times, it may feel that you are not in control of one or more of these.

While the best way to navigate this is to seek help, let us share some common wisdom for your finances. Looking at the big picture in such instances may seem daunting, but there are small things you can do to feel more confident about your finances. Some of these may seem obvious, but it is important to keep reminding ourselves about them.

Be aware where your money is going

Nowadays, there are several avenues to spend money, whether it is cash, credit cards, debit cards, UPI, direct debits and so on. Some like credit cards and BNPL may need to be paid a month later, while others are an immediate expense.

But with so many options, it's hard to keep track! And many of us do not have a clear idea of where our hard-earned money is going.

“People do not have an awareness of their total expenses. First, for a period of three months, and then for another three months, find out how much money you are spending under each head,” says B. Srinivasan, director and founder of Shree Sidvin Investment Advisors.

Have a budget in place

Once you know where you are spending your money, figure out the areas of expenditure. This will help you make necessary adjustments in case you feel your expenses under a certain head are too much and try to reduce them. This is the first step in creating a budget.

“Have clarity on how much you want to spend and under what heads and how much you want to invest. As long as you are investing the required amount every month, you can spend the rest guilt-free,” says Srinivasan. Once you have a budget in place, it is important to stick to it.

Build an emergency fund

As the name suggests an emergency fund is a fund that you need to create so that it can come in handy in case of emergencies like a medical situation or a job loss.

Normally, one should keep an emergency fund of 6 months of monthly expenses in a savings account or liquid funds as emergency funds. However, after the pandemic and in light of the recent economic conditions, experts are now recommending keeping 12 months of monthly expenses, especially if you have commitments like home loans and other EMIs.

Take control of your debt

All debt is not bad, but high-interest unsecured debt like personal loans and credit cards can put a strain on your finances. Try to avoid going for personal loans for funding expenses like the purchase of gadgets or travel and stay away from credit card EMI as much as possible.

In case debt payments are a bother, try and pay off high-interest debt first. This method, known as the avalanche method, can help you control the debt burden faster.

Reduce your credit card spending

Credit cards are efficient tools when used wisely, but if the credit card dues are not paid in full on time, it would lead to a debt trap. Make it a point to pay your credit card dues on time and never make just the minimum payment.

Be especially careful if you have high credit limits and try to keep your credit card expenses to 30% or below your credit limit.

If your finances are not in order, it is never too late to start. Doing the things above will get you started in the right direction.