What you earn is important, but more crucial is how you spend, how much you save and how you invest. No, you don’t have to scrimp. Do indulge yourself but smartly and within limits.

Discern between your needs that must be met and the wants that can wait. For instance, don’t slip on paying your house rent or repaying the education loan. Also, buy the smartphone so essential in today’s workplace and go out on the occasional outing. But consider whether you really have to upgrade to a costlier smartphone every six months or immediately book the shiny new car.

Live well within your means, and upgrade your lifestyle gradually as your income level rises. Budget your monthly expenses and keep track so that they don’t spin out of control. Various online money management tools and even apps can help you with this. As far as possible, refrain from borrowing to spend on stuff that’s not really essential. Also, never default on your loans. This will mess up your credit score and make it tough to get credit in the future on favourable terms.

Once you start earning, start building up a contingency fund — about four to six months expenses — to cope with emergencies. Keep this in fixed deposits or liquid debt funds which you can easily access, and don’t touch it unless there is a crisis.

Be careful with plastic Everything now seems within reach thanks to your credit card. But the plastic in the pocket is a double-edged sword. Use it wisely and the credit card provides a host of goodies — free credit period, freedom from lugging around wads of cash, reward points and special offers. But slip up (not settling dues on time, continually using the minimum payment route, withdrawing cash on the card) and the credit card becomes a ruthless money-extractor.

Interest rates on outstanding amounts on credit cards are sky-high — a whopping 30-36 per cent per annum. So, if you delay settling dues, you run the risk of falling into a debt trap. Use credit cards but pay the bills, in full and on time.

Read also: The Big Story: Money mantras for the under-30

Invest in yourself Keep adding to your skills. This will be worth the effort, and help you leapfrog your earnings. It will also hold you in good stead when things don’t go according to script.

In a market economy, the risk of being out of work for some periods is a reality. Keep learning and stay relevant, and your chances of bouncing back improve vastly.

Getting a grip on the basics of finance will take you a long way in building wealth. Get started with the simple-to-understand resources on the internet. Approach a trusted financial adviser, if it helps. All said, be smart with money but don’t obsess over it. Take care of money matters but chase your passions. Wealth will follow. A K

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