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This is our Blog on Personal Finance. We will attempt to be analytical as well as educative. We will tell you what we like and what we don't. We will tell you what we do with our money and what we tell you is what we will follow for us. Tell us what you like to see.

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When can Saving Money Backfire?

4/11/2015

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Executive Summary – Saving money is good but there are some areas where we think we are saving money but actually end up spending more time, money, effort, health or all these factors. Buying unnecessarily on sale offers, wasting time and money on deals that we might not use, ignoring financial planning, under insurance and wrong financial planning and investment strategies with money saved end up making us lose more money.

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Yes, saving money is a good habit. We all try to save money and put a little bit away for a rainy day. But wrong saving  habits or ways to save money can backfire and you will end up wasting more time, health, money or effort or all of it. Here are some things that some of us do thinking that they will help us save money but actually are not very helpful -

1) Buying on a Sale – There are always sale offers in shops and malls. Online stores conjure up new reasons every year for putting out a sale and tempt buyers. But the sale offers usually are on buying more or spending more than what we would have budgeted. Many times we end up buying stuff we really do not need. There is no value in such buying. Consumption should be as per need and not because there are things out there to buy and to get satisfaction from the perceived notion of spending less and buying more. So you might feel you saved Rs. 500 on a pair of jeans but maybe you did not need it or you got some discounts in the supermarket for bulk buying on stuff that you did not really need now. If you buy too much of perishable stuff, you would need to store them properly, consume it on time else you would have to dispose them all.

2) Spend lot of time looking for deals – Do you spend a lot of time looking for deals on coupon sites and online stores? Some of us are always surfing the net for cheap ticket deals and hotel offers. We do not realise the time lost in these activities. We could have used this time to do something productive. Such habits eat into our working time. Many times, we buy stuff on deals without enough thinking and then end up not having time to use the coupons or go on the vacation booked leading to unnecessary waste of money and time.
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​3) What you do with the saved money? – You are a frugal consumer and strive to put as much as possible in your savings which is good. But the money saved is more useful if you utilise it properly. Do you stash all the saved money in your locker at home or is it lying idle in the bank. Savings make sense if you invest them properly and make the savings grow. If it is lying idle, inflation will lessen its value.

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Savingwali spending
4) Too much of Emergency Funds – Financial experts say that you should have an emergency fund. But if you go beyond the limit required, you are wasting the potential of the savings. If they are invested in better assets, you will get higher returns and your wealth will grow.

5) Saving on insurance – Many people especially youngsters still shun insurance. People take insurance policies just to save tax. Having medical insurance or home insurance protects you financially from emergencies and unfortunate circumstances which take a toll on your physical, emotional and financial health. Term insurance is a good way of protecting your near and dear ones when you are not there. If a person thinks he would save money by not buying insurance, he is being unwise and not thinking of the future.

6) Financial Planning  - Financial Planning is important to meet your short term and long term goals. Many of us are lazy or not confident of doing it or procrastinate doing it. We are not comfortable writing a will and investing in the market on our own. We do not want to spend money on taking professional financial advice. We end up buying “cheap” assets like real estate which might be in an area that does not have much potential to develop or stocks and MF schemes that have a low price. But there is not much value in buying assets that do not have potential to grow in value. All these actions lead to waste of money.
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7) Daily Living Aspects – We ignore many aspects of daily living thinking it will cost money and time or we are lazy. For example, we neglect small health niggles. We do not follow healthy eating habits or a daily exercise regimen to save time and effort. But if we continue to do so, we could have a larger problem at hand which will affect our health and our finances considerably. Sometimes we go to faraway places to shop as items are cheaper there. But the effort and money spent in going to and fro will negate the money saved. Sometimes we buy cheaper stuff which might be of low quality which results in replacement and this results in more expenses. It is better to buy stuff which will offer better value and last longer. It is better to take care of small things at the right time even if we have to spend money on them so that in the long run, we have a better life.
 
Saving money takes time and effort. It is good to look for opportunities to save money but you should look for the correct ways to save money else you will end up losing money.
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