Rising living standards should not affect savings

K. ARAVIND

It is natural for people’s attitudes to change as income increase. Mobile phones are usually replaced every six months or a year. Similarly, instead of travelling by bus, it has become a habit to call a call taxi. Instead of buying cheap clothes, some people look only at branded clothes.

There is nothing wrong with raising the cost of living in line with rising incomes. Ultimately, we work and earn an income to make life more comfortable. But if you do not pay attention to how much you spend in line with raising the standard of living, the costs will go beyond the limits. If the standard of living rises beyond that of income, it will adversely affect financial discipline.

The increase in the cost of living is most likely to affect people between the ages of 20 and 30. At this age, young people with light financial responsibilities may feel more inclined to get a good job and gradually increase their salary. Higher salaries at a young age can create a false sense of security. But while job security depends on many factors, it is not correct to assume that there will always be job security in life. Unexpected job loss can upset the standard of living.

Also read:  How to improve investment returns

The annual increase in the cost of living for people between the ages of 25 and 40 is 15 per cent to 20 per cent. But the increase in revenue is much lower than this. We often confuse this golden stream with the well. For example, suppose you bought a Maruti Suzuki Alto in 2014. Assuming a loan of Rs.3.5 lakh for this, the EMI can be assumed to be Rs. 6,000 to Rs.7,000. Now, if you buy a Swift car with a loan of Rs.5-6 lakh as part of raising your standard of living, the EMI will be Rs.10,00 to Rs.11,000. The increase in the cost of EMI is very high.

Also read:  What should those with two UANs do?

If raising the standard of living is a pleasure, then lowering the standard of living for unforeseen reasons is an unpleasant experience. This experience can be counterproductive if there is no control over costs. The drastic increase in the cost of living can lead to a decrease in the income required for later life.

It is important to maintain a balance between savings for future life and expenses for enjoying life today. You can reap the benefits in the future by avoiding some additional costs. This will help you to achieve the goals you want to achieve in life.

Also read:  Planning for early retirement

Unnecessary expenses can be avoided if the investment is carried forward in line with one’s life goals. If the investment is planned with retirement income, children’s education, marriage and housing in mind, there will be no money left over for unnecessary expenses. Only the money earned after investing a certain amount of income from each month for each of these purposes should be used for expenses. Care should also be taken to make it a habit to spend only within a fixed budget.