Three lessons in personal finance management from RBI’s inflation-targeting policy Here are three lessons in personal finance management from this policy
There’s finally some good news for the RBI and every Indian consumer on the inflation front. For the first time this year, retail inflation dipped below the central bank’s upper-tolerance limit of 6%, coming in at 5.88% in November.Since 2016, the RBI has been following an inflation-targeting policy with the goal of maintaining inflation at 4% with a tolerance limit of +/-2%. Such an approach gives the regulator clear direction and flexibility to manoeuvre policy settings based on economic conditions.
So, what does this mean for us?
Lesson 1: Set goals
The lesson here is that it’s important to have a goal in mind when it comes to your finances. Whether it's saving up for a trip, a new phone, education, or an emergency fund, having a clear goal in mind will help you visualize the path towards it.
Here’s where money management platforms like Fi Money can help. You can easily set up goal-based smart deposits and track them all from a single app
ET SpotlightTo contain rising inflation, the RBI has hiked the monetary policy rate by a steep 225 basis points until December, bringing it to 6.25%. It did this despite concerns that such a move would hinder India’s post-pandemic recovery.
A recent State Bank of India Research study found that if a household’s total cost of living stood at Rs. 100 in September last year, it was now spending Rs. 112 for the same basket of goods and services in India. This is significantly lower than the same household having to spend Rs. 120 in Germany and Rs. 123 in the UK, in comparison.
Lesson 2: Stay the course
It is equally, if not more, important to keep working towards achieving your financial goals after you’ve set them. While your plan should have the flexibility to accommodate slight deviations, don’t let them throw you off course.
One solution to this is to automate your savings and investments . You can set AutoSave and AutoInvest rules on the Fi Money app that neatly fit into your regular habits while enabling you to save and invest more.
For instance, if you make most of your payments online, you could set up an ‘invest the change’ rule that allows you to round off the change from every transaction and invest it in your choice of mutual funds.
ET SpotlightIn November, not only did India’s retail inflation ease and fall back within the RBI’s target range, but it also declined sharply from 6.77% in the previous month. However, the RBI will likely hike rates again in February next year, experts say.
This is because the RBI takes decisions based not purely on current events but also on its projections of the future economic environment.
Lesson 3: Plan ahead
Tracking all your expenditures, bank balances and investments can be a tedious task if you have to do it yourself. But it certainly does help to have a clear picture of your overall financial position, allowing you to course-correct to achieve your goals.
While it can be tedious to keep track of your finances by yourself, all you need is the Fi Money app. It comes with an AI-powered personal financial assistant that can keep track of all your finances for you.
ET SpotlightTaking cues from these three basic personal finance management lessons from RBI’s inflation-targeting policy should enable you to focus on achieving your financial goals and give you a good headstart to growing your wealth, irrespective of any distractions.
(This article is generated and published by ET Spotlight team. You can get in touch with them on [email protected])
This story originally appeared on: India Times - Author:Faqs of Insurances
