Finding it difficult to stick to a habit of saving money
Automatic savings is a fantastic way
How many of you want to have good savings but still finding it difficult to stick to a habit of saving money? Don’t trust yourself when it comes to saving money systematically. No matter how much you are determined that you will carefully set aside some part of your money each month, after taking care of all your expenses, it’s always going to be a flop. But don’t worry as today I’m going to tell you about some interesting things that will encourage you to save money in an automated way.
The Ultimate Mantra of Savings
For an average person, the monthly default equation is “Income – Expenses = Saving.” This equation looks very natural and logical. First, we take care of our expenses, and then if something is left, we save it. Here lies the root of the problem. Legendary investor Warren Buffett offers a simple solution to this age-old problem and says the equation should be “Income – Saving = Expenses” that is save before you spend. It can drastically impact your financial life in a positive way.
Follow the Rule – Out of Sight and Out of Mind
Choose the way where some part of your salary leaves your bank account and gets invested systematically and automatically. “Lesser the money available in front of the eyes, the chances to restrict useless spending is higher.” Life keeps on creating various kinds of requirements. If you have money available right with you, you may lack the will power and spend them all trying to handle those requirements. And there will be no savings at all!
Finish the manual mode of investing in your life and take the help of automation. Automatic Saving automatically “forces” you to do savings.
Take some simple examples such as EPF, where your employer deducts a small amount from your salary, and it gets accumulated over months and years. Although EPF does not earn very high interest; still, if you leave it undisturbed, it accumulates a decent amount.
Similarly, if you didn’t have money taken out of your salary every month, it would be pretty hard to pay taxes in April. But small amounts every month make it much easier.
Mutual Fund SIPs – The Best Automatic Savings!
Systematic Investment Plan, most commonly known as SIP, does wonder in doing savings for you. In this case, a fixed amount is automatically deducted from your savings or salary account mostly every month on your chosen date and directed towards the mutual fund of your choice.
If you have taken this first step, you have already won the big part of the battle. When you check your savings account after a year, you’ll be amazed by how much you have saved.
Other things, like returns, risk, can be taken care of even later.
Why Mutual Fund SIPs?
The most important reason is that SIP tends to generate better returns than many other investment options through its power of compounding that can help you achieve some of your most important financial goals. It can be short term goals like purchasing your very first bike or a holiday to your favorite destination that you aim to achieve in a 3 to 5-year time horizon or long-term financial goals like purchasing a dream home over a period of 10 to 15 years or even more. It is also like having an emergency fund for unexpected situations, which is equally important.
As SIP payments are completely automated, it is convenient, flexible and efficiently manages market fluctuation.
How to go for it?
- Decide the minimum amount you think you can save each month, e.g., 10%, 20% or 30%.
- Start a mutual fund SIP or systematic investment plan on a monthly or quarterly basis. Start with a lower amount, in the beginning, to make it sustainable in the long run.
- If your salary gets credited on date X, then set up a SIP of mutual funds on a date after 2-3 days.
- Trust automation, and that will do wonders for you.
- And if you need the money in the worst case, you can always redeem it back and use it.
Call to Action
Automatic savings is a fantastic way to live a good and fulfilling financial life. Start SIP early to benefit from its power of compounding and live a better life. Talk to a financial advisor now!
That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.
(About Author: Arindom is a professional writer, editor, blogger and a member of the International Association of Professional Writers and Editors, New York. A management postgraduate in finance with extensive industry exposure, he is associated with many reputed global online magazines and publications as a regular contributor. He loves to help his readers writing highly informative and well-researched investment-related content to make informed decisions.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of organisation)