Its time to pay attention to our savings NOW! WHY?
This month, i.e. September 2022, two different news & indicators have emphasized the need!
First, In the first week of this month, September 2022, we got the update about, India’s aspiration Index. In the survey conducted by BankBazaar, the Aspiration Index Number came up as 87.3 in the year 2022. It marked higher than previous three years.
When India’s aspirations are increasing, so their spending & dependency on credit!
Now, this month is ending on a note from another news that ‘Gross financial savings of Indian household’ is reduced to 10.8% in FY 22, lower than last 5 years.
When both such indicators are showing this parameter, this should get us paying more attention to our money management & savings.
Well, reasons for reduced savings are many, like-
- Rising inflation
- Increased amount of Loan EMI
- Revenge spending by people post pandemic
Now, when we can figure out the reasons, we should find solutions too!
Savings need to be increased or maintained always. They are ‘the base’ for your investments.
Investments are for your future. When savings are dropped down, your future goals & investments will face the heat.
Here, I have listed down simple, yet effective ways to maintain or increase your savings in these times, because, ‘Each rupee counts’!
Write down on expenses:
Start making records of your expenses, now daily or once in two days. This needs to be done aggressively When you know your cash & income is going neck-to neck due to rising prices, increased amount of loan EMIs.
Today, you can explore few apps or can maintain a simple excel sheet or can use diary to write down. Create two heads of expenses, one is ‘fixed expenses’ & another as ‘variable expenses.
‘fixed expenses’ will contain your utility bills, medical expenses, loan EMIs, children education cost if any, etc.
Variable expenses’ head can have many elements like clothing, eating out, travel, gift etc.
Each money counts & so the record has to be well updated always.
Draw a weekly budget:
Though you may be earning your income every month, when income & expense has gap, its time to draw a weekly budget.
People spend more on weekends generally where they go out, meet friends & family, they shop & eat out.
Sometimes, this makes them spend almost equal money as their fixed expenses.
When you have a ‘weekly budget’, you can better plan such expenses.
Allow you & family to spend within limits only.
Make part of your transactions by cash:
It’s true that ‘online payment systems, payment gateways, payment apps are blessings today. Specially while shopping or eating out or enjoying recreational activities, It does happen that, we pay online or we know that we can pay online.
Here, whole balance available in our linked savings a/c is indirectly assumed as our ‘maximum limit’ to spend on.
It’s a psychological phenomenon!
But, its better to spend what it is in our pocket!
Not fully but at least some expenses like your daily travel expenses, can be paid via cash. As per the weekly budget, you can keep the equivalent amount of cash in your pocket.
You will agree that, daily commute to work can be expensive if you miss your train or bus often. Spending for auto or taxi fare has become expensive. Such small amounts do matter at the end of month when you spend on them repeatedly.
Reducing amount from your cash in pocket can be a trigger point for you to actually judge your spendings!
Please note that, here, I DO NOT RECOMMENT OR ASK YOU TO FULLY SWITCH TO CASH TRANSACTIONS, BUT PETTY EXPENSES CAN BE SPENT VIA CASH TO KEEP A TRACK OF MONEY SPENT IF YOU ARE A FREQUENT SPENDER!
Talk to your children & family:
Usually, earning member of the family foresee the income: expenses ratio & how it is getting affected.
He/she can think or do many things to keep money on track but he/she should get equal support of family members who are dependent on them.
Though you earn your income as a reward of your skill, talent, hard work, dedication, this reward gets affected by many micro & macro-economic factors like inflation, geo political situations, foreign market’s performance etc.
Today, parents give their children the best they can give. This has made them feel that ‘they can get anything when they want!’
Well, they should get it always! But, understanding situations at home on the money front is also equally important.
You can talk to your family, grown up children about increased inflation, budget.
Grown up children should also realise & accept that ‘Its hard to earn money but even hard to maintain the same lifestyle’.
When you will talk freely, they will voluntarily support.
They will realize how each money counts! This way, you can break the ice with them about financial lessons, education & behavior.
Follow Income-Investments= Expenses formula:
We, Indians are known to be savers!
Earlier, when a person used to get one tip from all elders, family & friends, that,
‘Save whatever is left in hand at the end of month’!
That time, money had limited ways to go out from our pocket!
Today, scenario is different!
We want to spend freely on things & services we wish to!
Hence, we want the formula to be like this, i.e. Investment + Expenses= Income
But, it’s not possible always.
So, today, every one of us need to follow one formula-
Income- Investments= Expenses
This means, whatever investments you have started, please do not stop investing just because you are struggling with savings!
Investments are for your future & expenses are always meant for present things.
Keep investing & manage your expenses from the rest.
Its OKAY if shopping, dining out or trips outside are cut down on a bit.
Money management never goes well by following only rule books or formulas.
It has lot to do with our perspectives, approach, understanding, conviction , behavior & discipline.
Savings are the base of investing! Take good care of it!