one-financial-habit-can-help-you-avoid-debt

The One Financial Habit That Can Help You Avoid Debt

A simple financial habit that supports better money management and helps lower the risk of debt over time.

Written by : Knowledge Centre Team

2025-12-09

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8 minutes read

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Debt can accumulate slowly through everyday expenses, credit card use, or unexpected emergencies. Without a clear money management strategy, it’s easy to fall into a cycle of loans that leave you overwhelmed and stressed. A disciplined monthly savings is a financial habit that makes your savings a non-negotiable part of your financial planning. It gives you a safety net for emergencies and a fund for future goals. In this blog, you will see how adopting this single habit can protect you from hefty debt and put you on a stronger financial path.

Key Takeaways 

  • Debt often builds up through small, everyday spending habits and a lack of financial planning
  • A monthly savings plan turns saving into a non-negotiable part of your budget, helping you avoid debt traps
  • Separating wants from needs and creating an emergency fund are critical to long-term stability
  • Products like Promise4Future and iSelect Guaranteed Future Plus by Canara HSBC Life Insurance combine savings, insurance, and guaranteed returns
  • Avoid common mistakes such as treating savings as optional, overestimating future income, ignoring inflation, and dipping into savings for non-emergencies

Understanding Debt and How it Accumulates Over Time?

Debt can begin with small and everyday choices. You purchase unnecessary items or ignore your expenses. Without a clear savings plan, these habits reduce your financial backup. When unexpected costs arise, borrowing becomes the quick solution. Each small loan piles up, and managing it later can be overwhelming. 

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Let us look at some ways in which debt accumulates. 

  • Overspending on Wants vs. Needs - When you don't distinguish between wants and needs, your savings can quickly be exhausted. It’s easy to justify a lifestyle upgrade as a necessity, but each unnecessary expense takes away your financial security. Without a conscious effort to prioritise essentials, you create an imbalanced budget that leads to debt.
  • Lack of Emergency Fund - Lack of an emergency fund leaves you vulnerable to unexpected expenses. Without this financial cushion, even a small medical bill or car repair can push you to borrow at high interest rates. This borrowing reduces your future income and makes it harder for you to save. Over time, as you try to repay debts, you are trapped in a cycle that is difficult to escape. By creating an emergency fund, you protect yourself from falling into this pattern.
  • Dependence on Credit for Lifestyle - Dependence on credit for your lifestyle can quickly lead to financial trouble. The ease of using credit cards or personal loans makes it tempting to spend more than you earn. Although it may seem manageable at first, repayments soon pile up and drain your income. Relying on borrowed money accelerates debt growth and makes it harder for you to regain financial stability. By living within your means, you avoid the stress and long-term impact of this cycle.
  • Ignoring Financial Planning - Without a structured financial plan, your income often gets spent without clear direction. You may cover immediate expenses but overlook future obligations such as insurance premiums, education costs, or retirement savings, leaving you vulnerable to borrowing when those obligations arise.
  • Living Paycheck to Paycheck - When you spend almost everything you earn each month, there’s no cushion for unexpected costs. This habit forces you to rely on credit during even minor disruptions, turning short-term cash flow problems into long-term debt commitments.

The One Habit That Changes Everything:  Monthly Savings Plan

A monthly savings plan is a powerful financial habit that prioritises your future over impulsive spending. This structured approach builds consistency, creates an emergency cushion, and gradually grows your wealth. The key lies in setting aside money before tackling bills or luxuries, which makes saving a natural part of your routine. Over time, this habit transforms your financial stability, reduces debt dependency, and gives you greater control over life’s uncertainties. Some of the key benefits are as follows.

  1. Helps You Bring Financial Discipline to Your Life: A monthly savings plan encourages the habit of consistent savings by setting clear financial goals. Without clear financial planning, it becomes easy to delay or neglect savings. This plan ensures that a fixed portion of your income is regularly invested, creating financial discipline. Over time, this habit strengthens your ability to manage money effectively and also secures your family’s future. The dual benefit of systematic savings and insurance coverage makes it a dependable tool for overall financial stability.
  2. Provides You with Insurance Coverage along with Guaranteed Payouts: Since a monthly savings plan functions as both an investment and an insurance product, it offers comprehensive protection. In case of an unforeseen event, your family receives financial support through the insurance cover. Additionally, guaranteed maturity payouts ensure your planned goals remain achievable. The combination of protection and savings gives you the confidence to plan your future without worrying about unforeseen financial challenges.
  3. Provides You Tax Savings Options: Monthly savings plans qualify for tax benefits under the Income Tax Act, 1961. Premium payments are eligible for deductions of up to ₹1.5 lakh under Section 80C. Additionally, the maturity amount and death benefit may be tax-exempt under Section 10(10D), subject to conditions. This means you grow your savings as well as reduce your annual tax liability. These benefits make monthly savings plans a smart choice for individuals seeking financial growth while optimising their tax obligations legally and effectively.
  4. Helps You Meet Your Financial Goals: Life’s important milestones, such as higher education, home purchase, or retirement, require solid financial planning. A monthly savings plan aligns your savings with these goals, ensuring you are financially prepared when the time comes. By making disciplined contributions, you gradually accumulate a corpus that can support your dreams without burdening you at the last moment. Tailored plans can help address specific needs, like funding your child’s education, while still providing insurance protection for your loved ones in case of uncertainty. 
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Did You Know?

