If you're a non-salaried individual who has just set out on a journey to make your dreams come true, chances are you'll be struggling with your finances at the initial stages of your career. Be it for actors, artists, models, playwrights, musicians, video editors, photographers, sound engineers or even new freelancers and entrepreneurs, the absence of a regular inflow of money may force them to go through a phase of squeezed purchasing power with limited to nil financial security.
As such, it's important that you tread very cautiously on this treacherous path to stabilising your finances where certain pragmatic strategies will be your guiding light. We discuss a few handy tips that can actually accelerate you through this tunnel of strained finances quickly.
Grow your savings
Whenever you do make money, ensure you pay yourself first by saving up as much as possible, even if that means compromising on some of your "wants" like holidays, clothes and gadgets. An adequate savings fund can bail you out during lean times in the future. Also, try and build a separate emergency fund in a savings account with at least 3 months' worth of expenses so that you're on a stronger footing while dealing with an unexpected event such as loss of work or a family emergency. You can also go for a fixed deposit and let your emergency fund grow over time, and break it easily in the face of an emergency after losing 1% of the interest value.
Avoid falling into a debt trap
People without a regular stream of income are often forced to rely on loans from friends and family. While these "favours" may come to their rescue regularly, they should take adequate measures to free themselves from debt as soon as possible. If the debt situation is left unattended for a prolonged period of time, it may lead them to a debt trap that can cause immense psychological and financial stress apart from the loss of dignity and strained relations.
So, make sure you always have absolute clarity on your total debt situation (note down how much you owe to how many lenders along with any interest that you may need to repay with the loan) and go on a strict financial diet in order to be left with more money to repay your debt. You can do so by tracking every rupee that leaves your account and wallet, creating a budget for all your expenses and implementing every possible way to cut corners (like working out at home instead of the gym, using public transport, cooking at home, getting a flatmate or moving to a house with lower rent, so on and so forth).
Get a health insurance policy if you're not covered
Medical emergencies are one of the most common reasons behind the draining of precious savings and investment returns, especially in the current times of high medical inflation. As a result, you'll be well-advised to use a portion of your income or savings to buy a health insurance plan if you're not covered under any other family floater or group plan. Yes, that will cost you some money, but you can get a good coverage amount with low premium if you start your policy at a young age. Also, a number of individual health plans come with a No Claim Bonus clause (amounting to, say, 25% of the coverage amount) which gets added to the total coverage if you don't make a claim in a policy year.
Be really savvy when it comes to expenses
Cashback, End of Season Discounts, loyalty benefits, redeemable reward points, discount coupons, special offers, and bulk deals-there's no dearth of options which may help you smartly boost your savings on your regular spends. So, be informed, and always look for innovative ways to cut down your expenses. However, smartly evaluate the cost of availing these benefits and don't overspend and breach your budget just to get additional discounts. In other words, don't buy 3 to get 3 when you actually need 1.
Work towards increasing your income
Well, truth be told, you might feel that your cost-cutting measures are falling short of stabilizing your finances completely. Therefore, you must prioritize measures to increase your income, because a broader income pool is perhaps your best bet to get rid of debt, raise investment capital, build an emergency fund or simply boost your savings. Doing part-time jobs or weekend gigs, taking online classes, starting a Youtube channel, participating in online surveys-the possibilities are endless. You just need to identify your skills (and maybe even your passions) and devise your strategy to generate a side income.
Remember, your next step should be to invest to grow your wealth and meet your short and long-term financial goals on time. But consider investing in high-returns fetching but riskier instruments such as equity only once you've consolidated your financial base, freed yourself from debt and also have other less risky instruments in your portfolio. Wish you all the very best!
(The writer is CEO, Bankbazaar.com)