Budget wisely to save

Everyone can make money employing their skills. However, saving money is a different cup of tea altogether. It is easier said than done. It calls for discipline on the part of the individual, to save his/ her hard earned money. Keeping track of how and where the money goes requires effort and planning.

To make savings a habit, budgeting one’s income as well as expenses is a must. Often, we spend money on unwanted things. Keeping a tab on big expenses and checking them at the right moment is central to saving.

Budgeting plan

Budget your expenses and savings every month and jot the same down. Compare the previous month’s expenses with that of the current month. This will tell you how you are spending your money.

Meeting expenses such as electricity and credit card bills would not only provide clarity but also help you rein in unwanted expenses. This would definitely bring about the desired results.

However, there are challenges when it comes to controlling expenses, even for the disciplined individual. Sticking to a plan is never easy, but a casual attitude can lead to the collapse of a plan. So, be careful, keeping in mind the allocation for every item on the list.

Also, one of the biggest advantages of budgeting is the ability to handle rising costs with prior allocation. Providing for contingent liabilities beforehand would go a long way in easing your worries.

Find out where the money goes

There are simple ways to adopt and derive benefits from budgeting. Understanding what types of bills one pays is one. For example, paying a phone bill with an add-on feature like a premium broadband connection. If that add-on service has not been used fully for at least three months, then it is a drain on one’s income. Instead, one can think of opting for the base plan, cutting down the premium feature and saving on a part of the bill amount.

No shopping binges

It is preferable to earn more than what one spends. However, that isn’t the case always. Spending more than what you earn can leave one in debt. So, buying what is necessary and not splurging, would help in case an existing debt is being serviced.

Nowadays people buy articles sold at a discount even if these goods are not immediately needed by them. This is not a saving, rather it is an outgo. It is wise to buy branded goods, rather than investing in cheaper models. The best brands are expected to last longer and would save on recurrent expenses. Avoid buying articles, even if they are priced low.

Avoid top-up loans

Availing of top-up loans binds one’s financial freedom. It is always better to clear existing loans before taking fresh ones. The top-up loan would put the individual in financial stress as he has to service additional debt with his income. Instead, paying off more towards existing loans (housing or education loans) would help in winding them up faster. This would plug the outgo and help one save a lot in the long run. However, one may think of availing of a top-up loan if the individual has got a raise.

Be wise in credit card use

Credit cards if used wisely can offer many benefits, but casual behaviour can lead to trouble. One must understand the interest rates charged and how credit cycles are built in the banking system. If one misses a credit card payment, he or she may end up paying a penalty that could add up to the interest as well. Credit cards charge nearly 3 per cent per month. That means a whopping 36 per cent per annum. Think about the penalty over and above the interest rate!

If you are using a credit card, ensure you have money in your bank account and pay before the due date of the bill cycle.

Normally, credit card companies persuade cardholders to avail of a bigger loan. One must take a step back and consider how much loan is actually needed. In such a scenario, it is advisable to avail of a bank loan rather than a loan from a credit card company. And, never take loans beyond the extent of 10X of one’s average monthly income. We can say that simply because credit card loans are a big drag on your savings.

Check your bank account

Deposit any unspent money in your bank account --- this is one of the hallmarks of a successful saving habit. Also, keep track of the balance in your bank account, either online or by visiting your bank. If an account-holder has linked his savings account for bill payments, including credit cards, or if a cheque has been issued for a payout, check to ensure there is sufficient balance. Otherwise, one may finally end up paying penalties and interest charged on the credit cards.

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