Ravi Speaks:

‘Risk-taking’ in savings- ‘a must’-in present times.

Times have changed and changed drastically. People have also changed their ways and approaches for the little savings which they could make presently.

Earlier, the stress was mainly on the savings as Bank instruments like Fixed Deposits and even Recurring Deposits. Now that is not the scene anymore. The interest rate for such savings has gone almost negligible and the interest which once upon a time back used to be 10.5% to 11.00% is now just 4.40% to 5.50% only. In the earlier times, the FD for five and a half years would automatically get converted into double the amount of the principal amount invested. Now it is difficult and that much yielding anymore. Even there used to be some instruments in the Post & Telegraph departments like Indira Vikas Patra and Kisan Vikas Patra-which also would get doubled in the amount invested after the same period of 51/2 years. All that is gone and no such easy money-making instruments are existing anymore.

Discouraging Saving Bank Interest Rates

People used to have enormous amounts invested in their FDs and RDs earlier, but now their money is not in those segments anymore. Also, the risk-taking capacity of people presently has increased drastically and their investments in the ever-changing markets like the share markets have increased drastically. Some of the regular salaried persons also have invested in not only the Share market but also in the high-risk zone of the speculative market-where the market variation is of a very high order. In such a case, the gainer is a gainer if it clicks for him in the gainer category, but a loser, if the share rate speculated, goes down miserably. I have seen people losing millions even in such a severe loss speculative market, especially in the Post 1985 upsurge market. After the market boom was noticed in 85-86, there was a sudden decline in the share market and the people who had invested heavily during that period had to lose very heavily.

Look at the present-day scenario-it is the repetition of the same old 85-86 season happening despite so many odds like Pandemic and many economically poor corporate performances and there is every probability of yet again a declining trend going to repeat itself. Some of the bigger houses have registered a good gain, and that is reflected in their share market performance also, but there are many that still are not showing any possibility of revival. Despite all these people, mainly investing in this sharing business directly or indirectly through Mutual Fund schemes-where the variants are directly attached with the Share market performance of the specified shares taken into consideration.

Investing in such a variant, the market is still considered advisable by the experts for the people who have been trying to save their money for rainy days. Rightly so, since the dividends accumulated this way are far more than the conventional way of saving, which, according to modern times, is considered a conservative approach otherwise. I have seen some of my friends investing X- the amount in January 2021 and at present having the same amount crossing 2X figure and this is despite all that Pandemic and poor economic show. Had it been put on the conventional side, that would not have even fetched 20% more to the principal amount invested?

Looking to the top-notch banks like SBI, HDFC Ltd, ICICI, etc people are drifting away from them only for the simple reason of a negligible return coming their way. They are looking out for a suitable way out where they could invest the saved amount and get the maximum return-which invariably makes their land into the Share market directly or indirectly.

Let me enumerate the stepwise approach for a new young couple to save the valuable earnings for the rainy day:-

Keep track of your spending.

Let the young couple evaluate in the initial phases how much the fixed spending is and how much the unpredictable one is. Let them conclude after a couple of months only what would be their definite expenditure where they could not help spending a fixed amount within a month. The rest of the money, if saved beyond that spending amount, can be evaluated for the further saving budget.

Make a savings budget.

This amount, which they have concluded as the saving amount, can easily be planned for the savings budget. They could think of various options as discussed above for the proper saving of their hard-earned money. Here again, they should not leave the continued process of working out ways to reduce spending even more.

Look for methods to reduce your expenses.

Here again, the various options and spending ways could be analyzed by the couple yet again and they could easily work out how to restrict their spending and increase their saving.

Make a savings plan.

Now they should go for a very serious saving plan where investing their money-which could fetch them high dividends as a return after the investment. The details, as mentioned in the present market scenario, should be their index into which they should thoroughly study and invest accordingly.

Choose your priorities.

They should very well see their plans be realized as per their priorities in the times to come. For all this, they should have short-term and long-term goals as their targets to be met. The short-term goals can range from three years and the long-term for over three years beyond and can go up to even twenty years goals for saving.

Choose the tools.

Choosing the right tools is the major step where the investment should go for the maximum return and the couple should invest accordingly as per their saving quantum and the decided risk-taking which they have opted for.

Make saving a habit.

This monthly saving should be developed as a regular habit by the earning couple. They should ensure that the amount which they have been spending for the entire month is around the same expected one which revolves around their average spending every month and the rest of the amount comes as the clear cut-out saving as per their plans.

Monitor your funds as they increase.

With passaging time and strict discipline employed in one’s spending and the saving-the couple will naturally find an increase in their earnings and consequently in their cumulative savings as well. They should seriously plan out and work out the various short-term and long-term goals-where this increase in savings can be better invested for some important milestones in their careers.

Tool for Spending Analysis

The couple, after saving around a twelve-month or eighteen-month period, jot down the monthly expenditure and work out the average and apply the analytical approach to decide on various necessary expenditures in the times to come. This tool is applied for the proactive identification of saving opportunities, and managing risk factors, and that way optimizing the buying power directly in proportion to the savings reached by the couple over some time.

Finally, to conclude the new generation has been very alert and attentive to these bigger changes happening in the circles of money earning, spending, and above all money-saving for the rainy days although there is real hardship in managing the various tools to reach a considerable saving goal fixed by the modern-day couple.

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