Published Article Details

How to generate a monthly investible surplus?

Posted by: Arti Bhargava on Sep 18, 2017, 06.30 AM IST

Aarav is 30 and single. He has no responsibility other than taking care of his own needs. Despite working for the last four years, he has no savings or investments except for some money in Ulips and ELSS funds.

While he has not begun planning for the future, the fact that he has nothing left in his bank account at the end of a month is bothering him. He blames it on casual spending on weekends and impulse buys. Aarav wants to know how he can stop spending and start saving.

Aarav's tendency to spend can be blamed on easily accessible money that has not been earmarked for a specific purpose. He needs to address the issue to resolve his poor money habits.

Keeping all his money in the savings bank account is not advisable for two reasons. Very often, the thought of a good amount of money in the bank encourages unnecessary and irrational spending. Aarav must switch to using a debit card linked to his account and sign up for an SMS intimation of expense and account balance when he uses the card. His depleting balance every time he spends will act as a strong de-motivator for unnecessary spending.

Moreover, the low-interest rate that banks pay on balances in savings accounts is also an important reason to not hold too much money in such accounts. It is time Aarav deploys the surplus towards generating wealth. In the time that it takes to plan his future goals, he must initiate a few things. He should make an estimate of his monthly expenses including money required for things he enjoys doing and a margin for unexpected expenses.

The remaining funds should be invested immediately. He should identify a couple of diversified equity funds and start a systematic investment plan (SIP). Or he can sign up for the excess funds to be automatically transferred to a fixed deposit with the bank. Once he decides on goals for which he wants to save, he can assign the investments he is making to them.

Knowing that money has already been allocated and not available to him will curb Aarav's spending habits. Over time, as he sees wealth being created, savings will become a habit with him.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)

Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of This article appeared in Economic Times dated Sep 18, 2017, 06.30 AM IST

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