Financial Risks – Not Saving Enough

When blind spots are financial, they can work against us, unintentionally destroying our good efforts to make progress with our money. Proactively searching out the aspects of our financial lives that we’ve neglected can yield many rewards, financial and otherwise. Here are the three most common personal finance blind spots and there is a high probability that you have at least one of them. The following are the blind spots to avoid in financial crisis and today we will see about ‘Not Saving Enough’.

1. Not Saving Enough
2. Buying High-Cost Investment Products
3. Taking too much Risk

1. Not Saving Enough

Not bothering to calculate how much you require: The average person has to save around 50 per cent of his/her post-tax salary. But the proportion differs from person to person. An investment banker who has an unpredictable career should save more than the average person. So, calculate the amount based on your specific situation.

Optimistic return assumptions will wrongly indicate that you can get away with saving less: We talk of ‘nominal returns’ in daily life the interest rate on a fixed deposit, for example. And, a nominal return minus inflation is called ‘real returns’. Post-tax real returns, on your entire net worth, over your remaining lifetime are likely to be close to zero percent. It is optimistic to assume a figure which is higher than that.

Signs you are not Saving Enough Money

1. When you have no idea how much you spend

You probably have a good idea of how much money is coming in each month, but just how much is flowing out, toward expenditures like Rent, Food, Transportation, etc. It’s likely more than you think and, chances are, you could find ways to cut back.

To figure out exactly where you spend more of your money than you mean to, record your purchases for a couple of months. You could try writing expenses down in a notebook or using an app that will track your spending, such as Cost Track-Expense Tracker.

2. When you can’t pay your credit card balance in full

Not being able to pay more than the minimum month after month means you’re spending more than you have. That’s a path to credit card debt, which will make you fall even farther behind on your savings goals.

Analyze your spending habits and identify areas where you can cut back in order to free up your cash and pay your balance in full. If you’re already in the red, consider avoiding your credit cards all together and going cash only, which will force you to stay on budget.

3. No Savings Goals

You can’t get to where you’re going if you don’t know exactly what you want. Think about what you want your future to look like and then come up precise savings goals. Next, calculate how much you need to save for future purchases and for how long, and start setting aside a certain amount each week or month.

4. When you are living Salary-to-Salary

If you can barely pay your bills each month, you’re living salary-to-salary, which makes it nearly impossible to build up substantial savings. You either need to increase your income or spend less. You can also find a part-time job, start a side hustle or establish passive income. If you are aiming to spend less, start by reading up on money saving strategies from everyday people who save half their income.

5. Lack of Emergency Fund

An emergency fund is essentially an amount of money that you keep aside for emergencies. It is a fund that you can access at the hour of crisis or for unexpected and unplanned scenarios, and not for meeting your routine expenses. So, you must design it specifically to meet unexpected financial shortfalls that may apply to you. Say, you have decided to have an emergency fund of ?1 lakh. In this case, you can put aside ?5,000 or ?10,000 every month before you accumulate the corpus you need. It is OK to even cut down on your investments to build this amount.

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