8 small tweaks that can lead to big savings

Even seemingly small tweaks can have a significant impact on your savings over the long term.

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Missing utility and credit card bill payments for a month could result in sizeable penalty outgo.
Even seemingly small tweaks can have a significant impact on your savings over the long term. ET Wealth shows you how.

Don’t buy a term plan to cover retirement
This is how much a 35-year-old non-smoker male will pay to buy a Rs 1-crore term plan from Max Life Insurance.
Age now 35 years 35 years
Tenure 20 years 40 years
Age at maturity 55 years 75 years
Annual premium (Rs) 9,204 14,514
Total outgo (Rs) 1.84 lakh 5.81 lakh

Smart tip: A life cover is meant to replace your income and provide for your dependants in case of your death. Therefore, it is not needed after retirement. If you wish to leave behind a legacy, create a kitty over time instead.

Be a 'least risky' borrower for banks
For a salaried, male taking a Rs 75-lakh MCLR-based home loan with a 20-year tenure from SBI.

Risk group 1 4
Home loan interest rate 8.65% 8.75%
Interest outgo 82.92 lakh 84.07 lakh
Savings on interest outgo* 1.15 lakh -

Smart tip:
While banks use their internal risk scoring mechanism to categorise borrowers, credit score is a key parameter. Borrowers with CIBIL credit scores of over 750 are considered least risky. Ensure you pay your credit card bills, EMIs and utility bills on time to boost your score.

Hike EMI nominally when interest rates go up
*Savings compared to higher interest outgo if EMI was not hiked.

Buy a longer term health cover
For a Rs 5 lakh cover with unlimited recharge from Religare Health

Age 40 years 41 years
One-year premium (Rs) 7,386 9,103
Premium over 2 years if one does not lock into current rates at 40 16,849 -
Premium for 2 yrs if paid at one go at 40 (Rs) 13,665 -
Savings* 3,184 (23.27%) -

Smart tip: Your premium will rise steeply as you turn 41, as the age slab will change. You can save by buying a two- or three-year cover, by locking into the current slab’s premium. You can also pocket longer-tenure premium discount by paying at one go.

Invest in direct plans of mutual funds
Rs 2-lakh invested in an equity fund yielding 12% gross per annum with a 20-year investment horizon.

Age Regular plan Direct plan
Expense ratio 1.75% 1.25%
Final corpus after 20 years (Rs) 14.08 lakh 15.41 lakh
Difference (Rs) - 1.33 lakh

Smart tip: Investing through direct plans of mutual funds can make a substantial difference to your final corpus.

Don’t surrender Ulip in the fourth year
  • Surrender charges in year 4: Rs 2,000
  • Surrender charges year 5 onwards: Nil

Smart tip:
Don't surrender Ulip after paying premiums in the fourth year. Hold on for a year. This will save you discontinuance charges, especially if you can afford to pay premium for another year.

Good health saves you more
  • Annual premium for a 35-year-old healthy individual: Rs 6,300
  • Annual premium for diabetes* patient: Rs 8,190
Assuming a loading of 30% on the health insurance premium payable. *For a Rs 5 lakh cover

Smart tip: Premium loading depends on the insurer. It can range from 30-300%, as per Wellthy Therapeutics. Final premium depends on multiple factors.

Auto pay bills to avoid late charges
Utility Late payment fee (Rs)
MSEB 70#
Mahanagar Gas 100
Credit card 800*
Total 990
*For outstanding amount of Rs 10,000-25,000 if not paid on due date; could vary as per bank and card
#For a bill amount of Rs 3,230.

Smart tip: Missing utility and credit card bill payments for a month could result in sizeable penalty outgo. Instead, opt for billpay and issue standard instructions for credit card bill payment to avoid these charges.
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