In India, 38% of the individuals are debt-free, but 74% remain uninsured. 


Source: Business Standard

iSelect Guaranteed Future Plus

At  Canara HSBC Life Insurance, we offer a range of savings plans designed to suit different financial needs and goals. These plans help you save regularly, enjoy insurance protection, and secure guaranteed or market-linked returns. Some of the top plans are: 

Promise4Future Plan by Canara HSBC Life Insurance 

The Promise4Future plan by Canara HSBC Life Insurance offers you a smart mix of long-term protection and wealth-building. It comes in two variants:

  • Savings4Future: You grow your savings while staying protected. At maturity, you receive the Guaranteed Sum Assured plus any bonuses. If something happens to you during the term, your nominee receives either the sum assured plus bonuses or 105% of all premiums paid, whichever is higher.
  • Income4Future: You get a steady income stream during the policy, plus a lump sum at the end, along with bonuses. In case of your demise, the nominee receives the sum assured plus bonuses.

Additional Benefits:

  • You can choose flexible premium payment options and benefit from high-premium boosters
  • Annual bonuses and possibly a terminal bonus enhance your maturity value
  • The plan offers revival options if your policy lapses, giving you more flexibility

iSelect Guaranteed Future Plus by Canara HSBC Life Insurance 

iSelect Guaranteed Future Plus by Canara HSBC Life Insurance is a non-linked, non-participating life insurance savings plan that combines the security of life cover with guaranteed maturity or income benefits. You can choose from four flexible variants tailored to your financial goals:

  • Endowment Option: You receive a lump sum at maturity
  • Regular Income Option: You get a steady income after the premium-paying period, along with maturity benefits
  • Early Income Option: Income starts from the second policy year, helping with early liquidity
  • Long-Term Income with Return of Premium Option: Provides regular income during the term and returns the premiums at maturity

Additional Safeguards:

  • Payor Premium Protection Cover to waive future premiums if the payor of the policy (often yourself) dies during the term
  • Accidental Death Benefit for an extra payout in case of accidental death

This plan offers predictable, guaranteed returns and life cover, making it ideal for securing long-term goals with peace of mind.

Common Mistakes in Savings Planning 

Saving money is just about setting aside a portion of your income. It is about doing it the right way. Many people fall into habits that quietly weaken their financial foundation. By avoiding these common mistakes, you can protect your savings and move toward your goals with confidence.

  • Treating Savings as Optional: If you save only when there is money left after spending, your savings will always be inconsistent. Treat savings as a must-have expense, just like rent or utility bills. When you set aside a fixed amount every month through an automated transfer, you make steady progress without having to think twice.
  • Overestimating Future Income: It is easy to assume your income will continue to grow, allowing you to save more later. But life can be unpredictable. Job changes, health issues or market downturns can slow your earnings. Start saving from what you earn now so you are not depending on uncertain future income.
  • Ignoring Inflation Impact: Every year, the cost of living increases, and inflation slowly eats the value of your money. If you keep all your savings in low-interest accounts, your purchasing power will shrink over time. Choose savings and investment options that can beat inflation so your money grows in real terms.
  • Using Savings for Non-Emergencies: When you dip into your savings for vacations, gadgets or impulse purchases, you disrupt the progress you have made. Keep your core savings for emergencies, big planned expenses or long-term goals. For lifestyle spending, create a separate short-term fund so your main savings remain untouched.

Final Thoughts 

Building a strong financial future requires discipline, planning, and the right tools. By understanding how debt creeps in and committing to a consistent monthly savings plan, you protect yourself from financial stress and create growth opportunities. Pairing disciplined saving with reliable products like savings plans by Canara HSBC Life Insurance ensures both security and steady progress toward your goals. The earlier you start and the more consistent you remain, the greater your financial confidence and freedom will be in the years to come.

Glossary

  1. Monthly Savings Plan: A structured approach to set aside a fixed amount of money each month before spending
  2. Emergency Fund: Savings kept aside for unexpected expenses like medical bills or urgent repairs
  3. Inflation: The rate at which the cost of goods and services increases, reducing money’s purchasing power over time.
  4. Sum Assured: The guaranteed amount your nominee receives in case of your death during the policy term
  5. Maturity Payout: The amount you receive at the end of a savings or investment plan, often including bonuses
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Uncertain About Insurance

FAQs

Saving monthly ensures consistency, builds discipline, and helps you reach goals faster, whereas occasional saving is often irregular and less effective.

Many experts recommend saving at least 20% of your income, but the right amount depends on your expenses, goals, and debt situation.

Yes, but it’s wise to maintain a separate emergency fund so you don’t disrupt long-term savings goals.

Inflation reduces your money’s purchasing power, so you need savings plans that can grow faster than inflation to maintain value.

Yes, they offer tax benefits under Sections 80C and 10(10D) of the Income Tax Act, 1961, subject to conditions.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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