8 Things to Remember When You’re Saving

Adhering to your financial plans is essential for financial security. If most of your expenses are unplanned, you may end up overspending. This could trigger a short-term crisis, as you run short of money to pay your bills. These crises hinder your progress towards your financial goals. Without a proper framework to manage cash flow, you may become susceptible to an endless cycle of credit card debt. You might even run out of money to pay insurance premiums, leaving you vulnerable in the face of life’s uncertainties.
Nov 2022
5 mins read

The pandemic has shown us the importance of saving up and planning for the future, in order to anticipate risk and prepare for it. As you begin to plan and save, these eight tips will help you stay on the right path:

1. Plan your budget
The first step is to plan a budget and stick to it. This involves evaluating your situation, setting realistic goals for your household finances and creating achievable targets for your expenses, so that you can begin to save systematically.

2. Manage your cash flow
It’s vital to manage expenses every month and monitor your spending, in order to stay on top of your personal finance situation. Keep looking for items in your expenses that are not really necessary, so that you can free up money for savings.

3. Involve your family members
If you are married and/or live with your parents, share your saving ideas with them and work together in your household’s financial planning. This will enhance your financial position as you and your family align your aspirations, goals and resources. You will always be stronger together than you are when working individually.

4. Know your wants and needs
Talk to your family to identify your collective needs and wants, in the short-term and the long-term, as you set your goals. It’s important to be prudent and rational in this discussion – sometimes, you must be firm and say no, if some of these wants are not in line with your plan or your means.

5. Automate your savings
Left to ourselves, we often neglect to save or wait for the last day of the month. This can derail your saving plans. In today’s world, when everything is automated for speed and efficiency, why not do the same with your savings? Automated systems will deposit money directly from your paycheck or put a part of it into your savings account every month. This will save you another chore and free up your mind for further planning.

6. Conduct a periodic review of your finances
Examine your finances thoroughly from time to time, so that you can detect where you are overspending and how you could correct it. Reviewing everything helps you know your spending patterns – how often and where you shop, and how much you spend. It also helps in spotting any discrepancies in the bills, making budgeting more effective.

7. Start investing – and get insured
You are not just saving for the sake of it, and saving should be just one part of your financial planning. To make your savings count and to create wealth, you must invest. But first, remember to allocate a part of your savings to life and health insurance. Then begin to explore investments in equity or mutual funds like equity funds, debt funds, gilt funds or ELSS funds.

8. Remember to have fun too!
In the end, you only have one life, so try to enjoy it! Save as much as you can, but don’t completely sacrifice everything you enjoy just to add a bit more to your savings. Saving should not come at the expense of living a happy, comfortable life now.

These saving habits will stand you in good stead for decades to come. They will show you the path to follow on your investment journey and help you achieve your long-term goals as you work towards the dream of financial stability.

PGIM India Asset Management Private Limited
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