None of us ever thought how coronavirus pandemic would unexpectedly make a way into our busy lives and teach us the essential of maintaining health and financial savings. This pandemic made us realize that till now we have been spending on the wants rather than needs, in general we call this our discretionary needs. Many people spend their entire salary or income in various ways which not only lowers their future purchasing power but reduces accumulated wealth in a substantial manner.
As an example, our desire to keep up with constantly changing consumer products and tech gadgets like smart phones, WIFI, wireless earphones, smart watches, smart home appliances and many more. We spend enormous amount of money purchasing up-to-date branded products which most of the time are not essential for survival. Though we cannot detach technological products from our life, but we can lower our unnecessary dependence on discretionary items to increase our savings. Here we have identified various ways on how you can increase your investments to different financial products and thereby increasing savings:
First and foremost, prepare a detailed financial plan with your family. First step is to take a note of your overall household fixed expenses (rent, EMI, groceries, etc) which canâ€™t be avoided. Once you minus these expenses from your net salary/income, you will have better idea of excess cash that can retained for future investing or spending on leisure activities. It is very important to keep a note of your daily expenses; this would not only make you conscious about your spending habits but will make you smarter in keeping up with budget.
Since last few months we all have experienced the importance of savings and idle cash. To deal with such unexpected phase, you should always keep aside emergency fund. This emergency fund should be sufficient enough to meet your 5-6 months of household expense which includes purchasing essential items, current loan EMIâ€™s, SIPâ€™s, house rent, power and utility bills. You can keep this emergency fund either in your savings account, FDâ€™s or liquid mutual funds.
You should start allocating certain portion of monthly savings into mutual funds. Mutual funds investing are of two types: Equity and Debt. If you are young, you should allocate higher percentage of savings into Equity funds and keep invested for longer term. But, if you are on the age of retirement or your goals are approaching near, you should allocate higher percentage of your savings into debt funds. Take an advice from Mutual Fund experts for selecting mutual fund schemes as per your allocation strategy.
Health insurance is very important and most essential part of our lives. We all see hospitalization charges are mounting and amount keeps on running into lakhs which significantly erode all our savings. Buying a health insurance for your family not only secures your lives but saves you from financial distress. Currently, there are many health insurance plans to choose for as per your requirement which provides tax savings as per Section 80 D and adequate medical cover.
Yes, this is true. You can get a life cover of over Rs.50 lacs at a price of cigarette. Various insurance companies sell term plan for your life amounting to 50 lacs for as low as Rs. 18/day which is the price of one cigarette. This not only saves your family financially from key personâ€™s loss but protects you from various diseases.
This one is most difficult part to accomplish, but donâ€™t worry we are currently practicing to switch habits during lockdowns. You may have realized how much we saved from not going to expensive restaurants but learnt to cook delicious food at home, from not going to theatres to watching Ramayana and movies on tv, from not shopping cloths to discovering what we had in our closet, from not traveling to experiencing a joy of stay with family.
If you keep working on improving your needs rather than wants, you would become a millionaire by just saving and investing what you saved.