Saving lessons learnt from demonetisation
Demonetisation means stripping the currency of its status or value as legal tender. Under demonetisation, the old currency bills will become redundant and have to be replaced with a new currency.
The step taken by the government of India left citizens in a state of panic. The demonetisation of `500 and 1000 bills, though aimed at black money and illegal counterfeiting, has created a short-term crisis for the common man. It impacted the banking system and livelihoods of the non-banking sections of society.
The expanding queues and lower spending is evidence of the state of sheer confusion. Although the measure has received raving reviews – some criticising the implementation – and created inconvenience for the aam aadmi of India, we do have a few worthy lessons to learn from this reform.
Don't evade taxes
The logic is simple, every earning individual exceeding the tax slab must pay the appropriate tax on their income. Black money is one of the evils of every economy, the drawbacks of which can’t be emphasized enough. Keep your finances transparent, make sure your source of income is not under the table. This principle is not only moral but also conscientious financially.
Instead, invest in tax saving investments like Fixed Deposits and other risk adjusting investment instruments. Most importantly don't evade tax. If your finances are clean you have nothing to worry about such demonetisations.
Use plastic money
Plastic money is not only easier to handle but also safe to carry around rather than carrying bulk cash in hand. Debit cards and Credit cards today are accepted across the country for purchases; use them. Many banks even offer reward points on purchases made by cards.
Go digital
Digital is not only a trend, but the way of the future. From carrying out business transactions online to paying your grocery bills via payment app; going digital is a great way of handling your transactions. The NEFT/RTGS facility through digital banking portal can be used to transfer funds. During such dire times, technology has been a saviour. Apps like Freecharge, Chillr and PayUMoney are immensely useful to pay utility bills and shop necessities.
Buy health insurance
Although hospitals have been advised to accept `500/1000 notes, many have been turned away from hospitals and clinics. The pharmacies too have followed the suit and refuse to accept the cash. It has tragically affected many lives, some being refused health care due to liquidity crunch. This is where the importance of a decent health insurance comes through. While such reforms are unpredictable, be prepared in matters of health and avoid the avoidable, that is asking friends and relatives for money.
Spend within your means
The demonetisation led to a drastic crash crunch across the country. Most curbing their unnecessary spending and hoping to extend their existing cash in hand. An age-old lesson of adopting a lifestyle within our means stands true in such cases. Prioritise your necessities before spending on junk.
Be prepared and diversify
Diversify your savings. Instead of hoarding cash as savings for a rainy day, put the funds in a postal account or short-term deposits. Gold and share market are other ways to enhance the returns on your savings. Calculate the risk factor and your requirements for investing.
Stay prepared with copies of important KYC documentation like ID proof, PAN card and Aadhar Card.
This demonetisation has created awareness of need for better financial planning among Indian masses. These lessons are fundamental to new age managing of finances.
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