Do you find yourself wondering what to do with a bonus or a cash windfall – whether to spend it on vacation/new car/new mobile or to save this additional income for the future? Are you stuck somewhere in between “We live Just Once” and “Saving for the Future”? Does the idea of meeting your immediate goals excite you or you believe in delayed gratification?

Well, there are a lot of emotions attached with just one word, ‘Money’. Most often we are confused between living in the present and worrying about the future which is not certain. Should you be stingy today so that you can have all the fun in the future or should you live beyond your means as you do not know if Tomorrow exists? Here are 5 tips that could help you strike a balance between living your life today and meeting your long-term goals:

1) Spend at least 50% – Yes, you read that right! No one is asking you to be stingy and cut corners; after all economy booms only when there is spending involved. Hence, you must spend at least 50% of your income (in hand) on your needs, wants and desires. Giving yourself permission to spend will lead to achieving things that Money Can’t buy; like the Smile on the Parents’ face when their child surprises them on their wedding anniversary or the tears of joy that run through the parents’ eyes at the time of their child’s wedding.

2) Save at least 20% to spend ‘tomorrow’ – You must target to save a bare minimum of 20% of your income (in hand). This is mainly set aside to be spent in the future. Accumulated savings in the future results in money available to spend then. Availability of money at all points in time to meet any requirement is termed as financial freedom. Financial independence is what we aim to achieve right from the time we first receive money in our hands.

3) Reserve of 3-6 months expenses – A reserve means a standby or a fall-back option and there should be 3 to 6 months of expenses kept aside as a buffer which can be utilised in case there is a gap in cash inflow. There may be several reasons for this gap to be created, to name a few – losing a job, temporary ailment, sabbatical, etc, and maintaining a reserve will help cover for the expenses which invariably would continue to exist.

4) Plan for Spontaneity – I’m sure how much ever you plan and budget for your expense there is at least some part which ends being unplanned or spontaneous. A simple solution to this is to build in money which is purely for impulse buying. If you know there is money kept aside for the sole purpose of indulgence in the spur-of the moment buying decisions then your savings for long term goals is protected. Another key is to keep a tab on the amount in the spontaneous spending bucket; once it’s completely utilized you must create a pause on impulse buying too.

5) Invest by automating savings – The first step here is to ear-mark savings for different goals in the future. This will help determine the time horizon at hand along with the risk that can be taken based depending on the time horizon. The second step would be to convert these savings to an investment plan. Again, based on your time horizon and risk appetite investment strategies can be built. To begin with, mutual funds are a good and much safer investment products. The third step would be to automate this plan. The best way to automate this is via monthly SIPs i.e. Systematic investment plans where the money (apportioned for the investment) in your bank a/c is directly invested in the planned mutual fund schemes on the planned day of the month. You could spread your SIPs across the month in different schemes and same amount will be deducted from the bank and invested month on month.

Following the above steps will not only help you enjoy your short- term goals but also help you remain spendthrift in the post retirement phase. Planning your finances may look simple, but it is not easy. With the guidance of a Certified Financial Planner towards managing cashflows, automating savings and creating investment strategies, will along with a well-funded retirement account also aid in providing rich memories to be cherished and shared. Happy Investing!

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