5 Steps to Ensure you Always Have Funds to Fall Back On
Elated when your salary hits the bank but flummoxed towards the end of the month as you wonder where it all went? Sadly, this is a situation many can relate to. Living from paycheck to paycheck is indeed stressful, and it can take a toll on your mental health, career, and relationships. But what if we told you there is a simple fix to it?
Yes, a little planning and discipline can go a long way in breaking this cycle and grant you financial freedom. So here are five steps that can ensure you always have money to fall back on.
1. Track your spending
The first thing is to understand where your money is going. You may think you have a ballpark estimate of how much you are spending, but all the Amazon and Swiggy orders can quickly add up. You need to use an expense tracking app or a good old Excel sheet and track every single expense – right from your online orders, to grocery to rent and utility bills. Once you have everything in front of you, review it and find areas where you can cut your expenditure. For example, if you figure you are spending a lot on ordering food, you can start cooking more at home, or if your electricity bill is too high, you can reduce using the aircon for extended periods of time.
2. Fix your savings
“Do not save what is left after spending; instead spend what is left after saving.” You must have heard this advice by Warren Buffet umpteen times, but it is still gold. Set up savings instruments such as SIP Mutual Funds, Recurring Deposits, or Fixed Deposits, so that money is automatically deducted from your bank account. This will ensure you save every month, no matter what. Additionally, fix the debit date closer to your salary date so that your savings happen as soon as your salary hits the account and you are not tempted to spend. If you get your salary on the first of every month, ensure your savings gets debited by the third or fourth.
3. Find ways to grow your money
Explore various avenues to invest and grow your money. You will have to find a strategy that aligns with your life goals and risk appetite. Create a diversified portfolio of different asset classes – bank deposits, debt funds, gold, equity, and other equity-related investments. You can start by opening an HDFC Bank Demat Account that can serve as a single platform for your varied investment needs. The 3-in-1 (savings, demat, and trading) account offers a 360-degree investment solution so that you can build your wealth in a safe, secure, and seamless manner.
4. Save your salary hikes or windfall money
If you get a salary hike, do not increase your spending. While a little lifestyle upgrade is justified, do not be tempted to splurge. Find ways of saving the excess amount. You can create an emergency fund, save for your child’s higher education, or start planning for your retirement. You can use your HDFC Bank’s DigiDemat account and invest in mutual funds, stocks, Exchange Traded Funds (ETFs), and more. Do the same for any windfall money such as bonuses or inheritance that comes your way.
5. Be patient with yourself
Wealth creation takes time. Getting to the point where your savings generate real returns will need discipline and consistent efforts. Compounding has a snowball effect on your savings. For example, if you invest Rs 10,000 every month at an estimated return rate of 8%, at the end of 10 years your corpus will be approximately Rs 17.5 lakh. If you continue to invest for just five years more, the corpus will almost double to approximately Rs 33 lakh! A simple compound interest calculator can help you structure an investment pattern that will help you achieve your desired financial milestone.
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*Terms and conditions apply. This is an information communication from HDFC bank and should not be considered as a suggestion for investment. Investments in securities market are subject to market risks, read all the related documents carefully before investing.