I was having a bad day I was worried, tensed and sad not in a good mood at all for some personal reason, but then my phone rang there was a message on my phone. I picked up my phone to take a look and once I read that message all of a sudden my mood got better. The message was Your account XXXX was credited by XXXXXX amount. Yes, it was my salary which got credited and I become a happy man, although the reason for my bad mood was not money.
You can pretty much relate to my happiness if you are a salaried person. For most of the people out there, salary is the main source of their cash flow. Some people get high some people get a low salary but we all work throughout the month to get paid. And our lifestyle, expenses and almost everything revolves around our salary.
Now there are two types of people
- One who doesn’t spend their salary so easily and want to save it for their future compromising their present life.
- Second who spend their salary easily and want to enjoy their life in the present without worrying about the future.
Which way is better? first or second? Both ways are right and both are wrong at the same time. Nobody has seen the future you should enjoy your present but you can not ignore the future planning at all. So what to do?
According to me, it's not about spending your salary or saving it for later. Always remember Salary is meant to be get spent but the important thing is where and how you spent it so that you can enjoy your present and plan for a better future.
Here I’ll discuss where you should spend your salary according to me. You can pretty much disagree with me and I’ll be pretty much happy to hear your arguments or if you have anything to add here. Remember these things only apply to your salary, not to any other kind of income.
But before that why the salary is so important? why we are even discussing where you should spend it? Why there is a need to write an entire blog on it? So to answer that salary is a consistent form of income that guarantees you consistent cash flow secondly salary is the most time taking the form of income you have to spend 6–10 hours daily then only you can expect your salary at the end of the month. These two reasons make your salary a very precious form of income but as I said salary is meant to be get spent and thus you should spend it wisely and in a correct manner. Hope now you understand why salary is so important. So where to spend the salary? Let's take a look.
- On assets — You should spend your salary to buy/build assets that don’t actively require your time and efforts but still contribute to your wealth in the background. Why in the background? the simple answer is you have only 24 hours in a day and you are already spending 6–10 hours on earning your salary and 6–10 hours on sleep. You need an asset that generates cash even when you are busy earning your salary or sleeping. The assets should work for you even if you are not working and should add up to your wealth. The simplest example can be your investments. Your car or expensive gadgets is not an asset. Assets always put money in your pocket. It doesn’t take money out of your pocket.
- On skills — Spend your salary on skill improvements or learning a new skill. You can purchase a course or go to a class to learn a new skill or improve an existing one. This doesn't need to be related to your profession but the important part here is, that skills should add to whatever you are already earning or should become an asset in the upcoming time so that it can add up to your wealth.
- On yourself — Spend your salary on the well-being of your health so that you can live and earn more and when you earn more you can buy more assets and the more assets you have the more wealth you’ll have in the long run. Eat well, get habitual to a healthy lifestyle even if it is expensive don't think twice to spend your salary on it. Rember your biggest asset is not your house or your gold. Your most valuable asset is You. Because in finance terms your returns are infinite. It's important to take care of yourself. Also, get yourself insured by buying insurance by your salary.
- On emergency fund — I Know I told you earlier that salary is meant to be get spent the only situation where I’ll suggest you to save your salary is on building your emergency fund. You should have 5–6 months of your salary in your emergency fund so in case you lose your job or for any reason, you won't be able to continue your job for some time, you’ll have your emergence fund to survive. Let that emergency fund money idle in your bank account but you should definitely have your emergency fund ready for any hard situation.
- Don't spend on luxury — Yes you read that right don't spend your salary on buying luxury. Don't buy an expensive phone, a stylish car or anything that is a luxury on your salary. I know it's impossible to live without luxury you want luxury in your life, people judge you by your luxury and lifestyle. Luxury is a status symbol in today's world. Now I’m not against buying luxury, I also belong to one of you and I can’t live without luxury I love to be a showman to show my luxury to other people and I myself buy luxury. Yet I’ll suggest you not to buy luxury on your salary. But then how to buy luxury? Remember we discussed assets? Buy your luxury on the cash flow generated by your assets rather than buying it on your salary and wasting the most precious form of income you have.
- Donate — Another good place to spend your salary is to donate it somewhere, there are many needy people out there whatever you are making in a month it could be their entire salary of a year. You should donate some part of your salary to needy people.
And that's it doesn't spend your salary on anything which does not belong to the points mentioned above. I hope now you understand how and where to spend your salary and yes you can pretty much disagree with me but if you agree with me, next time before spending your salary remember the points we discussed above.
Now it's important to mention here that I haven’t said that don't spend your money, I haven’t said don't buy luxury, I haven’t said don't enjoy your life. All I’m saying is don't waste your salary. Spend your salary where it should be get spend. I spend my money frequently many times I just waste my money and I know it but I don't waste my salary at all. I always utilise my assets to generate cash flow whenever I need cash.