How to take better control of your finances this year?

Managing finances is an essential aspect of one’s life. Good management of personal finances goes a long way in determining the quality and security of life. Inflation is the biggest threat to long-term financial well-being for employees as it erodes the accumulation of wealth.

Increased costs continually put pressure on household finances. 2023 may become a financially challenging year for many. It has become now more important to support employees to take control of their finances to successfully navigate the cost of living crisis.

Voyagers partners, a leading HR solutions firm provide here a guide for money management to help employees budget, save and stay on top of their finances throughout 2023.

Creating a budget

A budget is a way of segregating expenditure and income into different compartments. A complete list is prepared of total income and exact expenses. Masterly planning is required to create the budget. The budget showcases and highlights the unwarranted expenditure and nudges the employees for financially prudential behavior. This may seem a daunting task for some but it helps get an overview of income and outgoings.

Managing the debt should be a priority

There exist many different types of debt with varying rates of interest. Credit cards and overdrafts usually have rates of interest between 18 percent to 40 percent. Expensive debt should be paid as early as possible. A loan of about 3 lakhs with a monthly installment of 5000 rupees will take around 10 years to complete with total interest payment coming to around 340,000 so it will be a wise decision to increase the monthly installment to 10,000 rupees a month. This way the debt can be paid in 5 years and the total interest comes out to be 1 lakh rupees only.

Tracking finances at regular intervals

After a proper budget has been created, the next step is to keep proper track of your finances and make necessary amends from time to time. It may have been the case that the income and habits of spending have changed. A proper review of bank and credit cards should be made. The spending habits need to be aligned with long-term financial goals. By keeping a regular tab you will discover from where the money is leaking towards unnecessary things that you may not want in the first place.

Shopping holds the key

A smart way of shopping can really make a huge difference at the end of the year. Planning a shopping list in advance will result in the discovery of lightning deals that will save you money. Switching between brands can also reduce costs. Supermarkets line up their products into various categories ranging from luxury to value. There’s not much difference in the quality though. Downshifting can actually cut the bills by 40-60 percent.

Multiple income streams

It’s the new buzz in the town. Having multiple income streams is a sure-shot way to accumulate wealth over a long period of time. One can take an additional job to supplement the income like babysitting, dog walking, or freelancing in the given domain. Creating multiple income streams increases financial security, helps tackle debt, and adds to savings each month.

An emergency fund is mandatory for the future

It is useful to have put an emergency fund in place for unexpected events in life. The employee should aim for 3-6 months of salary as the corpus of an emergency fund. One good way is to actively reserve a portion of the monthly salary rather than dedicating what is left after all the expenses. It is a good idea to set up a standing order for saving.

So this was the comprehensive list of ways and means to better your financial prospect in 2023.