Why Saving and Spending is all about Moderation?


The year is coming to an end and that should definitely bring some interesting questions to your mind about how you’ve saved and spent this year? Living expenses, Education, EMI’s, Emergencies and Gifts; what share did the all take from your income pie? Check your bank balance as on 1st Jan 2016 and as on 31st December 2016 has it grown? Liquid cash in your account speaks a lot about your spending habits. If you had a goal that you wrote down in the beginning of the year you might want to check how well you’ve done!



Here’s Aditya’s spends for the year 2016. Aditya is a 33 year old healthcare professional.  He works in the operations department as a Senior Manager – Operations & Quality Control at a leading hospital in Bengaluru. He is also the father of a 5 year old. His annual net take home is INR 8,40,000/- .

Living Expenses Conveyance (Staples, Medicines, Consumer durable EMI’s etc.,) – 273000
Car loan EMI 8200
Son’s Education – 50000
Home Loan EMI- 288000
Spent on Emergency for his Mother 60000
Vacation Expense 45000
Shopping, Lifestyle (Clothing, accessories, gadgets etc.,) 66000


Totaling to INR 7,90,200/-. Technically speaking Aditya’s year’s saving would be INR 49800/-. Aditya has premium commitments as he has to secure the future of his family in the event of an uncertainty and during times of health emergencies for which he must have a Life Insurance and a Health Insurance plan. Premiums for the sameeats another 30,000/- from the balance, leaving him with INR 19,800/-. Ah…and one more thing about Aditya’s finance. He also has a credit card balance of INR 33000/- on which he pays a little more than the MAD (Minimum Amount Due) every month.  One can say that Aditya is in his prime earning age with every possible financial commitment. Most of the time, these good 15 – 20 years are also the best years to save for a bright retirement and the best time to start on long-term investments.

Aditya can work wonders on his net take home pay, if he adheres to some level of discipline when it comes to spending. If you look at Aditya’s expenses and spending, he spends all that is left after EMIs. He isn’t saving a small amount in under any scheme in any way.  His voluntary saving is Nil. Here are few points that can turn around the bank balance of people like Aditya.

  1. Setting a Savings Goal: The # 1 thing for people who tend to spend everything in their account. This savings goal must be arrived at after carefully weighing the expected expenditure every month. Setting an unrealistic goal will only have you detract from pursuing the goal much sooner. As a first step, Aditya can go with a 5% on his net take home every month. INR 3500/- is definitely a great start and this would also put a tab on his credit card expenditure.
  1. Make it Automatic: The best way to financial self-discipline is to make the saving automatic. Open another savings account linked to your existing account or an RD and opt for a standing instruction that would transfer the amount to the account automatically. This way you won’t have the temptation to spend it all and you will spend only what’s left in the account.
  1. Emergency Expenses from the extra wallet: Although Aditya was able to pay for an emergency, he never had an emergency fund that would have taken care of it. It is quite possible that he’s sacrificed on some other huge purchase. The emergency fund comes to your rescue when you lose your job or have to pay dearly for hospital expenses. A typical emergency fund must be able to cover up to 4-6 months of your living expenses.
  1. Mind your monthly expenditure: This is one very critical thing that will put things in the right perspective about spending. There could a few things that you may overspend on every month. Like the coffee you buy at work or the spending you do for the binge eating between meetings. Weekend family outings and eat-outs. Especially the shopping that you do every month online. This is possible only when you write down your daily expenses or type them out on an excel sheet.
  1. Now set a budget: Once you know where you are overspending, or understand the places where the expenditure can be controlled, set a budget for those expenses and most importantly stick to it!
  1. Check Progress: Done all of the above? Then it’s time to check where you stand with your bank balance every month. Reached a milestone? Reward yourself with a small treat! Make a ‘money date’ every week and check to see if you have hit your weekly savings target.

When it comes to saving and spending it is all about moderation. There is no one thing that will get you through when it comes to reaching your goal on savings. The key to a healthy bank balance lies in all the little and big things you spend on, and the conscious decisions you make on how much you spend on those things. Think you are overspending or puzzled as to how to arrive at a savings plan, talk to a financial advisor today.

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