Twenty six-year-old Yogesh Tiwari already has plans for his increment. The information technology (IT) employee at Scorp Enterprises wants to buy a camera, which will cost him twice his monthly income.
Similarly, 30-year-old techie Suresh Babu Koganti, working at a multinational IT firm, has decided to buy an LCD television in September.
Tiwari and Koganti are not just two isolated cases. Financial planners say this is typical of a majority of youngsters — expenses are planned even before the money gets credited into their bank accounts.
“Many youngsters tend to think that increment money is separate of what they have been earning. It usually takes them three-four months to come to terms that it’s their salary,” says Malhar Majumder, a certified financial planner.
By the time they realise this, their monthly expenses go up in tandem to their salary, because they are either repaying a loan or managing their credit card outstanding. The oft repeated promise ‘I will start saving aggressively’ remains unfulfilled.
Tiwari, for example, has invested in long-term fixed deposits to avail tax deductions. However, he has not been able to start saving in a disciplined manner every month.
More From This Section
Financial planners say it’s not wrong to spend with your wallet growing fatter. “But, if you have to spend on something that is important to you, there is no point waiting for an increment or variable pays or bonuses,” says Majumder. A person needs to plan his purchase and save money on a regular basis. As his salary increases, the allocation to this fund should also proportionally go up.
If you belong to such sectors as IT or retail, where companies recently gave salary hikes, financial planners advise you to save a part of your salary regularly.
One way to decide the amount that you should save is by calculating the increase in your essential items. There are good chances that these costs would have risen by 20-30 per cent in the last couple of years. You can increase your savings by the same amount.
“This will ensure that your savings are on par with rise in costs,” says a certified financial planner. If you want to avoid all calculations, simply save at least 50 per cent of the increment, says another expert. To make sure that you don’t cross the demarcated amount, you can keep separate bank accounts for investments and expenses.
Financial planners suggest starting a systematic investment plan in an equity-diversified fund, as it does not require constant monitoring. Many others also want to invest specifically in a particular asset class, like Gopinath Guddati. The 29-year-old Wipro employee wanted to buy gold. This year, he started saving small sums with a jeweller. At the end of the tenure, the jeweller would buy gold for him of the accumulated amount. Meanwhile, Gopinath is getting an interest on the money saved, at the rate of eight per cent.
One can even opt for recurring deposit schemes. Currently, even private banks offer these at monthly savings of only Rs 500.
Remember, in the long run, it’s not about what you earn, but about what you spend.