Yash is single and earns around Rs 12 lakh per year. Though he plans to save, he does not have enough money left after his expenses. Despite his good intentions, he is often left struggling to find money to pay your premium, keep your PPF account alive, and complete Section 80C investments on time. The Covid-19 pandemic has only added to its problems because it is unlikely that it will receive a performance bonus this year. Yash doesn't know if he will be able to meet his goal of saving 20% of his income for the year. What should Yash do to be able to save more?
Low income reduces a person's ability to save. For someone like Yash, tax-saving tools under section 80c might be the only way to accumulate some wealth. Trying to save around 20% of one’s income is an ambitious goal for young people, especially in today's difficult scenario. Yash could discover that his expenses are consuming his income quickly, leaving him with almost nothing.
Yash must first evaluate whether he will be able to save 20% of his income per month, to make sure he can maintain this strict annual savings goal. You need to evaluate your typical lifestyle (travel, tools, etc.) and other avoidable expenses, and see if they can be reduced in today's environment. In the event that your mandatory expenses - rent, energy, transport, telecommunications, family, etc. - are more than 80% of your income, then your savings goal should be adjusted 20% down. The current pandemic can also be a wake-up call for you to consider setting aside some money to buy health insurance coverage. He can ignore buying a life insurance policy right now because you have no one to support.
If you find that he is able to save, but lack discipline, saving before you spend is a better approach than hoping to save after spending. Yash must create an Electronic Clearing Service (ECS) in your bank account and ensure that once your salary is credited, the funds are transferred to mandatory tax savings investments and recurring deposits. At the end of the year, he can use the recurring deposit corpus to pay his health insurance premium.
Source: Economics Times
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