Browse Author: Vedika K

Savings

Why is adequate savings important for every personal investment planning?

Saving a small amount every month is an important part of Individual finance management. We can use this savings for different short-term financial goals and it takes care of emergency fund requirements. Savings help us to continue with our financial plans for long-term goals like the purchase of a home, children’s education, children’s marriage, foreign trip, early retirement, retirement planning, etc.

Short term financial goals and emergency fund requirements are as followed:

  • Short term goals
    • Purchase of any house holds
    • Purchase of Mobile, Laptop, TV etc
    • Children educational fees
    • Advance or booking charges
  • Emergency fund
    • Any Medical Emergency
    • Any Unexpected expenses

Current Rule for Savings

It is the most common rule for finance management used for each individual in this lifestyle.

Income = EMI (Equated Monthly Instalment) + Expenses + Saving

With this rule, We all are paying EMIs first and managing our expenses. Savings comes last if anything is available in the account. With less available savings, All individuals are getting in to trap of EMIs to manage their financial expenses. Any Sudden or emergency expenses are lead us to another EMI only.

Golden Rule of Saving:

As per experts, We have to plan our savings first before paying any EMIs and other expenses. We have to minimize our expenses. We have to think or plan that how we can reduce our expenses and save more towards our goals. It doesn’t mean we should compromise with our present requirements.

Income = Savings + Expenses

With this rule, there will be a change in individual lifestyles. We have to wait to enjoy our lifestyle. For example, If anyone wants to purchase a new mobile phone, there are two ways to do so.

  1. Pay small amount of mobile and convert rest amount in to EMI. This will give you immediate use of mobile phone. But individual has to take burden of EMI each month.
  2. Save some amount each month for mobile and after some months individual can by latest mobile with same amount. There will not be any EMI burden after purchase of mobile.

We would like to hear from you on the above thoughts. Request you to share comments in the below section.

Note: This blog is based on my personal understanding of Savings. It may differ for each individual’s experience and understanding of savings.