1. 5 ideas to committing to your savings goals

5 ideas to committing to your savings goals

We all have an image of our future selves in our minds. We foresee money in our bank account, multiple properties, cars, and going on expensive holidays. It is great to dream about a comfortable, prosperous future, but only if you start building its foundation today.

By: | Published: May 8, 2017 11:26 AM
There is no greater principle for money management than that of saving before you decide to spend. Ensure that a chunk of your monthly salary is directed to investments and savings.

We all have an image of our future selves in our minds. We foresee money in our bank account, multiple properties, cars, and going on expensive holidays. It is great to dream about a comfortable, prosperous future, but only if you start building its foundation today. Earning lots of money alone will not aid you in reaching your financial goals. You also need to smart about saving and investing in order to get there.

As hard as it is to stay committed to saving money, let us have a look at a few ideas to make it an everyday possibility.

1. Save first, spend later
There is no greater principle for money management than that of saving before you decide to spend. Ensure that a chunk of your monthly salary is directed to investments and savings. Automated savings will transfer the money from your bank account to a savings tool such as mutual funds on a weekly or monthly basis. Make use of recurring deposits so your saving needs are met. Once you have made your monthly deposit in your savings scheme, you are free to go ahead and spend on necessities and even luxuries. Every rupee you save will be yours to use in the future, and it will have multiplied into more money.

Even your credit card charges, house rent money, insurance fee etc. should be deducted from your bank account through automation so you are not tempted into spending the money. Make your peace with this practice and watch your savings grow consistently.

2. Chalk out your money plans
Little is achieved unless we have an objective in mind. Take some time to decide what your economic priorities are, and define them well. You could be saving up to buy a desirable property or maybe an expensive car that you have always wanted. Your aim could be to save for your child’s college education or even take a lavish foreign vacation with the entire family. The objective is personal to you, but the ways to reach the objective are accessible to everyone. If your goal is long-term in nature, make use of schemes such as mutual funds and PPF. For short-term needs consider recurring deposits or debt mutual funds. Focus on your aim and work towards reaching it.

3. Budget yourself
Find out where your money ends up going every month. Asses the damages and the expenses you have that can be done away with. Prioritize the spending that is essential for your fiscal plans. Divide your expenses into necessary (house rent), occasional (medical visits) and discretionary (a night spent pubbing). Put a cap on those discretionary expenses and prioritize on your investment needs. Making a simple cut on unnecessary spending goes a long way in saving lots of money, over a substantial period of time.

4. Missing on a better alternative
Consider this – if you spend Rs. 50,000 on a holiday that you could have delayed, you missed the opportunity to make the down payment for the bike your son wanted. This is just an example of opportunity cost. Making one choice limits your ability to make another choice. It’s the same with money choices. This does not mean that you have to stop yourself from spending your money on the things you desire. You just need to be careful of your opportunity costs.

5. Manage your debt
We have all heard the adventures of young people and their credit card exploits. Credit card isn’t free. Your delayed payments come at an enormous interest cost. It is dangerous to have mounting loans very early in your financial career. Do not spend beyond your means as this will lead you into a downward debt spiral. Focus on your repayment plans and do not avail more loans to pay back your older loans. Falling into debt could be a difficult place to get out of.

Discipline is key to committing to your savings goals. Map your expenses well every month so there are no unnecessary spending. It is easy to get swayed by the urge to overspend, but there need to be limits. Dream big, have high aspirations, but also value the discipline that will get you there.

(The writer is CEO, BankBazaar.com)

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