Revisiting the three pillars of personal finance in 2021

These include your ability to save more, your ability to invest regularly and keeping that monthly expenditure in check.

Published: 04th January 2021 09:54 AM  |   Last Updated: 04th January 2021 11:46 AM   |  A+A-

Invest, Savings

Most of the money saved by individuals is lying in bank deposits or fixed deposits. (Express Illustrations | Tapas Ranjan)

Express News Service

The New Year brings hope. A lot has happened over the past 12 months to put your financial life in a tizzy. Many of you are looking to do a lot more in the year ahead. While you concentrate on your work to generate more income, the year is also a test of your money habits. Three main pillars drive your finances. These include your ability to save more, your ability to invest regularly and keeping that monthly expenditure in check.

Save more
A lot of you have managed to develop a habit of saving more money than ever before. Your money 
behaviour has witnessed a dramatic shift over the past ten months. There is a realisation that you can live with ‘less’ and save more. This column advocates keeping up with that habit even when you do not need to. Yes, lockdowns are slowly getting lifted.

However, if you are new to saving money, you may want to continue doing that over the next few quarters. We have repeatedly highlighted the importance of an emergency fund. The surplus you create has to help you build a war chest to tide over a new crisis. While we may not see a situation on the scale of 2020 for some time, you will encounter many small battles.

When things get back to normal and lockdowns are lifted, businesses are likely to implement new work practices. A lot of companies have learnt new things about productivity. Just like you have learnt to work with ‘less’, businesses have learnt to save more too. Expect no respite in the jobs market if you are looking for a salary revision or a new job.

Invest more
According to the Reserve Bank of India data on bank deposits, most of the money saved by individuals is lying in bank deposits or fixed deposits. Many of you have pulled it out of the stock market too. You are worried about the rainy day. But, merely saving will not help in the long run. Your money should earn enough to beat the prevailing inflation in the economy.

A recent assessment by the Reserve Bank of India’s monetary policy committee in December 2020 highlighted the risk of inflation in the economy. You need to plough your money into productive businesses. Investing them through equity or equity-linked assets is required for your long-term financial security. 

As companies get more efficient and productivity enhances, it would be reflected in their market value. Share prices currently are at a record high. A lot of you may wonder if that is an excellent time to start. While you should not put all your savings into equity assets in one go, most financial commentators advise spreading your savings through systematic investment plans. It may be a good idea to discuss potential investment ideas like exchange-traded funds, diversified equity funds or select frontline companies with your financial advisor. 

The bottom line is that you need more investment than before to meet your future needs.

Spend wisely 

​The third pillar of your finances is spending. While saving more in the year gone by, you have managed because of forced curbs on expenditure. You could not travel, you could not go out, and you could not indulge in any window shopping. However, things are opening up slowly. Airlines can operate flights, but restrictions do remain on free movement. Shopping malls have opened too.

There could be a lot of temptation to go back to the spending life you led before the onset of the pandemic. Businesses would do everything to woo back customers. However, you may notice that their ability to attract you with discounts would be limited. Many companies may want to recoup losses incurred in 2020 by revising essential products and services’ prices higher than before. 

In 2021, a key to your finances would be your ability to keep spending in check. By no means you need to give up the joys of life. However, if you have discovered bonding together with family without having to spend much, you may want to continue doing that in 2021. Just like businesses, you have to identify that ‘new normal’ for your spending.    

(The author is editor-in-chief at


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