Markets: Eerie calm

Markets: Eerie calm

it is not clear when market sentiment can change; as in the past, it can be quite sudden.
At a turn and yet not

At a turn and yet not

RBI could be tempted to cut policy rate to support growth at its bi-monthly review.

How to make the most of your money!

Sep 20 2013, 18:56 IST
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It is often misunderstood by many that earning and investing are alone sufficient to be wealthy. Reuters It is often misunderstood by many that earning and investing are alone sufficient to be wealthy. Reuters
SummaryIt is often misunderstood by many that earning and investing are alone sufficient to be wealthy.

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Many a time, it is seen that people give importance to earning more money or on investing the money earned in various investment avenues. It is often misunderstood by many that earning and investing are alone sufficient to be wealthy. Equally important is to make the most of the money you already have. People generally tend to ignore this important aspect due to their busy schedules and demanding lifestyle. The following are a few tips which help you augment your money by making the most of it:

Make the most of your credit card: The increasing use of plastic money has led to the boom of the credit and debit card industry in our country. While debit cards keep an automatic check on your spending due to the instant debit from your account, credit cards are more dangerous. If not used properly, your credit card can upset your financial position greatly. When Raj used his credit card to purchase his mobile phone worth Rs. 25,000 he did not think it would become a big problem to his finances. When he received the bill the following month, the credit card outstanding was Rs. 25000, but the Minimum Amount Due was Rs. 200. Raj was elated that he had to pay only Rs. 200 at present, and thought he could pay the remaining amount at a later date. What Raj didn’t know was that he had to pay a huge interest on the difference amount at the rate of 3% per month. This amount is added to the next month’s bill, which again specifies a Minimum Amount Due. If Raj pays only the minimum due in the following month as well, the amount outstanding further balloons. This cycle continues and soon Raj will realise that the amount outstanding has increased to a very huge amount which is almost 3 or 4 times his original spend. It is therefore always better to pay the entire amount outstanding and not the minimum specified on the bill. A credit card is fine as long as you pay the full amount always on time.

Avoid paying penalties: It is a well known fact that money saved is money earned. But most of us tend to ignore this in our day to day lives. Penalties are levied by service providers if you do not pay your bills on time - be it utility bills, credit card bills or insurance premium. As most of us lead busy lives, it is but common for us to forget paying our dues on time. It is advisable to keep reminders to pay bills on time. Using the Electronic Clearing Service (ECS) or the Auto-debit mode from your bank account to billers will make life easy when you pay your utility bills. This has two benefits - one is you will avoid paying penalties, which means you save on this amount. The other benefit is that some service providers offer you discounts when you opt for ECS payments and pay your bills on time. This also means you save money.

Don’t let your money stay idle in your account: Rakesh had his salary account with ICICI Bank, which offered him 4% pa interest. Every month, Rakesh’s company used to credit salary to this account. After withdrawing money for his monthly expenses, Rakesh left the remaining amount in this savings account itself. After 8 months, the balance in his savings account increased to Rs. 3 lakhs. Due to his busy lifestyle, Rakesh did not bother to direct this amount to useful investment avenues, which resulted in a hefty loss for him. This amount if invested in a fixed deposit earning 8% interest per annum could have given Rakesh Rs. 24,000 as interest in a year. Alternately, this amount can also be invested in a liquid plus mutual fund, if liquidity is of importance. However, Rakesh’s negligence has cost him dearly. If you are a busy individual with no time to track your money, the least that can be done is to opt for a sweep facility in your savings account, where any excess over a stipulated minimum amount is automatically transferred to a fixed deposit account earning higher interest.

Track your expenses: Although this may not seem to have a connection with increasing your money, tracking your expenses over a long period of time helps you in cutting out unnecessary expenses and brings about a discipline in your spending patterns. You will be able to find out the heads where you spend the most, thus forcing you to think how to cut down expenses. It is recommended to use a financial tool which will help you understand your expenses and cash flows.

When you follow basic tips to make the most of the money you have, you will be reaping the twin benefits of both saving money as well as gaining the maximum benefit from it. These simple but effective ways help you make the most of your money, thus indirectly helping you in increasing savings.

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