The importance of savings, a core component of personal finance, can’t be stressed enough. Prudent savings help sail a crisis and address crucial life goals. However, despite knowing its essence, many people fail to save. The list of reasons is long. So, why do people find it difficult to save? Let’s find out.
This is perhaps one of the biggest deterrents to savings. If you can’t budget properly, you will not be able to save, no matter what. While budgeting, you need to distinguish between needs and wants. Trimming wants or non-discretionary expenses go a long way in saving.
Follow the 50-30-20 budget rule to start saving. Spend 50% of your income towards needs, 30% on wants, and save the remaining 20%.
Of late, the lending space in India has seen a flurry of lenders offering lifestyle-related loans. These loans, which one can avail in a jiffy, require minimal paperwork. However, they carry a high rate of interest which pushes up EMIs.
High EMIs can stretch your finances and put you in a tight spot. The money that you could have saved goes towards EMI payment. Therefore, it is in your interest not to avail these loans, unless absolutely necessary.
High discretionary expense is another reason for non-savings. In the digital age of discounts and offers, it is easy to fall prey to lucrative deals without thinking twice. However, these expenses can stretch your finances and are a big roadblock to savings.
If you are a slave to discretionary expenses, you will struggle to save. Keeping them on the backburner can help you save and overcome tight situations induced by pandemics such as COVID-19.
If you are under the burden of debt, you will fail to save. Debt eats up a significant portion of your earnings. At the end of the month, you will be left with little to save. Therefore, you must strive to be debt-free.
Note that not all forms of debt are regressive. Debt availed to learn a new skill or a course that can elevate your income potential is not bad. However, if taken to satiate things you don’t need can stress financial zoom levels.
With little focus and effort, you can save money and channelise your savings towards investing in different financial instruments for wealth creation. Tools such as systematic investment plans (SIPs) in mutual funds result in forced savings and also help create a corpus for key life goals.
Source: Zee Business