HOW TO FOCUS ON SAVINGS WITH FAMILY BUDGET AS THE TOOL

I am asked by some as to why their savings and financial position does not improve despite making a budget some times regularly and some times off and on ?

For those who don’t make and review and analyse the budget the answer is in the question itself partially. But for other who regularly make a budget, review it and analyse it and still can not focus on savings and dont grow their kitty there is a way to do it.

Savings or “Bachat” as we learn in our system is understood as what is left after expenditure from normal income. This is the root cause in my opinion why we don’t  or can not focus on savings. For two reasons

1. When the equation is earning - expenditure = savings the focus tends to be on expenditure

2. Where as when the equation is Earning - savings = expenditure the focus shifts to savings

Secondly in life it is easy to raise your standard of living and increase spending but very difficult to lower it and increasing the earnings in most cases is not within your control and normal salary increases are co-related to the inflation and rarely help to increase the savings.

Savings not getting the focus thus is mainly due to following the wrong equation and belief. For your savings small or big not growing the main reason is most people are one being not aware or educated on financial aspects and secondly investing the savings in instruments which make for returns poorer than the inflation in most cases. Other reasons are inability to take calculated risk while investing , not planning, not having a long term vision, taking irrational decisions and getting influenced by marketing efforts of financial planners, insurance agents and brokers.I plan to discuss in details in the future weekly blogs.