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It may be ironic, or even pushed by pure marketing and commerce, but spending tends to increase rapidly during Ramadan even though Muslims are told to keep expenses to bare minimum and fast. Ramadan is considered as an exceedingly generous and charitable month while also encouraging the importance of praying and spending time with family and friends.


It can be a way to lose track of your finances during this holy month as you head out to iftars, distribute food, and donate to charity. This can affect anyone’s short term or long term financial goals.


No matter what your beliefs are, it is always meaningful to change your habits, reflect on your financial situation and create a budget for Ramadan.



Do you know your sources of income?


The foremost tip to manage your finances, is to know your sources of income and keep checks on it. Apart from your monthly wage you may also be receiving other forms of income as a family. Some of you might have invested your money in areas delivering returns. The returns from your investments can be a significant part of your source of income. It is important to set aside a sum of money for special events such as Ramadan and Eid 


Create a budget and stick to it


Even though Ramadan has already started, it’s never too late to make financial decisions by creating a budget for spending. Planning your expenses beforehand tends to be a better strategy to stop you from overspending. Start by making a list of things you are most likely to spend on throughout the month and allocate a specific amount of money for them while also considering daily expenses and necessities.


It is important to stick to your budget and not bulk buy or overspend during this month. There is a golden rule that states one should never go grocery shopping when they are hungry. While you are fasting, hunger can play an important role in tempting you to make bigger purchases. Research also says not to bulk buy for the whole month rather cut short the expenses.



Patience is a virtue


The current economic situation has impacted everyone especially the job markets leading to increasing uncertainty about your financial situation. Like fasting, it is important to be patient with your finances and decrease your daily expenditure by a realistic budget. You will see hope and large rewards in the short term, that will benefit you in the long term.




Utilise rewards and discounts


This holy month does come with its fair share of excitement as the markets flood with rewards and discounts. These offers are a good way of saving and sticking to your budget. You can utilise your reward cards and make the most out of the discounts being given at supermarkets, clothing stores and restaurants.


Most importantly, remember to give back when you can


Ramadan is all about charity and being humble. This month makes us realise how fortunate we are to have food on our table and a roof above our heads. It is necessary to make charitable contributions and help the poor and needy. The coronavirus pandemic has affected millions of families and being a force of good during these tough times is crucial.

Most Muslims prefer giving Zakat in Ramadan because there are more rewards for doing so, but it is not necessary. Zakat benefits humanity and thus, by regularly paying it a Muslim performs his duty and discharged his obligation towards poor Muslims. Zakat being the backbone of the Islamic economic system, aims to improve the living standards of the poor and prevents the accumulation of wealth in a few hands.
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Islam as a religion guides Muslims on everyday aspects of life; that being said, Islamic finance is not only a way of investing or lending ‘ethically,’ it aims to be Shari’ah (Islamic law) compliant based on justice and equity. Islamic finance strictly follows rules set by Shari’ah that are dictated in the Quran and are the teachings of the Prophet Muhammad (S.A.W).


You may have heard that Riba is the only reason you should invest Islamically, however there are a many differences between Islamic and conventional finance methods. This system encourages the need for fair contracts and transactions that demonstrate economic purposes while discouraging excessive uncertainty, gambling and short selling. The question arises where a basic investment can help one spiritually and make us better Muslims. Some of the fundamental elements of Islamic Finance are outlined below.

 

Interest is forbidden (Riba)

 

Islamic finance is the most sin-free option available for investments. Muslims globally can invest without a predetermined fixed rate that is prohibited and defined as an exploitative practice. Islam encourages social justice through the fair earning of profits and shared rewards amongst lenders and borrowers for an equal distribution of wealth.

Surah al-Nisa states, “And for their taking interest even though it was forbidden for them, and their wrongful appropriation of other people’s property. We have prepared for those among them who reject faith a grievous punishment (4: 161)”

It can simply be expressed that people who believe that Islamic finance is unethical, don’t realize that by walking away from a Shari’ah compliant investment, they are supporting the conventional financial industry that acquires interest. Islamic finance and banking is still a developing industry and may not be perfect, but it’s certainly the most sin-free option currently available.

 

 




Managed Risk Sharing

 

When a risk is shared amongst two or more parties, the risk faced by each party is reduced and therefore, Islam encourages risk-sharing economic transactions. The principles behind this Shari’ah compliant finance do not eliminate potential risks involved with financial transactions, but instead seek to reduce them whereas conventional finance tends to unfairly place the risk on the borrowing party.

 

Consequently, Islamic Finance reiterates the utmost importance of disclosing information to lower risks and uncertainty at the time of investing in mortgages or contracts. This enables you to practice Islamic duties by providing any information that may or may not be a hindrance at the time of the contract or investment. Following these Islamic teachings can help one become successful in their ventures and refrain from investing in risky investments.

 

 

Required Zakat

 

Every able Muslim is supposed to donate 2.5% from their idle balance of money to impose social justice. In most Islamic countries, this amount is deducted from Muslims bank accounts during the month of Ramadan. Zakat management is one of the main components of Islamic Finance, aiming to distribute wealth amongst the poor. Muslims also, give Zakat by taxing their property to ensure the socially responsible distribution of wealth

Given this all-pervading purpose, it is safe to say that the Shari’ah addresses all the prominent aspects that are important in shaping our lives, such as family, spirituality and our on-going focus, wealth. 

Therefore every year in Ramadan you are engaging with instructions of Our Creator and performing acts according to Islamic teachings and the Shari’ah.

 


 

Choosing Islamic Finance over Conventional Finance

Islamic Finance distinguishes itself from conventional finance by avoiding risks and interests, promoting risk-sharing and the importance of Zakat. Similarly, financing Islamically can help one start a business, own a home and make investments without compromising their beliefs. If you support Islamic Finance because of its obvious advantages socially, economically and spiritually it is important to research the type of investment that you would benefit from in the future. We need to go an extra mile to promote this upcoming industry that will benefit not just Muslims but Non-Muslims too.

 

 

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