7 tips to manage your money smartly

"Money money money! Always sunny in the rich man's world," sang Swedish pop group Abba in 1976.

"Money is better than poverty, if only for financial reasons," said filmmaker Woody Allen in 1975.

"If you would be wealthy, think of saving as well as getting," said American powerhouse Benjamin Franklin as long ago as 1758.

So it seems people have always loved money and have been asking and wondering about how to make money and, more importantly, how to keep it from vanishing.

Managing money is often made out to be a nightmare. There are always things to buy and hardly ever enough money to buy those things.

And when there is money to spare, it always disappears quickly.

However, nothing is rocket science (except rocket science itself), so managing finances is easier than it seems.

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Illustration: Uttam Ghosh

Courtesy:YouthIncMag.com

Make this a ritual before bed (along with brushing your teeth) -- write down how you spend every penny everyday in a notebook.

At the end of the month (or week; depends on how often you want to review your spending), tally your expenditure and break it down into different categories -- money spent on clothes, on travelling, on food etc.

Then identify areas you can cut down on and consciously reduce spending there.

Opt for non-branded items over luxury brands. Utility trumps fashion.

If you can make something yourself instead of buying it, make it. DIY (Do-It-Yourself) is both fun and easy on the pocket.

Buy clothes at sales or online. You might spend less online as there are no items physically present around you to distract you from your list.

Buy cinema and other entertainment tickets when offers are available. Buy 1 get 1 free offers are commonplace nowadays.

Use mass transit transport whenever possible. Buses are cheaper than autos and taxis. Alternatively, walk or cycle if the distance is short.

Before buying anything, ask yourself firmly, "Do I really need this?"

Illustration: Uttam Ghosh

Investment is a small word with big implications.

While it is only about saving and putting away money some place safe, it is an act that can save your life.

Investment is not just about making and saving money, it is about creating wealth, which is more than just currency notes.

Experts say you should start investing as soon as you receive your first paycheque.

You could start earlier, while in college itself, but the money you invest then is more likely to be your parents'.

Investing your own money might give you greater satisfaction.

Investment should be a serious discipline from day one. Start investing with your first paycheque.

The old approach to saving was Income – Expenditure = Saving.

The current approach is Income – Investment = Expenditure amount. So the first thing you must do after you get your salary is invest, then budget your expenses.

Credit cards are a must-have in this day and age but use them wisely. They attract the heaviest interest rates, so don't use them for impulsive buying. When paying bills, pay credit card bills first.

Loans also require disciplined repayment. If you want to buy a car or a home, buy it on a loan, even if you have enough cash in your bank account.

The value of property will always increase, so you will end up paying much less at the end of, say, five years than what it becomes worth then.

Illustration: Dominic Xavier

Always pay your bills on time: credit card, loan, mobile phone etc.

Maintain a diary or calendar of payment due dates.

Deposit money every month in your bank account, say 20 per cent of your pocket money or salary.

Save, then splurge. Also, spend less than you earn.

Illustration: Uttam Ghosh

The top five places where you can invest your money:

The Bank: Open a free bank account and keep your cash in there. In an emergency, you might need easily accessible cash.

Insurance: Preferably life insurance because times today are uncertain. Life insurance assures your family security.

Property: It's hard to buy a flat or a house at the start of your career, but start saving up. At least you will have some money put aside.

Mutual Funds: A low-risk investment area. Start with a small amount.

Shares: More risky than mutual funds. Returns are not guaranteed. So invest in a company that has a good reputation and proven track record of steady profits.

Illustration: Uttam Ghosh

Recession has nothing to do with investing.

In fact, buying shares might be profitable as stock prices are down during a recession and the market does well after the recession.