Good money habits that augment your savings

Trust me, inculcating good money habits is no rocket science. Doing little things on a regular basis helps create wealth. Then, the financial plan automatically falls in place. Let’s have a look at what these things are…

Write down your income and expenses

List all your incomes and expenses. Write down the expenses as mandatory and voluntary. After listing all the heads, make two columns against each expense: one for the expected expense, the other for the actual money spent. This way, you can compare the amounts and keep a track of your hard-earned money and accordingly cut down wherever necessary. Also, make it a habit to write down every rupee you spend every single day.

Be ready for emergencies

In order to be ready for any emergencies, here are two steps, which everyone needs to follow: First, prepare an emergency fund. Keep aside funds equivalent to three months mandatory expenses in the form of cash and fixed deposit so you are prepared for any untoward incident. Second, have insurance in place. This means life insurance for the earning member of the family and health insurance for all other members of the family. Remember to pay the health insurance premium on time, especially for members over 50 years of age. This is because once their policy lapses, getting a new policy for them is difficult.

Manage your debts

Debt may help you in buying that dream house or the car you desire, but if you go overboard, it can land you in trouble. Whenever you plan to borrow, first calculate the ratio of total annual debt payments to the total annual take-home pay.

The ratio should not be more than 45 per cent of your total take-home pay. If it is more, not only will you be in financial trouble, but your credit history in the market also will take a beating.

Read financial statements carefully

Reading your bills, statements and all your financial mail as soon as you receive it, is a habit that will serve you well.

Often, credit card statements bill the same item twice or banks charge you erroneously. If you do not read your statements in time, you won’t be able to do anything about it and then it will take a lot of time and hassles to sort things out. The same goes with your bank statements, demat statements, and fund statements. Reading your financial documents helps you know what’s going on with your finances and brings discrepancies to your notice while you can still get them rectified.

Systematically file financial statements

This way you will have track of all your financial dealings and can refer to them in case of any trouble or find them when you need them. Also update your financial records regularly rather than letting it pile up for the year end.

Complete bank work on time

Don’t procrastinate your bank work. For example, if your cheque book is exhausted, make sure you have a new one before the last cheque is used. It generally takes 4 – 5 working days for the new cheque book to arrive. This way, if you have to make any immediate unexpected payment, then there is no need to panic. The same holds true for all other bank work. Also, keep your bank profile updated at all times so that your statements reach you in time.

Make timely payments

Never delay money-related transactions—be it credit card bills, any other bills or your mortgage payments. Delay means penalties and mind you, they are quite a bit.

Save in a disciplined manner

Everyone should have a piggy bank—not just children, but adults as well. However small the amount, save every day! With the money saved per month, you can start small savings like post office schemes where the minimum required amount is Rs 100. When you start saving larger amounts, start investing in different investment avenues.

Be penny-wise

Even if you can afford everything, there is no harm in being frugal. The extra 10 bucks saved on something add up and before you know, you are saving huge amounts. When planning to buy an expensive product do look out for deals. Due to increased competition, everyone offers deals. So why not save if you can?

Plan your retirement

The earlier you start, the faster you will reach your goal. The amount required to save for your dream corpus will be much less if you start saving at an early age.