Inculcating the habit of saving

You have wants, and you have needs. You usually have two ways of paying for them – pull out the credit card or use the money you have set aside. Which would you prefer?

It’s a safe bet that most of us would choose to have a stash of cash to pay for everything from impulse purchases to long-term financial goals, but how do you save when there are bills to pay, and the pay-check only goes so far?

Saving your money isn’t always easy, especially when you don’t have a lot to spare. After paying all your usual expenses, there may be very little “fun” money at the end of the month. When we find ourselves with extra cash, like a tax refund, many of us rush out to buy those shoes or that electronic gadget we’ve been eying for months instead of putting it into our savings.Thankfully, there’s a better way to be successful with savings. Here are 4 keys to savings success.

 Saving immediately will make you feel good. Have debt? Put a little aside anyway. Acquiring a savings habit as soon as possible is critical. By setting a little aside each month while aggressively paying down your obligations, you will graduate into being debt-free with a happy little nest egg in place. Plus, if you have an emergency, you won’t have to touch the credit cards and feel like you’re driving in reverse. Set a SMART goal.

All achievable goals share the same five factors: Specific – describe your goal to the smallest details. Measurable – how much do you need to save? Actionable – break it down into reasonable action steps. Realistic – could you achieve this goal in the given time? Time-bound – what is the timeframe for the goal?

Saving money is one of the essential aspects of building wealth and having a secure financial future.

 Saving money gives you a way out of the uncertainties of life and provides you with an opportunity to enjoy a quality life. Putting aside a sum of money in a systematic manner can help you steer out of many hurdles and obstacles in life. It can support you in your hour of need and ensure that your family has something to fall back on in case of an unfortunate event. There are many reasons to save and several ways to save with ease.Here are some of the important aspects of savings that you should know.Reasons why saving money is important. 

Savings is crucial for everyone, regardless of their earnings, spending and life stage. Here are some reasons why you need to start saving. It offers peace of mind: Knowing that you have a certain amount accumulated for times of your need, gives you peace of mind. You can lead a stress-free life with the knowledge that you will not have to struggle if things take an unexpected route.It gives you a better future: Your savings can be the answer to a number of your goals. You can buy a house, accumulate funds for your retirement, or purchase a vehicle. You can secure your future, indulge in the best of things that life has to offer and live a very fulfilling life. It provides for your children’s education: With a considerable amount of savings, you can fuel your children’s dreams and pay for the best schools and colleges across the world.You can plan your short-term goals: Savings are not just aimed at the long term. You can also benefit from savings in the short term. A lot of people save for a few months and then travel. It gives your family security in case of an unfortunate event: By saving in a disciplined manner, you can make sure that your family well-provided for. In unfortunate times, your savings can act as a cushion for your loved ones and help them overcome any financial difficulty.  If you are new to savings or find it difficult to stick to your objective of saving, then you can try the following steps.

Limit your credit card usage

Credit cards may provide a temporary sense of relief, but the high rates of interest can deplete your savings in no time. It helps to limit your debt and restrict credit card purchases to ensure that your savings are intact and growing.

Keep a track of your expenses

If you find it difficult to save regularly, try to record and keep a track of your monthly expenditure. This will offer you a clear picture of where you spend. You can then identify the things that are not important and aim at saving more by avoiding those purchases.

Create a budget for savings

It helps to devise a budget for each month. You can create a plan at the beginning of the month to target savings and set limits for spending. This lets you focus on what is important, reduces the chances of over-spending, and lets you save as planned.

Invest in long-term financial tools

When you save, it is also important to see your savings grow with time. Investing your money in a long term investment plan can have many additional benefits. These plans offer a lucrative rate of interest that lets your money retain its value and beat inflation. One such instrument is the savings or endowment plan. The ICICI Pru Assured Savings Insurance Plan is a new age endowment plan that is designed to address your life insurance needs.

 Income is defined as household disposable income in a particular year. It consists of earnings, self-employment and capital income and public cash transfers; income taxes and social security contributions paid by households are deducted. The income of the household is attributed to each of its members, with an adjustment to reflect differences in needs for households of different sizes. Income inequality among individuals is measured here by five indicators.

The Gini coefficient is based on the comparison of cumulative proportions of the population against cumulative proportions of income they receive, and it ranges between 0 in the case of perfect equality and 1 in the case of perfect inequality. S80/S20 is the ratio of the average income of the 20 per cent richest to the 20 per cent poorest; P90/P10 is the ratio of the upper bound value of the ninth decile (i.e. the 10 per cent of people with highest income) to that of the first decile; P90/P50 of the upper bound value of the ninth decile to the median income; and P50/P10 of median income to the upper bound value of the first decile. The Palma ratio is the share of all income received by the 10 per cent people with highest disposable income divided by the share of all income received by the 40 per cent people with the lowest disposable income. The disposable income is used for consumption towards satiation of needs and wants. Post consumption, if any amount is left, the individual thinks a punt savings, be it in the form of short or long term financial commitments. 

The marginal propensity to save is the portion of each extra taka of a household’s income that’s saved. The MPS indicates what the overall household sector does with extra income—specifically, the percent of extra income that is saved. 

The writer is MD and CEO of Community Bank. He can be contacted at masihul1811@gmail.com