Here’s How You Can Stay Committed To Your Savings Goal In 2018
Posted on Monday, January 29th, 2018 | By IndusInd Bank
Do you wish to save money, yet find yourself falling short of your wishes? Whether you want to purchase your dream car, go on an extravagant holiday, set up your ideal home, or simply secure a comfortable retirement, saving should begin as early as possible. You don’t have to wait until you earn big bucks to begin saving for your dreams. An average salaried person is just as capable of saving as any other as long as you set a careful budget plan. Without having a budget plan in place, you run the risk of overspending on things you might not need. Here are certain steps you can follow to stay committed to your savings goals and set up your finances for the future.
Set Well-Defined, Realistic Goals
First, start by setting up a realistic, end-term goal – what is it that you wish to save the money for? Once you have an answer to this question, you will be able to set a course that leads up to your financial requirements. It might seem daunting if you set too high a goal that might not be achievable as you begin to earn. Instead, divide your long-term goal into multiple small-term goals. Create a budget plan where you save first and spend later after getting your salary. As the legendary investor Warren Buffett has said, “Do not save what is left after spending, but spend what is left after saving”. So, set aside a 30:70 ratio where 30% of your income can be put to savings while the rest can be kept for your monthly expenses. You can also set up automated payments by giving standing instructions to your bank to redirect the necessary amount towards your investments.
Invest In The Right Instruments
Choose your investments based on your goals. For long term goals, such as retirement or building a house, invest your money in a PPF or in equity mutual funds. If you are currently focused on short term goals, such as purchasing a car then investing in liquid funds or a recurring deposit is a better idea.
Maximize Your Tax Benefits
When you start out in your career, saving tax might not be a priority as your earnings may not be too high, or you may not have a thorough knowledge of taxability. However, it is best to start learning about taxations on various instruments as early as possible. You can begin by investing in avenues that offer tax deduction under Section 80(C), such as PPF, EPF, tax-saving 5-year FDs, ELSS, etc. From here you can select your tax-saving investments on the basis of your long term or short term goals.
Buy Life Insurance
Opting for life insurance may not seem like an urgent requirement when you are young. However, a life insurance can take care of unforeseen situations and help you save some money as well depending on the type of insurance you take. While a term life insurance provides high covers for a low premium, it offers you no returns. Instead, try opting for long-term, traditional life insurance plans that include endowments and money-back policies. ULIPs are also a good option as they are market-linked insurance plans that come with a lock-in period of 5 years and offer market-linked returns.
Be Careful With Debt
As you start earning, it might be tempting to avail a credit card and use it for all your payments. However, keep in mind that using a credit card comes with its own set of debt-related pitfalls. If you must use a credit card, make sure you only spend as much as you can repay. Be sure to repay the credit in full rather than repaying the minimum amount due as that can lead you to pay the hefty, remaining sum after a year. Additionally, taking on too many loans at the beginning of your earning career can careen you into a repayment cycle that can often last for years.
Therefore, by keeping track of your monthly expenses on a regular basis is necessary to be able to stick to your savings goals for the year. With proper discipline and careful budgeting, you will soon be able to achieve the financial goals you set yourself.