Bad Money Habits to break in 2023: World Savings Day, marked on October 31 annually, highlights the significance of saving for the future. Saving is essential for financial emergencies and ensuring a steady income in retirement.
World Savings Day, also known as World Thrift Day, has its origins in the European savings bank movement. The first International Savings Bank Congress took place in Milan, Italy, on October 31, 1924. During this meeting, the delegates decided to designate October 31 as World Thrift Day to promote savings and financial responsibility.
The idea behind World Savings Day is to raise awareness about the importance of saving money and developing sound financial habits. Over the years, it has evolved into a global observance, with various countries participating in activities and campaigns to promote financial literacy and responsible saving.
While the specific activities and focus may vary from country to country, the overarching goal remains the same: to encourage people to save, plan for the future, and achieve financial stability. The choice of October 31 for World Savings Day is a historical legacy from the first Congress and continues to be observed annually to reinforce the message of prudent financial management.
If you are one of those among millions who can never manage to save for a rainy day, here are the habits that are stopping you from saving, and here are the ways to overcome them.
The disposable income has increased in the past few decades, which means the ability to save has grown, too, but with a plethora of options to spend and the ease of spending, it's becoming more and more difficult to save. "Our lifestyle and also the cost of things has increased manifold, so to meet these and future requirements, providing for an amount which includes future inflation is paramount. Giving up something today for a better tomorrow seems to be passè, but it's important to decide priorities and ensure you live a life which means everything to you rather than trying to impress others," says Shweta Jain, the founder of Investography, a financial planning firm.
Temptation to buy the latest gadgets can turn into a habit that would impede your financial progress. "In modern times, that flexibility to buy any product with a credit card loan or any other load where the payment is just a small part of the total cost for several months can make any expense fit in your cash flow, and thus the immediate gratification by buying that product can give materialistic fulfilment. As opposed to saving the money to buy something more meaningful in the future without any loan," says Amit Kukreja, a Securities and Exchange Board of India (Sebi) registered investor advisor (RIA), and founder, amitkukreja.com, a financial planning firm.
"To overcome this habit, start investing money every month and prioritise it over your regular expenses, even if it is through a recurring deposit. The movement of that money makes it unavailable for any EMI or unplanned expense payment," he says.
Also, many people are mindlessly upgrading their lifestyles to impress those they may not even like. "It's become a trend for young adults to buy cars before they even start their careers, and our homes are filled with electronic items that hardly get used throughout the year," says Hemant Beniwal, certified financial planner and director at Ark Primary Advisors, a financial planning firm.
This can be a bad habit because it leads to a lack of awareness of the flow of money (in and out of your bank account) and, thus, an inability to save the money. "To overcome this habit, make a budget for your monthly expenses. Track your expenses against the income that you have and ensure the expenses are categorised with a limit for each category. Once the limits are set, one would realise the amounts that he/she can save and invest for a financially rewarding future," says Kukreja.
Avoid dealing with your responsibilities in a reactive manner, like settling a bill only when contacted by a collection agency. This approach ensures a continuous cycle of financial crises, negatively impacting your credit score. Your payment history significantly influences your financial standing, with over one-third of your credit score determined by timely payments for utilities, car insurance, and credit cards. If faced with challenges, proactively negotiate a payment plan with your creditor before the situation escalates to collections. Prioritising timely payments is key to maintaining a healthy credit profile and financial stability.
To overcome this, build an emergency fund to cover unforeseen expenses and monitor your credit score regularly. Enhance financial literacy to make informed decisions and cut unnecessary expenses to redirect funds towards obligations. These steps ensure a proactive, informed approach to managing finances, fostering stability, and improving your credit profile.
Credit is a financial tool, not an additional income. Set clear spending limits aligned with your budget and avoid impulsive purchases. Prioritise timely payments to prevent interest accrual. Regularly review your credit card statements to track expenses. Embrace a cash-first mindset for everyday transactions, promoting financial discipline. By viewing credit cards as a tool for convenience rather than free funds, you can build healthy financial habits, avoid debt traps, and foster long-term financial well-being.