Debt and savings: A guide to better personal finance management

Loans and credit cards are two forms of debt that require regular repayments. If you have either of these debts in your portfolio, your monthly expenses will feature EMIs or credit card bill payments.

Debts are effective financing solutions that help you meet your financial obligations when you are short on funds. However, managing them is what makes the difference in effective personal finance management. Wondering why?

The answer is simple – to maximize savings and investments.

Yes, you read it right! Debt and savings are co-related. Here’s how –

• Effective debt management = more saving
• Enhanced savings = enhanced investments = corpus for your financial needs = low debt requirement

So, debt and savings are two sides of the personal finance coin. Let’s assess how to manage each side effectively.

Effective debt management tips
 

Here are some tips that can help you manage your debts more efficiently - 

• Compare and choose

When you are in the market for a loan or credit card, compare the interest rate across lenders. Choose a debt with the lowest interest rate to save on the interest outgo. As the interest component is reduced, you can save more!

Pro tip: You can also negotiate the interest rate with the lender and get it reduced. Assess your options and negotiate for lower rates.

• Borrow what you can afford

You might be eligible for different types of loans. That doesn’t mean you have to avail of all. Borrow only what you can afford to repay. If there’s a financial requirement, try and use your existing savings to meet it. If you are short on savings, you can resort to loans but keep your debts limited.

Pro tip: Save ahead for a big purchase or a major financial goal. This would create a corpus for your financial needs, reducing your loan requirement.

• Repay on time

Debt repayment should be a priority in your monthly budget. Do not miss any EMI or credit card bills because they will have two bad impacts. First, you will have to pay a higher interest outgo on your outstanding liability with a late payment fine. Second, your credit score will reduce which would mean a higher interest rate when you borrow in the future.

Pro tip: Set reminders for EMI or credit card payments. You can also opt for the auto-pay facility, which automatically debits your savings account for debt repayment.

• Reduce the outstanding balance 

Try to reduce your outstanding loan amount to reduce the interest outgo. Most loans allow prepayment facilities, which allow you to pay a lump sum amount towards the debt to reduce it.

Pro tip: If your investments mature or you get a bonus, use the surplus funds to prepay your debt.

• Debt consolidation

If you have multiple loans and credit card balances, you can consolidate them into one loan. This would help in two ways. First, you can eliminate the multiple interest payments and pay interest only on one loan. Second, managing one loan is better than managing multiple loans.

Pro tip: Opt for a personal loan to repay your existing debts and credit card dues. The loan is easy to obtain, collateral-free, and can also provide optimal funding.

Effective tips to save more
 

Now that you know how to manage debt, here are some tips to help you save more -

• Effective budgeting

First things first. Make a monthly budget listing your income and expenses. This can give you an overview of your finances. Plus, listing your expenses can help you prioritise them, allocate your income to the important expenses, and then use the remainder for other spending.

Pro tip: Prioritise debt repayment and recurring monthly expenses like utility bills, household expenses, etc. Categorise your expenses into different heads to understand them better.

• Expense tracking

Remember your mom and grandma writing down household expenses in a journal? It helped them understand the monthly budget and areas that could be managed better for enhanced savings.

Just like them, tracking expenses can help you manage your money better. You can know where and how much you are spending. Plus, you can see if there are unnecessary expenses that can be eliminated to save more.

Pro tip: Expense tracker apps like the Metra Trust Mobile banking app can help you track current and previous expenses across banks.

• Choose the right savings account

A savings account is a basic banking tool for managing income and expenses. It allows you to make easy deposits and withdrawals, and even earn returns on account balance.

Choose the right savings account, which not only gives you a convenient way to bank but also offers attractive interest rates on your balance. Metra Trust Savings Account can be the right choice, with interest going up to 7% p.a.

Pro tip: Look for accounts offering frequent interest credits to earn higher compounding returns. For instance, Metra Trust Savings Accounts offer monthly interest credits, which can help you earn better returns.

Metra Trust – the right personal financial management tool
 

Besides a rewarding savings account, Metra Trust offers an advanced mobile banking app, too. This app can be an effective personal finance management tool for your kitty with its account aggregation feature, which provides:

• A single view of all your savings accounts across all banks
• A smart statement of all your transactions across your bank accounts
• Money Manager tool, which tracks your expenses and also gives a cashflow summary
• Personalised offers based on your spending habits

With Metra Trust Mobile Banking app, you can track your expenses to identify unnecessary ones and trim them down. Plus, you can prioritise debt repayments by enabling the auto-debit facility on your bank account.

Making personal finance easy
 

Use the tips mentioned above to manage your debts and increase your savings. This will boost your personal finance management and help you create a suitable corpus for your goals. With Metra Trust as your personal finance partner, you can not only increase your savings with attractive interest rates but also utilise the Optimus feature of the mobile banking app to manage debt.

Take control of your money and enjoy financial independence.