In the current scenario, when due to high competition in every field, profits/incomes are increasing at a slower pace in comparison to Inflation rate, which is increasing with higher pace.  In current situation, mostly youngsters are very much concerned about, how to manage financial situation when we have expenses more than our Income. This article is relevant to every person irrespective of earning-

1. Create Budget: Every person should maintain a budget, at start of month they should elaborate the incomes inflow and outflows. This habit helps us not to spend money on things which we really do not require.

2. Create Emergency Fund: As discussed above, due to the concept of nuclear families and un-stability in the market due to internal as well as external factors, there is high number of chances that, your regular source of Income may be effected, to come out of this situation, everyone should maintain at least 6-8 Months household expenses related fund separately in bank account/ liquid assets which can easily be accessible in case of emergency.

3. Apply 80:20 Principal: If you want to manage your financial situation along with wealth creation, then you should follow 80:20 Principal. According to it, Out of your total Income, firstly, you save 20% of your Income for your Investment and retirement purpose. Rest 80% can be spent to meet your regular life style. If you are able to save even out of this 80%, then it is bonus for you.

4. Term Insurance: Everyone person should have term insurance coverage, according to their premium paying capacity and the amount of liability they are carrying. As observed in many cases, single person is earning hand in whole family and they take loans, and due to some mis -happening , the earning person got died then surviving peoples are not able to repay loan liability and they suffers a lot in this situation. So every person should take adequate value term insurance, so that it covers whole amount of loan value which can be easily repaid along with other liabilities of deceased.

5. Pay your debt as soon as possible: In the current scenario, every person desired to meet its luxury desires as soon as possible, even on the basis of taking loan from banks. They take loans, even when their financial situation does not allow for this. But to meet own desires, they take loans and get stressed when pay EMI and Interest. To avoid this situation, you should pay your debts as soon as possible.

6. Invest in Tax Saving Instruments Like PPF/ Sukanya Samriddhi YojanaAs per Section 80 C of Income Tax Act, 1961 you can invest upto Rs.1,50,000/- in Tax saving Investments during financial Year. Take example of PPF in which EEE Model applies which means when you invest, you get deduction under Section 80C, interest earned on this income is also exempt and maturity value is also not taxable. In PPF and Sukanya Account you will be able to get more interest in comparison to Interest offered on FDR by banks along with benefit of exempt interest income.

7. Automate your Investment Amount: By the use of technology, now you can automate your investment process. For this, you have to instruct your Bank that on monthly basis this amount will be deducted from my account and credited to Investment account. This process helps you to invest without your Involvement.

8. Start Saving Early and see the magic of 8th Wonder: Compound Interest is known as 8th Wonder, which means if you start saving early and allow your investment to compound, for a longer period of time, then you will see that, at the time of maturity you will get a huge amount, just because of compounding effect.

This article is for the purpose of information and shall not be treated as a solicitation in any manner and for any other purpose whatsoever. It shall not be used as legal opinion and not be used for rendering any professional advice. This article is written on the basis of author’s personal experience. Adequate attention has been given to avoid any clerical/arithmetical error, however; if it still persists kindly intimate us to avoid such error for the benefits of other readers.

The Author can be reached at mail –shivsharma786@gmail.com and Mobile/Whatsapp – 9911303737

Author Bio

Qualification: CA in Practice
Company: Shiv Kumar Sharma & Associates
Location: Delhi, New Delhi, IN
Member Since: 03 Dec 2018 | Total Posts: 21
My Self CA. Shiv Kumar Sharma. I am a member of "The Institute of Chartered Accountants of India" since 2012. I have Qualified my B.Com (H) in 2010 And Cleared CS- Executive Exam in June 2013. Currently, I am in Practice and dealing in Direct and Indirect taxation along with ROC Compliances. View Full Profile

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