To increase your savings it is necessary to have a disciplined approach to your personal finance.
If you have set yourself some goals in life, you need to save and invest to be able to have enough money to achieve those milestones. Unless you inculcate a habit of saving, it is unlikely that you will be able to reach your goals comfortably. For having a decent saving from your monthly income, you need to control your expenses too. If your expenses exceed income on a regular basis you are likely to eventually fall in debt trap. However, this can be avoided if you plan your budget wisely.
Here are 5 things can do to increase your savings while planning towards completing your financial goals.
Change your savings habit
Money management is always linked to your budget and your expenses. For a good budget, you must inculcate the habit of doing savings. Vaibhav Agrawal, Head of Research & ARQ, Angel Broking says saving first then spending is a crucial first step in the financial planning process. Far too many people try to save what is left after expenses and then they are never able to meet their savings targets. “By saving first you are “paying yourself first” and ensuring that the amount saved will be available for you to grow your wealth,” he said.
“Have a written Goal Plan in place and save for them first, before you incur your monthly expenditures,” said Harsh Gahlaut, CEO, FinEdge
Manage your debt
To increase your savings it is necessary to pay off your debts. You must work on reducing your liabilities which will also help in reducing your premium cost while purchasing a life insurance policy.
“First and foremost, resist the desire to make impulse purchases using credit cards. Expensive debt such as personal loans and credit cards can severely damage your personal finances in the long run if left unchecked. Never roll over your credit card outstanding amounts from one cycle to another. Avoid trying to ‘keep up with the Joneses’; instead, build up your lifestyle and assets at a pace that doesn’t leverage you and strain your finances,” said Gahlaut.
Prioritise your expenses
It is important to know your expenses. You should always maintain records of every cash outflow.
Gahlaut also said that you should clearly segregate ‘needs’ from ‘wants’ and maintain a written budget. Compensate for overspills under one budget header by cutting back on another. Occasionally, go on a ‘fiscal fast’ during which you completely cut out all expenditures that aren’t absolutely necessary. “Also, provision for lump-sum expenditures such as your car and health insurance premiums, or your child’s annual tuition fees, by breaking them up into twelve parts and running a monthly SIP in a liquid or ultra-short term debt fund for that amount,” he said.
Discipline is a key factor
You will only be able to save money when you are maintaining discipline. Discipline is also key to initiate your savings towards financial goals over a long period of time. This way you can slowly and gradually increase your savings every year. Once you start prioritising your spending, you will automatically start saving in a systematic way.
Know about the opportunity costAlways be careful about your spending. Your money in hand can either appreciate or depreciate. For instance, if you have Rs 1 lakh and you are thinking of either buying a car or invest. If you choose to buy a car, you can make a down payment with that amount take a loan for the remaining amount for another 5-7 years for which you will have to pay an EMI. On the other hand, you can invest the same amount of Rs 1 lakh in a lump sum and then start an SIP for 7 years to meet up some of your futuristic financial goals. Investing will lead you with a high corpus later in life. But this does not mean that you should always compromise with your wants. But if you take the right financial decision at the right time you will stand to gain!