While planning your budget you must identify the avoidable and unavoidable expenses
The current Covid lockdown has set uncertainty in the air. Along with that, this unprecedented situation has coerced us to relook at how we manage life and minimise our expenses and maximise our savings. However, managing and ensuring that you save is not as easy as it sounds. Here are 5 simple steps which you can adapt to increase your savings, and by extension your mental peace.
Keep a check on your spending: The foremost step for saving money is to keep a track of all your expenses to discover places where you may be unknowingly overspending. Start by saving the receipts of all the purchases done in a month and categorize them further so you can identify areas where you have overspent. You can then strike off the unnecessary expenses.
Set your budget: While planning your budget you must identify the avoidable and unavoidable expenses. Your budget should outline how your monthly expenses measure up against income which can help you to ensure the right spending. While setting up the budget, one needs to factor in the important monthly expenses Like grocery, medical, education, conveyance.
Build Emergency funds: It is always advisable to be prepared for unexpected times. Emergency funds are categorised as an important part of a healthy personal finance plan and one should not touch it except in a true emergency case. Everyone can opt for their customised way to maintain an emergency fund. However, an extremely simple way to do this is to open a new bank account and deposit a dedicated amount in it at the start of each month. As you evaluate your expenses down the course of time, you may increase the amount of deposit.
Plan essential expenses: Once you have your emergency fund set aside, you can start saving for big expenses well in advance. Whatever the expense may be, you can start saving a small amount every week or every month. You can also take decisions of big expenses by ensuring that they are paying the best prices for products and services. Look for discounts, coupons, and cheaper alternatives whenever you can. During this uncertain Covid-19 times, it is very much advisable to concentrate on essential expenses and postpone non-essential buying.
Pay all your debts in time: Firstly, try to get the loans at a competitive interest rate by researching the market thoroughly. It is crucial to choose the best loan option available and keep up with the payment cycle going until your debt is fully paid off. No matter how big or small the loan might be, it is advisable to pay the monthly payment on time every time to avoid facing penalties or interest. Paying off your debt faster will not only improve your credit score but will also help to reduce the total interest charges.
The author is Vice President, CSR and Communications, Home Credit India
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