Start Fresh with Investments This Diwali

Time to read: 3 mins | November 3, 2018

Among India’s many religious festivals, Diwali is one of the most important festivals. It is considered to be an auspicious festival to start a new venture, project, or take on a new journey.  

This Diwali take pledge to take a fresh approach towards saving and growing money.

Here are some of the ways to surmount them…

Gain control over spending hard-earned money -Debit card and credit cards are great if you use them sensibly and smartly. Also, to have better control over your personal finances, keeping a track of your statements/account balances regularly is imperative to review your cash inflows and outflows.

Likewise when you invest in wealth generating avenues, it is important to regularly review your portfolio to ensure that you’re on track in the journey of wealth creation and accomplishing financial goals.

Begin to save enough for the future – Amidst the atmosphere of consumerism and competition, individuals and families chase short-term, instant gratification. Sure, we all have aspirations to live a better life and provide our families with the best. However, if you have been working for more than a couple of years and still live from paycheck-to-paycheck with meagre savings, facing this demon is critical to your financial wellbeing.

“Don’t save what is left after spending, but spend what is left after savings.” – Warren Buffett.

The first step to your financial freedom is to save. And the next step is to invest that money sensibly in wealth-creating investment avenues so that you counter inflation, accomplish the envisioned financial goals ––for your children’s higher education needs, their wedding expenses, and your retirement among a host of other financial goals, and secure your future financially.

Avoid creating a mountain of debt – Borrowing money for specific purposes such as to purchase a car, a property, for higher education needs, or even for any personal reasons is not a bad as long as you have the means to service the debt obligation. Borrow but prudently. Remember, loans and financial obligations must always be taken seriously and repaid in due time, as any default on the payments can harm your credit rating and ability to seek loans in the future.

Make an attempt to raise your low credit score – A low credit score would limit your access to a loan when you need it the most. When you approach lenders/banks for various types of loans, they first access your credit score to assess your creditworthiness and credit behaviour. Thus, if your credit score is low, make a genuine effort to improve it.  Keep a respectable credit score of at least 750 and above at most times.

Maintain an emergency fund – Life throws a nasty surprise when it is least expected. Emergency situations like loss of job, hospitalization, unexpected increase in your child’s school fees, etc., can arise at any moment and leave you high and dry.

Hence, it is better to be prepared to counter such events.

Remember the old adage, ‘A stitch in time saves the nine’.

While a personal loan can help you address such situations, having an emergency fund, also known as a contingency fund or a rainy day fund is very important.

Ideally, you must maintain at least 6 to 24 months of living expenses, including EMIs as your emergency fund in a savings bank account. You may add a little 5%-10% extra for medical emergencies, taking cognizance of the health insurance and medical record of you and your family members.

While doing that while big is better; holding a very large portion as a contingency reserve too is not sensible, particularly when you have other financial goals to address. You should just hold an optimal amount as a contingency reserve and keep reviewing it regularly taking cognisance of the dynamic events in life.

Engage in a sensible money talk with family – Have you felt the hesitation about having that tough conversation regarding money at home? Are you looking for ways to discuss this with your spouse, but haven’t found a way yet?

You see, when you have responsibilities to shoulder at home, a sensible money talk with family members is important; after all, it’s a question of the family’s financial future.

Money symbolizes different things to different people. For example, power, freedom, love, sense of security, boosts self-esteem, etc.  Getting a perspective of your family members can help you when planning for life goals and taking financial decisions.

Pay attention to your financial literacy – In the age of knowledge economy that we live in, let’s aim to take some time off our schedule to be financial literates so that we handle our personal finances astutely.

Robert Kiyosaki has beautifully said, “Intelligence solves problems and produces money. Money without financial intelligence is money soon gone.”

Happy Banking!

Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinion on investing. Axis bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.