A bonus or an annual increment can be used to kick start your long-pending investment programme, say experts
Madhu T TNN
It may sound familiar to you. You were waiting to kick start your investment programme the moment you got your annual increment. Or performance linked bonus. But what happened to your plans. They remain only on paper, right? The moment the money came into your bank account, suddenly there was an (real or imagined) expense. Poor you. Well, you got company. Many people go through the same experience year after year. Like incorrigible addicts, they fail to commit themselves to a programme. And, according to financial experts, in most cases the money is spent on things which could have waited. Or even avoided. For example, someone suddenly gets the idea to have a summer vacation. Sure, the money is in the bank, why should you wait. However, the idea may hamper your plans to meet a specific goal in life. “It may sound trivial, but it should be seen as a struggle. Those who manages their money better will definitely start saving more after a pay hike. However, those with difficulties in managing money would only splurge the money,’’ says a financial advisor. Is there a way out? Well, the easy one is to pretend that you didn’t get that extra money. The logic is simple. If you don’t have the money, you can’t spend it. So, why don’t you imagine that you never got anything extra. Stick to your usual spending pattern. Channel the extra money for something more useful. It may sound simple, but the practice won’t be that easy. “We were always amazed how the money is spent on something we never planned for. Some expenses may look avoidable while looking back, but some would really look genuine,’’ says Pallavi, a software professional. Her husband Ramesh seconds her. They both used to plan to make sure that the extra money is tucked away safely for a rainy day, as both of them work in IT and the sector has its ups and downs. “The job security is a big issue in our field. So, we always wanted to have a huge savings, so that we can fall back on it,’’ says Ramesh. After struggling with their unexpected expenses claiming the extra money, both of them opened Public Provident Fund account with a bank and invested a bulk amount in it. “We selected PPF because it is safe, and we can’t touch the money even if we want. All we wanted was to have the extra money to go to a safe place and we are happy now,’’ says Pallavi. But what about their job security and their idea about cash cushion to falling back on? “Well, we are just making a beginning. Next time, probably we will do something about it,’’ replies Ramesh. Moving on to another method to make good use of the windfall, Renjit has good idea that may work for you. It is equally simple. All you have to do is to commit the extra money for a recurring deposit or a systematic investment plan with a mutual fund. His reasoning is simple: your usual expenses don’t jump up with your extra income. Make some provision for increased expenses, and invest the rest somewhere else. Last year, his salary went up by Rs 12,000. He committed Rs 10,000 to an SIP. He set aside the extra Rs 2,000 for monthly expense, as rents were climbing up in his neighbourhood. “I was convinced that this is the only way to save. I always used to have plans, but something would go wrong in the last moment,’’ he says. No wonder, he gets thumbs up from our financial advisor. According to him, Renjit did the wise thing. “He is right. Mostly, our expenses don’t keep pace with our rise in income. If set aside some money for inflation-related expenses, we would still have money to invest,’’ he says.
Madhu T TNN
It may sound familiar to you. You were waiting to kick start your investment programme the moment you got your annual increment. Or performance linked bonus. But what happened to your plans. They remain only on paper, right? The moment the money came into your bank account, suddenly there was an (real or imagined) expense. Poor you. Well, you got company. Many people go through the same experience year after year. Like incorrigible addicts, they fail to commit themselves to a programme. And, according to financial experts, in most cases the money is spent on things which could have waited. Or even avoided. For example, someone suddenly gets the idea to have a summer vacation. Sure, the money is in the bank, why should you wait. However, the idea may hamper your plans to meet a specific goal in life. “It may sound trivial, but it should be seen as a struggle. Those who manages their money better will definitely start saving more after a pay hike. However, those with difficulties in managing money would only splurge the money,’’ says a financial advisor. Is there a way out? Well, the easy one is to pretend that you didn’t get that extra money. The logic is simple. If you don’t have the money, you can’t spend it. So, why don’t you imagine that you never got anything extra. Stick to your usual spending pattern. Channel the extra money for something more useful. It may sound simple, but the practice won’t be that easy. “We were always amazed how the money is spent on something we never planned for. Some expenses may look avoidable while looking back, but some would really look genuine,’’ says Pallavi, a software professional. Her husband Ramesh seconds her. They both used to plan to make sure that the extra money is tucked away safely for a rainy day, as both of them work in IT and the sector has its ups and downs. “The job security is a big issue in our field. So, we always wanted to have a huge savings, so that we can fall back on it,’’ says Ramesh. After struggling with their unexpected expenses claiming the extra money, both of them opened Public Provident Fund account with a bank and invested a bulk amount in it. “We selected PPF because it is safe, and we can’t touch the money even if we want. All we wanted was to have the extra money to go to a safe place and we are happy now,’’ says Pallavi. But what about their job security and their idea about cash cushion to falling back on? “Well, we are just making a beginning. Next time, probably we will do something about it,’’ replies Ramesh. Moving on to another method to make good use of the windfall, Renjit has good idea that may work for you. It is equally simple. All you have to do is to commit the extra money for a recurring deposit or a systematic investment plan with a mutual fund. His reasoning is simple: your usual expenses don’t jump up with your extra income. Make some provision for increased expenses, and invest the rest somewhere else. Last year, his salary went up by Rs 12,000. He committed Rs 10,000 to an SIP. He set aside the extra Rs 2,000 for monthly expense, as rents were climbing up in his neighbourhood. “I was convinced that this is the only way to save. I always used to have plans, but something would go wrong in the last moment,’’ he says. No wonder, he gets thumbs up from our financial advisor. According to him, Renjit did the wise thing. “He is right. Mostly, our expenses don’t keep pace with our rise in income. If set aside some money for inflation-related expenses, we would still have money to invest,’’ he says.
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