# How to manage your money

Updated on August 5, 2012

We have lot of dreams: to buy new car, new home, new mobile, to give better education to children,it goes like that. But, do we really able to find money from our salary or earning, for that ? The answer may be ‘NO’, because we don’t know how to balance between our earnings and expenditure!. Our monthly expenditure will be always more than or at least equal to our salary. Slowly we become bankrupt, forget about investment!

If you have a dream you should start saving the money. Try to balance between your earnings and expenditure. Do this exercise: Note down your earnings per month in left hand side of a sheet. Write your expenditure per month in right hand side of the same paper as given in Table 1.

## Table 1:Earnings Vs Expenditure

Earnings
Expenditure
Salary
House Rent
Food
Other Income
Travel

Electricity Bill, Newspaper

Children's tuition fee

Miscellaneous expenses
Total Earning:
Total Expenditure:
Total Savings per Month= Total Earning-Total Expenditure=_________

Try to Balance between your Monthly earnings and Expenditure

If you are making a table like this, you will find that Your Total saving per month is a positive value. But is it really happening at the month end? If your answer is ‘NO, then you are spending more money than your expected expenditure. Find where you are spending more money and try to stop it, if it is not necessary.

Invest For The Long-Term:

After all these calculation you may find that you can save a certain percentage of your income every month. Invest this money for future, even if it is a very small value. Choose an appropriate investment plan suitable to you. You can have bank fixed deposit, Mutual funds, shares etc...Try to deposit in more than one plan. Remember the proverb “Don't put all your eggs in one basket”. Invest systematically! Invest every month! You can see the magic of compounding in the money you invested.

The Magic of Compounding:

Start investing in your early age of life. If you have not yet started, start as early as possible. See Table 2.

## Table 2:The Magic of Compounding your Investment

Age at which Investment Starts
Investment (Per month)
Value of your investment at different ages
Value of your investment at different ages
Value of your investment at different ages
Value of your investment at different ages
Value of your investment at different ages

15 Years
25 Years
35 Years
45 Years
55 years
1
500
2,00,810
6,21,580
17,12,946
45,43,671
1,18,85,842
10
1000
77,171
4,01,621
12,43,159
34,25,893
90,87,343
20
2000
-
1,54,343
8,03,242
24,86,319
68,51,786
30
5000
-
-
385858
20,08,106
62,15,798
40
10,000
-
-
-
7,71,717
40,16,212
50
20,000
-
-
-
-
15,43,434
(Assume 10 % returns per year to amount deposited)

Let us assume that, one parent starts depositing 500 rupees in his new born baby’s name, every year. The amount will be more than 2 lakhs when the children become 15 year old. The amount he deposited gets rolled over to 36 times at the age of 55. Now, if a person starts depositing 40 times more money at the age of 50, the amount at the age of 55 will be only 15 lakhs, rolled over to only 1.29 times of the money he deposited! Isn’t it surprising? This is the magic of compound interest.

Start investing as early as possible, even if it is a small amount. It will help you to achieve your dreams. Deposit small amount every month in your children’s name to give him better education, when he needs it. Deposit small amount every month to buy new house, new car and achieve your dreams !

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