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Earn – Spend – Save – Loans

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The financial life is related to the four keywords

Earn

The place you work and how much you earn. What is your future in the industry you are working and what you will be in next 3-5 years.

  • What skills you have and what skills that you can learn. So the above makes what you earn.
  • The other important function is what you have learnt in your college and what is the reputation of your college.
  • All the above makes how much you earn and what is that you are gonna earn in next few years.
  • So most important thing if you want to work as salaried is that you have done the best courses which are in demand with the industry that’s gonna do well.

The next thing is what you can learn during your job which counts for experience and that helps in next level.

Spend

In this world to survive you have to spend to meet ur requirements etc.

The forms of spending are

  • Basic Food(need spends)- Money spent on groceries/food and your min daily needs come under this category. These are our min basic needs which covers food items
  • Clothing Spends- Our spends on what we wear- whether its basic clothes or we take it to next level of designer clothes.Spends on this can wary- it can be basic also but it can go high if we go for the best.
  • The cost of living- Ie the home we stay and the bills we pay for it.
  • Transport cost- how do we travel- if personal vehicle- how much we spend
  • Communication spend- These days mobile spends is considered as must have for everyone in the family.One should understand how much we are paying for it.
  • Travel /Holiday spends

So above are our basic spends and takes away of what you earn.

Save

The difference between your earning and spending determines your saving.To save more you need to be smarter and see what you have to spend and what you can go without it.

One formula is that if you can earn more great- if you cant then try to spend less and concentrate on only basic stuff.

The other set of question is where you save your savings and do you make roi from that saving. Your savings should earn you 50% of your monthly earning after you have done 10 years of work.

Loans

If your spends are higher than your saving that leads to loans

  • Personal loans– this is that type of loan that happens if your savings are low and your spends are really high.If you are getting into this trap, your financial balance is tiliting- try to take as low as personal loan and try to either spend less or earn more.Never take personal loans to spend on holiday /expensive gizmos etc.
  • Home Loan- This helps to build an asset and reduce your spends if you are living in a rented facility .If you have saved and can take a home loan– go for it.
  • Car loan- Transport is important but take a Car loan only to travel not for something you cannot afford. This will increase your spends as with Emi – Petrol, Insurance and Maintenance cost will pile up.
  • Credit cards- Only use credit cards for convenience as you cannt move with cash all the time.Seeing credit Card as a credit tool will hurt your financial life a lot as the credit charges are highest in credit cards

So the relationship between a perfect financial life lies in your hands.Earn more-Spend less- Save more n smart and take Loans when you know you can pay back easily.

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