Investment is not only important to save tax but also vital to create lifelong savings that make us realize that we’ve lived our lives prudently and have created wealth for our children as well as grandchildren.
However, given the rise in expenses, inflation, high education cost, medical expenses, it is not too easy to make investments and create wealth. Only those who have an ardent mindset towards savings can create wealth via regular investments in life.
If we talk about such people, then we can categorize them in two groups – First group being the ones who invest their cash physically at end of every month and Second group being those who auto invest their earnings towards the beginning of every month.
Financial experts are of the view that auto-investment mode at the beginning of the month is superior and most-effective way to Save More money than the method used by the First group.
Let’s look at the benefits of investing on auto mode at the starting of each month:
Benefit 1 – Unwanted Expenditure can be Best Avoided
Thinking to spend on the necessary expenditure and other expenses first and then investing whatever is left/saved is not the right approach and wouldn’t pave way to creating wealth. What should be done is that as soon as the salary comes at the beginning of the month, the amount of necessary expenditure should be deducted and a 10% reserve should also be retained as the “Margin of Safety” amount and the remnant amount should be invested right away.
Benefit 2 – Forces the Habit of Saving
It’s very difficult for new financial investors to get into the habit of saving. Most of the people live off their paycheck and get caught up in the vicious cycle of earning – spending – earning – spending. So if you invest in the auto mode at the beginning of the month, you tend to get into the habit of squeezing your unnecessary expenses in the money left with you i.e. 10% margin of safety and you are forced to develop the habit of saving.
Benefit 3 – Managing Lack of Investment Discipline
Majority of the people think that every month they’ll invest a certain sum say Rs 25,000 of their Salary or Income. But the question is can you trust Yourself with this investment consistently for the next 5 years. You won’t be able to do it no matter how hard you try; at times you’ll postpone it due to other financial transactions, you’ll be busy with work or just lazy, and mostly you’ll just forget it and your financial life will suffer due to this. You’ll fail to transfer the money from the bank to the investments and will just end up spending it elsewhere. Here is where auto investing in investment tools like SIP or Recurring Deposit will come into play and your money will get invested automatically at the start of the month without your intervention.
Benefit 4 – Guilt-free Spending
This is one advantage of saving in auto-mode, which is not duly acknowledged. When you spare your cash towards the beginning of the month, at that point rest of the cash is accessible for your costs, which you can spend uninhibitedly, with no blame. The majority of the general population who don't sufficiently save or save towards the end of the month, continue stressing to save money while at the same time spending their cash.
Benefit 5 – Reduce Risk on Investments
Investing in auto-mode lets you spread your investment over 12 Months and gives you the average of ups and downs that the market goes through. However if you make your investments in one-go, like making investment to save tax under 80C, then your complete investment is put under a high-risk zone that can either give you a great return or a huge loss.
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