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Source: kan_chana, Shutterstock
Summary
- Keep a tab on expenditures.
- Pay off the debts at the earliest to save money.
- Maintain an emergency fund for unexpected scenarios such as jobs loss or hospitalization.
Leading a financially disciplined life is one of the biggest challenges these days. Home loans, car loans, business loans have become an integral part for the life for many. But managing these debts properly is essential for a healthy financial life. Several factors such as lack of proper financial planning and irresponsible borrowing can push you into the dangerous debt trap.
Here, we explore the three main methods to start a financially disciplined life:
Spend less than you make
One of the best practices for a financially disciplined life is to keep a ceiling for expenditures. Never spend more than what you earn. People are forced to access high interest rate debts when their expenditure level jumps over the income. This can derail the financial stability. Be always judicious in choosing between what you need and what you want. Investing a decent amount from the income is one of the most sustainable idea, rather than lavish lifestyles and extravagant purchases, which often bring people down in the long run.
Reduce debts at the earliest
Paying off the debts at the earliest can prove to be a judicious decision. It can help to stop paying large interests and save money. Whenever there is extra money, try to reduce the debts such as loans or credit card bills without a second thought. Sometimes people tend to pay only the minimum monthly payments for the credit cards. In such cases, the monthly credit card bill keeps growing rapidly because of the high interest rates charged by the banks. Always make sure to pay off the debt, which charges the highest interest rate first.
Keep an emergency fund
It is always recommended to keep aside some earnings to deal with unexpected and unplanned scenarios in life. The year 2020 showed us how unprecedented job loss and illness can impact our finances. Millions lost their jobs following the pandemic while many received reduced pay. An emergency fund can help in such situations to support expenses at home, paying bills. Also, the increase in lifestyle diseases points to the need of an emergency fund. Sometime, in the absence of any emergency funds during unexpected situations, people are forced borrow fund in form of personal loans or from credit cards, which are risky instruments. So, a substantial emergency fund is always a necessary.
