Savings FIRST

Given the state of the global economy, it's better to ensure a safe future for your family and yourself. Aman Dhall helps you get into the savings mode

 Money is better than poverty, if only for financial reasons — Woody Allen. Not everyone may agree with this famous remark by one of America's greatest film directors. But given the state of the global economy, it would be foolhardy to ignore the fact that it's indeed money that makes the world go round. So it's better to be prepared for tough times rather than have to face a crisis. As wise people say, getting prepared is half the battle won.
    India, not entirely insulated from the global meltdown, may not succumb to recession, but it's always better as an individual to take precautionary measures for your family's and your own well-being. Often, savings are a luxury for the bread-earner. And many people save only when faced with immediate income-tax related issues. How much you will save is also related to the kind of habits, attitude and flexibility you adopt to boost your personal investments. To help you get into the savings mode, here are seven ways you can improve your financial health.
GO EASY ON THE PLASTIC
Spend now pay later, is a recipe for financial disaster. If you are paying only the minimum amount, think twice before swiping the plastic, as this can keep you in debt for years. Most credit card companies, charge around 36-49% annually on the outstanding amount, which can burn a hole in your savings. Wealth managers even suggest doing away with multiple credit cards, as this will allow you to have a better control and awareness of your total spend. There are arguments that multiple cards help you transfer liabilities, but its efficacy still remains doubtful.
CUT DOWN ON MULTIPLEX MANIA
If you are a movie buff who goes every weekend to a multiplex and goes out for dinner afterwards, then it's time to cut down on that. Not entirely, but indeed you can be watchful. Says Rajesh Saluja, CEO, ASK Wealth Advisors; "It's a combination that could deliver a gaping hole in your wallet. Eating more often at home is not only good for your health but also for your finances. This change will definitely boost your savings significantly."
MAKE FULL USE OF TAX EXEMPTIONS
Money saved is money earned. One sure way to boost your savings, believe financial planners, is to reduce your tax outgo. Under the income tax act, there are certain deductions and exemptions that are available for the taking. "You should make sure that you take full use of them. If you are not good at numbers, consult your tax or financial adviser so that you not only make some wise investment choices but also save a whole lot of money," says Zankhana Shah, a certified financial planner and head of Mumbaibased Moneycare Financial Planning.
RENEGOTIATE HIGH-COST LOANS
Give yourself a second chance, if you feel that you are getting charged at a very high rate of interest by the housing finance company. This way you can add to your savings. With interest rates on the downward trend, lenders are willing to accommodate good customers. It is advisable to try and look at renegotiating/ transferring/ swapping your existing high cost loans. "Even you can renegotiate rentals on commercial and/or residential properties," feels Saluja.
CHOOSE LESS EXPENSIVE HOBBIES
Yes, hobbies can be costly, especially if they involve use of an equipment such as a single-lens reflex camera, golfing clubs and aeromodelling gear. If indeed you are planning to spend on your hobby, financial planners advise that go for the ones which are not heavy on your wallet and don't let your choice be driven by the brand. This will allow you to indulge freely and unwind. And better drop that passion of cultivating a finer wine palate, it is an expensive habit and hobby!
SAVE ON TRAVEL
There are several elements to this cost-cutting measure. Be it travelling to office by car pools or for that matter the need for a driver. You need to review — are you better of driving the car yourself! And don't ignore the benefits of planning a holiday in advance. You may well avail yourself of great bargains. "Travel by train instead of air, particularly for short distances. Also plan train travel when taking a family on vacation, it will save considerable amount of money. It may take more time to reach your hotspot, but what's the rush when you're on a vacation anyway," says Saluja.
INSURE YOUR HEALTH
Irrespective of whether it's boom or slump, bull or bear market, you just can't ignore the health needs of your family. This is a must have for all. It's always said that taking preventive measures is much better than the cost of cure. And it's common knowledge that cost of hospitalisation is on the rise in India, sometimes running into lakhs of rupees for certain ailments. "Before a catastrophic event hits your health and wealth, get that health cover for yourself and your family. It's one thing you shouldn't take a chance on," says Saluja.
FUTURE PERFECT

• Spend intelligently. Use a formula: frivolous expenses — not more than 3-4% of income, non-essential — no more than 10% , luxury — no more than 15%

• Keep 10-20% allocation of your portfolio for gold. It's a safe haven during uncertain times

• Don't follow the herd and park too much money in long-term bonds. It could be volatile. Do it if you understand the risk

• Read the fine print and understand 'guaranteed returns' on any product

• Go for FDs only if your income is going to be below tax-free limits
    — By Kartik Jhaveri, director of Transcend consulting