5 Ways To Be A Great Saver

Spend today, or save for a rainy day? Enjoy your life right now, or build financial security for the future? This is the most common money decision that faces all of us - and on a daily basis. In times of rising inflation and consumerism, stalling market growth and social media fuelled personal competition, saving money has become more challenging than ever before. Here are five thing you could do to make sure you're a better saver than most.

Watch your reserve-surplus ratio
Your reserve-surplus ratio is the most critical personal finance ratio, from a savings perspective. Defined as the percentage of your monthly earnings that you end up not spending, this figure is something that requires close monitoring. Effective savers have a reserve-surplus ratio that's at least 25%, and preferably as high as 40%. Every time you get a raise, make sure you keep your reserve-surplus ratio constant. What most people do is the exact opposite; they increase their monthly spends in advance, in anticipation of a raise - a fatal error.

Put it on auto-pilot
It's not enough just to have an adequate surplus left over at the end of each month, in your savings account. You need to ensure that this money earns you real returns - that is, inflation beating returns, at the very least. Leaving your savings to accumulate in low return, easily accessible savings accounts outs you at the risk of splurging the money, were a tempting enough proposition to arise. Like EMI's, you should put your monthly savings on autopilot instead - so that its 'out of sight, out of mind'! If you've got a long-term outlook, there's nothing better than Mutual Fund SIP's to channelize your monthly savings to.

Adopt a balanced approach
In your enthusiasm to inculcate healthy savings habits, make sure you don't tilt the balance in the opposite direction and spread yourself too thin for your comfort. We've observed many individuals who end up saving as much as 60% to 70% of their monthly incomes, compromising on their lifestyles in the process. This is rarely a sustainable strategy, and typically falls apart over time. Adopt a balanced approach wherein you save enough but spend enough as well - a life well lived is an importance aspect of financial planning, too!

Manage your risks
What does risk management have to do with being an effective saver, you ask? A lot! Financial emergencies can erode your goal-based savings at a moment's notice and can in fact drive you into leverage. Managing financial risks that arise from medical emergencies, personal accidents and critical illnesses, is extremely important. At the very least, a floating medical insurance cover to the tune of am3-5 lakhs per family member is a bare minimum requirement.

Don't keep up with the Joneses
Want to fast forward yourself to financial ruin? All you need to do is obsess over what your neighbour, your friend from school or your colleagues are earning and buying. You'll never be an effective saver if you're in the constant pursuit of outdoing others. While I'm not advocating complacency, it's vital to understand that everyone's life flows in a different manner, and personal finances fluctuate. Taking loans and piling on the EMI's to present a flashy side to the world, will backfire terribly over time. Don't go broke trying to look rich - "act your wage" instead!