Are you stumped by the fact that you actually saved more money on your first job than you do now? You’re not alone. While this phenomenon stumps all logic – shouldn’t you be able to save more money as your income goes up? Well, only if your personal finances evolve accordingly.
Below are a few reasons why you find yourself in a tight budget every month despite earning well.
Living Beyond Your Means
While it’s perfectly fine to dream big and aspire for a better quality of life, one must not channelise this dream purely via possessions. It’s natural for our wants to increase as our income goes up; the way we deal with this impulse is what sets the tone for our financial future.
As your income scales up, you’ll notice that you have access to powerful financial tools. For instance, banks will readily offer you credit cards with a high credit limit. In situations like this, you have to ask yourself if you can use this new-found freedom responsibly.
It may be tempting to fulfill all your wants now just because you can, but remember, credit usage demands responsibility. Successively big expenses on your card can be difficult to pay back. This is where you want to exercise caution. Don’t use more than 40% of your credit limit. Why? Because, firstly, credit card debt attracts high interest rates. Secondly, doing so will affect your credit score. The bottom line is, don’t flex your credit muscle just because you have a big limit; use it well but with careful restraint.
“Investment? Sounds Boring!”
This is a common sentiment among a few millennials. There’s a stigma around finance that makes youngsters find it boring. Hence, they don’t bother to learn about investment and wealth generation. It’s no secret that SIPs can help you cultivate discipline when it comes to saving money.
Staying away from the world of investment can risk you to have inconsistent saving habits. Look, there’s nothing wrong in embracing the YOLO spirit, but when it comes to money, you need to know how to not only earn and save, but also grow your wealth.
Not Tracking Your Spends
Today, tracking where your money is going is easier than ever. You can even do it via your smartphone. However, despite having technology to back us, some of us decide to wing it when it comes to calculating our money – this is one of the most common mistakes people make when it comes to handling personal finances.
While it may seem trivial to note down minor expenses such as, say, buying a bar of chocolate, one runs the risk of developing a callous attitude towards tracking money, because all these little expenses will eventually snowball into a significant amount.
Thankfully, simple habits such as checking your bank statement every week or checking how much cash you’ve used from your wallet can keep this bad habit at bay. As cliche as it sounds, a rupee saved is a rupee earned. Appreciating its value will fortify your relationship with money.
BankBazaar.com, India’s leading online marketplace for loans and credit cards.