MONEY, MONEY, MONEY
GOLDEN RULE – NEVER KEEP ALL THE EGGS IN THE SAME BASKET!!
Money though known for its volatility, no permanence, a commodity which, when not there, sustenance becomes difficult and when in excess, finds one to have sleepless nights just to safe guard it and to yield better interest or dividends. So what is this all about? People are different from each other, one may prefer conservative mode of savings and investment, some may would want to dabble their hands at the equity, debt market or any other financial segment they would deem fit, to suit their idea and the availability of funds with them. It should be seen in totality as a specific individualistic idea rather than a general concept as all caps won’t fit all the heads isn’t it?
It’s all about SAVINGS, prioritising savings is an essential step to ensure financial security. However, most of us do not save as much as we would want to, while some of us do not have the required surplus. At times people choose to meet their needs at hand and put off savings for the future. However, spending sensibly and saving regularly is a good way to keep your finances safe. Here are some simple tricks that will help improve your savings rate and build up a secure financial status. Here are some cues towards this.
Manage your increased income, an annual increment or a bonus might sound like a lucrative reason to spend the extra amount on luxury but, investing a major portion of the raise is a more sensible option to ensure financial security. Investments like SIP in a mutual fund or a recurring bank deposit wherein the amount gets deducted from a person’s bank account automatically at the beginning of the month are good options. People have the tendency to blow off the annual increment money, make a pre-planned project, even before it reaches them.
That way, the extra money would be spent immediately it hits the account of a person and no savings can be made. The best thing would be to make the money be in the account for a little while and decide the best course of action, as if there is a change of mind to not to spend on a luxury item, postpone the expenditure for a short time and invest the money for a short period investment and later decide whether to splurge the money on luxury item, travel or any other expenses, best known to each individual.
Keep your savings in a separate bank accounts, one that will manage your investments and savings and one for your daily expenditures. Do not use the debit card of the account wherein you are depositing your savings. This way all your savings will be secured at one place and you will be able to manage your money better. The logic is, what money you don’t want to take often and spend keep it hidden, or into another account which you won’t be accessing too often. That way you will forget that you have an extra account excepting when, you want to deposit money into it.
Match your expenses with investments, every time you spend on a luxury item, keep aside the same amount in your savings. It will also help to monitor your expenses since your liquidity reduces every time you spend. This might finally discourage you from splurging and help your savings to grow. This will also give you a cushion to withstand any untoward expenses (any spare parts becoming faulty suddenly, not covered in the warranty period), maintenance, towards the luxury items, like air conditioner and other gadgets, which will make sure that we have recurring expenses just to keep them going.
Save your EMIs, when your EMIs are about to end, plan where you would want to invest this amount to effectively channelise your surplus into savings. This way your monthly outflow of money will remain the same, but your savings will get a boost. This rule applies provided you don’t apply for another loan because one has been closed by repayment. The best way would be to stay put for three months after finishing one loan, then decide whether to go ahead with another loan, be it educational purposes, car purchases, or any other which will make you re-think whether to go ahead with another loan the moment one loan commitment has gotten over. EMIs are long-term commitment and you cannot stand stranded for want of extra money, at the time of need. It becomes hard to rotate or circulate money, when you are hard pressed for them.
Opt for long-term
saving Instruments, locking your money in long-term investment schemes like
PUBLIC PROVIDENT FUND (PPF), NATIONAL PENSION SCHEME (NPS) or insurance
policies which does not allow early withdrawals is a good way to remain
invested and manage your savings for a long time. I assure you, PPF is a 15-year scheme, which can be extended indefinitely in block of
5 years. It can be opened in a designated post office or a bank branch. It can
also be opened online with few banks. One is allowed to transfer a PPF account
from a post office to a bank or vice versa. A person of any age can open a PPF
account; even those with an EPF account can open one.
One can deposit a maximum of 12 times in a year, but remember to deposit before the 5th of the month to get interest for the full month, as the interest is allowed on the lowest balance at the credit of an account from the close of the 5th day and the end of the month. Many investors deposit a lump sum amount right at the beginning of the financial year. There are provisions to take loans and make partial withdrawals from the scheme as well.
With the tax-saving season on, many may be looking to open a PPF account. The maximum amount to be invested in any financial year is Rs.1,50,000/- per person. Today, in 2018-19 it offers 8.0 per cent. As the interest is tax-free, the effective pre-tax yield for someone paying tax at 5.2 per cent, 20.8 per cent and 31.2 per cent rates will be 8.4 per cent, 10.10 per cent and 11.62 per cent per annum respectively. This is just for an example.
Involve a friend or a relative with you, be it a close friend or relative, can help you to keep up with your savings decisions, or an investment adviser or an auditor who can guide you on best interest yielding investments. Both of you can compete with each other to see who saves the maximum. Alternatively, they can act as your motivator and keep tabs on your spending’s and savings. It is best to have someone besides you who can pull all stops when things are not going in the way, they ought to be, in case of a bad investment or a dead investment, so that the damage control can be done at the earliest, without getting our hands burnt.
All this needs, to take some time to think, before making any decision to purchase something, take some time off and think about whether or not it is essential for you. Weigh the importance of the purchase with the price to be paid for it and chalk out the pros and cons. We are travelling in a time period where, what was thought to be luxurious things, cannot be called so, as they have all become NECESSITIES OF LIFE.
Always keep your future in mind, as your money only comes at the time of your own need rather than anybody else’s money, let this be in corner of one’s mind always. You don’t really think about saving for your retirement from a young age but it actually helps you to realise how deviant are you from your goals and how much you need to save to make them happen. I would rather advise youngsters to go into VOLUNTARY PROVIDENT FUND, contribution in addition to your employers’ contribution towards this end, from your salary. This will provide for those extra sizeable amount, at the time of severance package or full-term, voluntary retirement as the case may be.
Any Government bonds, schemes are the best and they don’t fail the trust of the people, that includes RBI, bonds too which is taxable now. Though Government function system may leave a lot to be desired.
There is a saying that, learn to live like the chettiars’, for they are frugal when it comes to spending money, but their saving pattern is unbeatable, so are their marriages, where the simplicity exhibited by their clan in normal days, goes for a holiday at that time and you can see the real worth of each and every family in the community. People from old school of thoughts would always vouch for very meagre existence to save in greater magnitude.
It is a belief, that money helps when your kith and kin let you down, so,
SAVE FOR THE RAINY DAYS, MONEY, MONEY MONEY………
VIJAYASHREE RAMESH, ADVOCATE & SOCIAL ACTIVIST.