Money Saving Tips: How to save? Know the easiest way to start saving, important tips on budget, emergency fund, investment, expense control and financial planning.
Money Saving Tips: Every person wants to have savings for the future. But often the entire salary is spent by the end of the month. In such circumstances it is difficult to save. Saving does not just mean depositing money, but also making your future safe. Saving is useful for big expenses like sudden illness, job loss, children’s education, buying a house or retirement. For example, if a person suddenly loses his job. If he has savings equal to 5-6 months’ expenses, he will face less economic problems until he gets a new job.
How to start saving?
Saving does not start with big money, but with good habits. First of all, write the account of your income and expenses. See monthly where the money is being spent. Note down non-essential expenses in this.
Save first, then spend
Often people spend first and consider the money left as saving. But financial experts generally recommend adopting another approach. As soon as your salary or income comes, first keep some part aside for savings, then plan to spend the remaining money. For example, if your salary is Rs 40,000, then initially you can keep Rs 4,000–8,000 (depending on income and needs) in a separate account and meet your monthly expenses with the remaining money.
Why is it important to make a budget?
It can be difficult to make savings without a budget. Make a simple budget, in which write – household expenses, rent or EMI, electricity and water, children’s education, travel, medical expenses, savings. When every expenditure is fixed, unnecessary expenditure will be reduced. Create an emergency fund. Emergency fund means money which can be used only when needed. Try to have an emergency fund equal to at least 3 to 6 months of essential expenses. This may vary according to each person’s income, job security and responsibilities.
Pay attention to small expenses
Many times, it is not the big expenses but the small daily expenses that reduce your savings. Like drinking tea and coffee outside every day, unnecessary online shopping, many OTT subscriptions, ordering food again and again. An example- If a person eats outside food worth Rs 200 every day, then the expenditure will be around Rs 6000 in a month. Saving can be done by reducing this habit.
fix target
There should be a target for savings. Like buying a new car, buying a house, children’s education, foreign trip, retirement. When the target is fixed, the desire to save increases.
Connect savings to investments
Just keeping money in a bank account does not always lead to growth. According to your target, risk appetite and time, some part of your savings should be invested in different options. Like- Fixed Deposit (FD), Recurring Deposit (RD), Public Provident Fund (PPF), Mutual Fund (as per risk) and National Pension System (NPS).
use digital tools
Today many banks and finance apps provide the service of automatic saving. You can set up auto transfer to your savings account or investment account on a fixed date every month. This makes it easier to maintain the habit of saving.
What mistakes should be avoided while saving?
- Never spend your entire salary.
- Do not take loan unnecessarily.
- Do not use credit card excessively.
- Do not invest without a plan.
- Do not use emergency fund for regular expenses.
Is saving possible even with low income?
Yes. Saving depends more on our habits than your income. If a person saves just Rs 500 or Rs 1,000 monthly without any gap, he can accumulate a decent amount.
Content Sources: Reserve Bank of India, National Center for Financial Education, Investor.gov (US Securities and Exchange Commission), CFPB (Consumer Financial Protection Bureau), Organization for Economic Co-operation and Development (OECD).
Disclaimer: The information given in this article is only for general awareness and education purposes. It should not be taken as any kind of professional financial advice, investment recommendation or legal advice. Before making any investment, purchasing a policy or taking any major financial decision, please consult a Certified Financial Planner.