Savings and future: The must-knows in 2022

Saving money is an essential trait that everyone must cultivate. It is the fundamental pillar of financial planning. As long as you have money, you can enhance your quality of life, build an asset, or claw your way out of a tough situation. However, given the rising cost of living and modern lifestyle expenses, many people are unable to generate enough savings that would allow them to live a comfortable and stress-free life. 

If you are looking to save money and break away from the cycle of living from paycheck to paycheck, here are six key factors to consider.

Live within a fixed budget

Before you get started on a savings regimen, it is important to have a clear idea of where your money is being spent. Having a budget not only helps you identify spending patterns, but also makes it easier to prioritise expenses or change habits.

While drawing up your budget, categorise your outgoings based on importance. Essential expenditure includes rent/maintenance, utilities, groceries, medicines, EMIs on existing loans, children’s school fees, etc. Other incidentals such as shopping, eating out, and subscription to a gym or OTT platform are considered non-essential expenses.

Ideally, your total outgoing towards non-essential expenditure should not exceed 20%-25% of your in-hand income. These can be managed easily to increase savings, even if just for a short-term goal like travelling or buying a new gadget.

Save before you spend 

A common mistake most people make is trying to save whatever is left after various expenses are taken care of. However, savings should not be an afterthought, but rather a priority. To fulfil your various financial goals, it is crucial to adhere to a structured savings plan with consistency and diligence. Save money first and work the rest of the budget around what’s remaining.

One way to avoid temptation to spend is to open a dedicated savings bank account for your saving and investment goals and transfer the funds there. If you are a salaried professional, the savings initiative should happen on your monthly payday. Self-employed and freelancers need to plan depending on their cashflow cycle. 

To begin with, consider saving at least 20% of your monthly income. Over a period of time, as your income grows, you can scale this up to 40% of your income, as long as your spending patterns don’t change.

Build an emergency fund

Unexpected expenses like sudden hospitalisation of a family member, household repairs, car breakdown, etc., can take you by surprise. Alternatively, your income stream could get affected due to a pay cut or layoff, which we saw happening to millions of people during the peak of the COVID-19 pandemic.

An emergency fund gives you the financial security to tide over an unexpected crisis without having to compromise on your savings and future goals. It is recommended to save and keep aside funds equivalent to 3-6 months’ worth of expenses. In case of an emergency, this fund will ensure that you don’t need to break your investments – or worse, be compelled to borrow from someone.

Avoid unnecessary debt

Debt, especially with high interest rates, will not only eat into your savings but also bring on repayment stress. While going absolutely debt-free may not be possible, consider a loan only when necessary, as in the case of a car loan, education loan, or home loan.

If you have existing loans, prioritise paying off those with higher interest costs, such as credit card dues or personal loans, at the earliest. Subsequently, you could try refinancing or consolidating loans as and when better terms are available.

Do not miss payment deadlines or EMI dues as the additional interest cost and penalties will not only have a snowball effect on your debt but also adversely impact your credit score, making it difficult for you to avail of a loan in the future.

Undertake goal-based investing

We all have different goals that require different savings approaches based on timelines and amount required. These could range from short-term goals like wanting to go on a vacation, medium-term goals like getting a new car or sending children abroad for further education, to long-term goals like buying your dream home or ensuring a comfortable retired life.

To accomplish all your goals within the right time-frame, consider creating separate investment buckets with an assortment of financial instruments that align with your goals and risk profile. This not only helps in monitoring and managing different portfolios, but also ensures all your goals have a fair chance of being fulfilled.

If you are unsure about your financial planning skills, get a fiduciary advisor on board who can guide you on the right investment plans.

Choose the right bank account

Whether you are looking to put money aside for a rainy day, create a savings corpus for a life goal, or wish to track and monitor investments, you need a bank account that can help you do all of this and more. Metra Trust Savings Accounts offer a suite of versatile and investment-friendly benefits that can be the backbone of your savings plan.

Your money with an Metra Trust's savings account can earn up to 7.25% interest per annum, with the added benefit of monthly interest credits rather than quarterly credits (as per the standard practice). This means your emergency fund or savings corpus is not just accumulating but compounding a lot quicker!

The savings account also comes with a complimentary personal accident insurance cover of Rs 35 lakh and an air accident insurance cover of Rs 1 crore, thereby safeguarding the financial future of your family even if you are not around. Other features and benefits include free and unlimited ATM transactions, higher POS transaction and ATM withdrawal limits, cashback and discount on merchant payments, etc.*

Conclusion

As with any other goal, start off with a realistic and consistent savings plan. Select an ideal bank account and investment tools, monitor periodically, and scale up gradually. Make savings a habit and watch your dreams turn into reality.

*for an average monthly balance of Rs. 25,000/- and above

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Metra Trust or its affiliates to any licensing or registration requirements. Metra Trust shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.