We Indians are wired to save money for hard times or emergencies since childhood. Have you ever imagined, how you would survive if you lose your job? It is a very difficult situation to counter and you can only overcome it if you have enough savings which can help you sustain for a while until you find another job. Over and above this, you must also have sufficient funds to safeguard yourself and your family against emergencies which can arise without a warning. These emergencies could be unexpected medical expenses due to a critical disease or heavy losses in the business. Ask yourself the following questions. Based on what you have answered, you will understand where you stand financially.
Have you been paying your utility bills on time?
Many people do not realise that money can become expensive if not taken care of properly. Some often forget the payment dates of utility bills, LIC policy premiums, outstanding payments etc. because of which they are charged extra fees and penalty. This not only increases the bill amount unnecessarily, but also adds to poor credit history.
If you are facing problems occurring due to bounced cheques and have often missed the due date of bill payments, it is time you pull up your socks. There are several easy ways to solve this problem. Always set some money aside, only a ball park estimate, for recurring expenses which arise at the end of each month, such as utility bills, EMIs etc. Also, you can set a reminder on your mobile or circle the dates on the calendar which would help you remember to make the payments on time. Following such a system will ensure that you never forget the due date and would pay your bills on time.
You use your credit cards excessively and often take loans
Owning a credit card is often associated with status symbols. Everybody wants to own a credit card with a high credit limit but only few understand the responsibility it entails. A credit card can be of huge help to all of us provided it is used in a proper manner. Credit card payments should be made on time. Else the interest and late payment charges can reflect badly on our finances and credit history.
Credit card holders do not realise that this money which is provided to them is not free of cost. The bank charges a fee for its services, hence, everybody must use a credit card judiciously. A person who is aware of the concept of compounding will realize its benefits. It can be a wise decision to deposit a sum of money in the bank and enjoy the compounding rate of interest. This interest can be useful to fund monthly expenses. It is not that a credit card does not have its advantages, there are points that we get with every transaction which can be redeemed against purchases. However, it must be used wisely. Credit cards are like short term debt and should be used only if one does not have enough money to make an important purchase.
Obsessive, compulsive, impulsive shopping
Try to discipline yourself by buying only what is needed. Prioritize you expenditure. There is a famous saying that says, “If you buy things which are not needed you will have to sell off things which are.” Many people get habituated to buying things which are not needed and end up cluttering their house with unnecessary items. At the end, not only do these things pile up but also prove to be useless expenses. We sometimes even buy simple items that are available in local shops from big branded showrooms, only for their brand value. Also, when we visit malls, we often get enticed by offers and schemes that we may not even require in the first place. These are things we need to avoid.
Many of us just tend to buy certain things only because our neighbor owns them. This may be something as simple as a food item or even a showpiece. Let others not influence your shopping patterns. You may not be able to afford all that your neighbor can.
Electronic items get old over time and require maintenance and repair, leading to more expenditure. Even in case of clothes, styles go out of fashion very soon. Think twice before you spend money on an expensive piece of clothing.
Cheques that bounce!
Take extra care while writing a cheque and ensure that you have sufficient balance in your account. If you do not have the required amount in your account, your cheque will automatically bounce. The bank will levy charges as penalty if a cheque given by the account holder bounces. This not only increases your expenses, but also puts you in the bad books of the banks. Now-a-days, banks keep a strict check on banking activity. If the bouncing of your cheques is a regular feature, your account can even be temporarily suspended. If you are not sure of your bank signature, avoiding writing cheques and make online transfers instead. This not only helps you save time but also enables you to find out how much money is available in your account.
Follow these tips to be prepared for difficult situations
Normally people adhere to their salary account for day to day expenses and let the remaining grow for itself. In fact, it is wiser to transfer the rest to another account for the purpose of savings or investments. The fund that is formed can be used as a contingency fund.
You can also resort to a Fixed Deposit if you do not require the money immediately, as FDs have a lock-in period. Fixed Deposits will control your temptation to spend unnecessarily as premature withdrawal of an FD can attract penalty charges.
It is very important to make a budget of your income and expenses. It is more important to stick to that budget. Many people are very enthusiastic about a budget initially but forget all about it in a few months.
Try to use your debit card more often than your credit card. This will help you track your expenses better. Make use of your credit cards only if you cannot afford to pay the entire outstanding amount at that time.
Do not get into a habit of being under debt. Debt simply makes money more expensive. In fact, learn to take control of your spending habits and only then apply for a credit card.
People who are careless with their expenses and savings should not own a credit card since it can do more harm than good.
It is best to accept the fact that you are in financial trouble sooner rather than later and act on it. Living in denial will only make matters worse.