To save or to spend?

What do people plan for 2018, on the personal finance front? Here are some resolutions!

With 2018 upon us, it is the season of good intentions. By now, many of us would have made our resolutions regarding fitness, careers, hobbies, etc. Better financial decisions will definitely be one among them. Resolutions could range from starting a SIP with a mutual fund to signing up for an insurance policy.

BusinessLine reached out to a few people to find out what they have promised themselves.

Here goes:

Investing in gold

Though gold has under-performed in 2017, still many want to bet on the metal in the New Year. This is no surprise as Indians have always had an affinity for gold. Sneha Sitaram, Internal Audit Consultant at Capri Assurance & Advisory Services, who had plans to purchase a car or a MacBook in 2018 has changed her mind. “I want to buy gold, I decided not to go ahead with buying a car because it is not just a one-time investment. I would have had to spend on its maintenance and also cough up for the fuel...so it is less of an investment and more of a liability...but gold can be of help when there is some fund crunch, it will also act as a hedge against inflation.”

Sai Lakshmi KV, proprietor of Essensture Minds Training Services, has similar views. “My New Year resolution is to invest in gold. Over the long term, it may give a better return than equities, I feel. But I will buy it only as coins. In jewellery, I will have to shell out on wastage, but in coins there is no such charge.”

But some like Purba Bera, Associate Manager at RR Donnelley, like to stay away from gold.“I don’t want to venture into gold this year because I will never sell it, be it jewellery or bars. Also, there are too many factors — domestic and international — that impact gold prices and it becomes difficult to keep track of all of them continuously,” says Purba.

Starting a SIP

In the last one year, mutual funds (MFs) have seen strong inflows on the back of the robust rally in the stock market. For beginners and people with low risk appetite, MFs are a good choice. Purba prefers to invest in mutual funds in 2018.

“I have made direct investments in equities so far, for the long term. But this year I have plans to start SIPs.”

Sneha too wants to try her luck with equities through mutual funds. “Investing directly into equities requires time and knowledge while mutual funds are an easier option. I have already started my SIP, this year my plan is to create a mutual fund portfolio for myself.”

CA Kartik Srinivasan, founder of Vannam, wants to start SIPs this year to save up money for a big holiday. “I am planning to set aside a minimum of 40 per cent of my savings in MFs. I will choose a diversified equity fund that can give me a good return over a three-year time frame. I’m making this investment purely to go on vacation.”

Buying property/land

Purba Bera feels it is the best time to invest in real estate, given that home loan rates are down, property prices are stagnant and the sector has witnessed regulatory changes that protect buyers’ interests and guard them against frauds. She says, “Purchasing a property is not a priority for me, but if I get a chance, I will not want to miss the bus, as prices are low now.” Sai Lakshmi, on the other hand, wants to buy a plot. “I may not use the land immediately, but in the future, I will build a house there and settle down.”

There are some people who see a home loan as a big financial burden. Abhishek Krishnan says, “I live in a rented house now. I’m planning to lease a house with 40 per cent of my savings in the New Year. This will save me the rent, and, at the same time, I will not be burdened by a home loan. My current earnings may not help me service a home loan EMI.”

For contingencies

Many investment advisors recommend setting aside money for emergencies. Pramod Muddebihal, Technical Liaison Manager, Zerodha, says, “This year, I intend to start saving money for contingencies. Even if it is a small sum, I want to start on it...”

Shiv Shankar, a Chennaite, who is particular about living within his means, says “I compulsorily put aside a part of my income for contingency purposes every month. As a resolution for this year, I will increase allocation to this fund. It will be challenging as that will restrict my spending, but I would like to do it.”

Purba has resolved to go it easy on credit card use. “I’m planning to reduce my spending through my credit card. I resolve to use my credit card only for emergency purposes from this New Year.”

A budget for every month

Drawing up a budget at the beginning of every month can help people like Purba. It can help one save on wasteful expenditure.

Some people we spoke to wanted to make allocation to investments, including post office schemes and MFs this year from their monthly budget.

Sneha wants to increase the provision towards post office deposits and reduce savings in bank deposits. Kartik of Vannam says “I will always prepare monthly budget and allocate it to each expense head and spend the remaining. For this year I plan to budget for bank deposits and mutual funds.”

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