Set up an Emergency Fund
Before You Spend, Save – The Golden Rule to Survive 2025
The end of the year is a perfect time to take a look at your financial situation, figure out where you stand, and consider areas where you need to improve. It’s easy to lose track of your weekly or monthly spending habits when you’re busy working, taking care of yourself, and doing other things. New year financial planning can help you overcome financial challenges and put you on the path to success. Assessing your financial goals at the start of the year can help you look for any patterns in your spending habits over the previous year and consider new goals such as reducing debt and cutting back on spending. For those who perform a budget review every year, take a look at the areas where you met or exceeded your goals, that’s great. You might consider ways you can do even better in the future.
It’s hard to get through a year without at least a few unexpected expenses, which is why setting up an emergency fund is so important. Having to borrow money from family or friends can put a strain on relations, and putting unexpected expenses on a credit card will result in expensive interest payments. An emergency fund can help you avoid this. Your emergency fund should be money that you can readily access whenever you need it, such as an interest-bearing savings account, where the bank pays you to keep your money in a safe place. You might also consider a money market account or a certificate of deposit (CD) where you can earn more interest.
Moreover, your housing loan instalment takes away the main portion of your salary and you need to have contingency plans to cope with recurring expenses including hospitalisation expenses, unexpected expenses to far off places and the expected summer vacation to a hill station. Figuring out your strengths and weaknesses when it comes to budgeting is an important step to improving your financial performance in the coming year. Evaluate your Savings, Investments, and Debts. Taking a close look at your financial goals is about much more than income and expenses, you’ll also need to consider your savings and investments, to see where you stand and how they are performing.
Savings is a good habit and one should cultivate the same on a regular basis. Small drops of water make an ocean. And if you save something for the day then you can very well bank on that during hard times when expenses go above your neck. You have a good job, earn a fat salary and have a bright future. Yet, none of this is evident when you look at your savings. This is because young people often find it difficult to save in the initial years of their careers. Studies reveal that discretionary spending can be as high as 18-20% of the income for young people. A 2011 study by Assocham revealed that almost 35 per cent of the urban youth spend up to Rs 5,000 a month on clothing alone. This is one of the reasons most young people have such low savings. Experts recommend some extreme measures for serious shopping addicts. Some say you should just note down the card details and then cut the card into pieces so that you can’t use it anymore. Others suggest you keep the card in a paper sleeve and stick pictures of your kids or spouse on it. You will be reminded of the other goals you may be jeopardising when you swipe the card for an unnecessary purchase.
Having worked in a bank as a Senior Manager and served for 38 years I learned the art of savings and during my retired life. I feel the security in life as I am not hard pressed for money. One should save first before spending exorbitantly thus losing a chance of saving for the future. Wait and watch approach serves as the best tool as we need to act patiently at the time of crisis and perseverance plays a pivotal role in preserving the earnings for our old days. The usage of plastic money puts you in a tight situation when the 45 days stipulated time gets over. You need to provide balance or if you pay part of the due, then for the balance amount you need to pay penal interest and sometimes face the wrath of Bank’s appointed agents when the amount falls overdue. It is better to be on a safer side and cultivate a savings habit for rainy days and save your skin and lead a peaceful life forever.
Like so many things in life, setting money aside as savings is a habit that needs to be developed. If you want to see your nest egg grow, you need to do what you can to encourage a savings habit. Setting money aside needs to become a way of life, instead of some sort of burden. Allocating money for the future is important, but you need to find ways to keep yourself motivated. Do any of these things work for you? What keeps you motivated to save?
