We are in the early days of a new year. Many have financial tasks such as tax-saving investments and insurance purchases to complete. Some are still trying to understand where to begin with their money plans and how to get better at savings. Savings are the bedrock of your finances. They pave the way for everything else — be it investments, insurance purchases or the fulfilment of aspirations. Here are some tips to get you thinking.

Set budgets

Budgeting involves setting your financial priorities for the year and allocating your income towards the financing of those priorities. Budgeting would also help you identify areas where you need to spend more or spend less. You can do this by going through your bank statements to understand where your money went and what changes you’d like to make this year. For example, you may find your food ordering needs to be reined in.

Be goal-oriented

Pick a target and aim to hit it by the end of 2021. For example, it could be saving three times your monthly income for emergencies, or saving 20 per cent of your income every month without fail.

Automate your payments

Use digital tools that complete financial tasks on your behalf. A recurring deposit or a mutual fund SIP will divert a fixed amount from your bank every month to a savings plan of your choice. Compulsory monthly savings is one of the best ways to improve savings. Also, automate your bills with netbanking or a payments app. Late payment penalties avoided are also savings. What’s left in your bank after mandatory savings and expenses is yours to enjoy.

Look beyond savings account

Too little money in your savings account is a problem. So is too much money. If you’re left with too little after your savings and spends, you could dip into your savings. If you’re left with too much, you aren’t saving enough.

Use a sweep-in fixed deposit to park excess liquidity and earn higher interest returns. Divert your savings into your provident fund. Start a systematic investment plan. Your options for earning higher returns are many.

Exit high-interest debts

Loans that attract high interest should be attacked consistently. Credit card dues can spiral into a debt trap. Get rid of unpaid card dues on priority. This will free up your income for higher savings. Pre-payment on large borrowings such as home loans will also help you get out of debt faster, as will refinancing to a loan with lower interest. You could also seek consolidation to merge multiple high-interest loans into a single low-interest loan.

Be ruthless

Be ruthless when it comes to cutting down discretionary spends. The fewer your spend, the more you’re likely to save. For example, cancel the online streaming services or subscriptions you no longer use. If you’re on a tight budget, buy used goods. Split costs with friends and family. Look beyond brands. Your local chaiwala is cheaper than multinational coffee chains.

Check your impulse

Use the 30-day rule to avoid impulsive spends. If you fancy something which could stretch your finances, wait for 30 days. After the wait, if you still want it, go ahead. But it’s also likely your impulse will subside, and you’ll avoid wasting your money.

Borrow carefully

When it comes to lifestyle and consumption, live within your means. Control what you borrow in this regard. Credit card-fuelled consumption will hurt your ability to save. Savouring life is important; to do it within one’s financial capacity, even more so. Also, compare your financing options across different loan products and lenders to find the deal with the best repayment terms.

Be strategic with spends

Maximise the benefits available to you. Hunt the web for free coupons and vouchers. Redeem the reward points you get against debit or credit card spends. Get a card that provides you the lifestyle you need. For example, if you love shopping online, get a card that provides extra cashback or accelerated reward points on your preferred online spends.

Challenge yourself

It’s important to not just save but get better at saving. If you’re already saving 10 per cent of your income, push yourself to save 20 per cent. If you’re at 20 per cent, aim for 30 per cent. This would continually require you to rebalance your priorities, which will bring you back to smart budgeting, goal setting and planning.

Protect your finances

Lastly, throw a protective ring around your savings. You don’t want them to disappear due to unplanned events such as a hospitalisation. Buy health and life insurance so that you and your family’s finances can stay strong against life’s vagaries.

The writer is CEO, BankBazaar.com