Money Saving Tips: Pockets empty at the end of the month? Adopt the golden rule of finance, which big investors and rich people also follow. Learn how to manage salary smartly.
How to Save Money: As soon as the salary comes on the 1st of the month, it seems that we will save a lot this time, but by the 20th, the bank balance starts decreasing rapidly and at the end of the month the pocket becomes completely empty. This is the story of most people. Whether you earn ₹20,000 a month or ₹1 lakh, if you don’t have the right way to manage money, the money will never last. The world’s big investors and finance experts also believe that there is no need for any magic or a huge salary to always keep money in your pocket. For this you just have to implement ‘1 Golden Rule’ of the world of finance in your life. Let us know what this rule is and how to apply it from today itself…
What is the ‘Golden Rule’ for saving money?
According to financial experts, most of us make the same mistake, as soon as the salary comes, we settle all the expenses first and think that whatever money is left, we will save it. The truth is that nothing is ever left after spending. To never run out of money, you will have to reverse your approach. This rule is called ‘First Save, Then Spend’ (Pay Yourself First). This is also the basic mantra of famous investor Warren Buffet. ‘Don’t save what is left after spending, rather spend what is left after saving.’
How to apply this rule in life?
To apply this rule in your daily life, you can adopt the most hit and simple rule of finance ’50-30-20 rule’. Whatever your monthly income, divide it into 3 parts as soon as your salary comes…
Invest 50% of your money for your needs
Keep half of your income for those things without which you cannot survive. This will cover house rent, ration, electricity-water bill, children’s school fees and essential medicines. The rule says that try to cover the basic expenses of your household within 50% of your total income.
Pursue your hobbies with 30% money
It is also important to enjoy life a little. Therefore, spend 30% of your income on your choice and comfort. This will include things like eating out in a hotel, watching a movie, shopping, recharging OTT or hanging out with friends. The rule says that if you start running short of money at the end of the month, then first cut this 30% portion.
Invest or invest 20% of your money in your savings.
This is the most important part of your income, which will never let you become poor. As soon as your salary comes, first of all set aside this 20% money. This will include investments like emergency fund, SIP of mutual fund, PF or any safe investment. The rule says that treat it as if you do not have this money. Whatever happens, this 20% money has to be invested.
Why will money never run out with this rule?
You will not have to extend your hand to anyone in an emergency.
When you save 20% of your money every month, within a year you will have a big ’emergency fund’ ready. If there is any medical emergency at home or if you suddenly lose your job, this fund becomes your shield.
money will start making money
Keeping money in a bank’s savings account does not make it grow. When you invest 20% of your money in the right place like SIP or good funds, the magic of ‘compounding’ (compound interest) works on it. This small investment of yours turns into lakhs in a few years.
Expenses will automatically be controlled
When you transfer your savings to a separate bank account as soon as you get your salary, your brain automatically learns to manage the budget for the entire month with the remaining 80% of the money.
To get started, do these 3 things today
Have two separate bank accounts
Do not spend your daily expenses from the same account in which your salary is received. Keep another bank account only for ‘savings and investments’ and transfer 20% of the money to it as soon as the salary comes.
Keep SIP due next day of salary
If your salary comes on 1st, then keep the date of your investments (like SIP or RD) on 2nd or 3rd, so that the money is deducted at the right place before it is spent.
stay out of debt
Avoid fulfilling unnecessary hobbies by taking credit cards or borrowing. Don’t make the mistake of buying something on EMI which you can’t afford today.
Disclaimer: The information related to personal finance, tax and savings given in this article is for general awareness and educational purposes only. Terms and rates change from time to time. Therefore, before taking any step or making changes in any financial plan or scheme, check the official rules of the concerned institution or consult an expert.