Let’s accept it: the most difficult part of saving money is actually to start doing it. In the study titled “On the Money: YouGov’s Global Banking and Finance report 2021”, YouGov, a British international Internet-based market research, stated that a little over a third (35%) of urban Indians want to save and secure their family and themselves in case of emergencies. In most cases, spending money in a way that doesn’t harm our savings goals might seem highly cumbersome.
Whether it is opening a savings account, decoding interest rates, or managing personal finance efficiently, here’s a list of handy tips to help you save money.
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1. Understand the monthly expenses and create a budget
The first step in saving money is looking at the current expenditures. This includes essential and non-essential expenses supported by one’s income.
Once the costs have been recorded, a monthly budget should be created to reflect the proportion of the costs to the income.
This exercise helps people organize their spending habits and even avoid overspending. The monthly budget should also take into account a mandatory amount for a savings plan. One should gradually increase the savings to 15 to 20 percent of the salary.
2. Open a new savings account
A savings account is where the monthly salary is credited and from where all the monthly transactions take place. However, this becomes a spending account, and consequently, this savings account is almost empty before the end of the month.
Therefore, one should open another savings account where the amount dedicated to the savings plans can be deposited every month. This allows people to achieve their savings goals even after all the monthly deductions and expenses.
3. Find methods to reduce expenses
Often, many find it challenging to save the amount reserved under their savings plan. In such a case, the only option is to cut spending.
The easiest way to do this is to see which non-essential expenditure can be avoided or at least decreased. For instance, if too much money is spent on watching movies on the screen or dining out, one can reduce the frequency of these activities to save money.
4. Establish savings goals
One of the most effective strategies to save money is to have an end goal. Setting saving goals and a deadline increases motivation and makes it easier to save.
Also, one must have clarity on short-term (one to three years) and long-term (more than three years) goals and calculate the amount needed to achieve these goals.
If someone wants to buy a house, they could determine how much down payment can be saved in one’s bank account to reduce the burden of home loan repayment.
5. Pay off the debt
Saving money while on a budget to manage existing debts is like a circus act. However, a saving tip here is to pay off the debt at the earliest. When the debt is cleared, you will have more money for your personal finance or savings plan.
6. Refinance the Mortgage
When you refinance your mortgage, it means that a new loan is taken to pay off the remaining sum. This could lead to a new monthly payment that can be less than the previous one. Refinancing can also modify the loan’s conditions or lock in cheaper interest rates. It helps save a lot of money on the mortgage with either method.
7. Invest to Save
Utility expenses rarely reduce over time. However, a quick energy audit can help evaluate how energy-efficient one’s home is. Simple fixes such as sealing open areas, installing new insulation, and using energy-efficient light bulbs and appliances can save thousands on electricity expenditures.
8. Consider investing with monthly targets
Once an individual starts earning, the next step should be growing the income. Many investment options are available, and many are easily accessible with minimum paperwork.
Hiring a financial advisor often helps in allocating investments in schemes such as SIP, PPF, mutual funds, and NPS. Of course, since mutual funds are subject to market risks, it is recommended to read all the scheme-related documents before finalizing the investments.
9. Review the subscriptions
Many people have subscriptions to several OTT platforms at a time. A good exercise is to check if all the OTTs are being consumed regularly. For instance, someone may have subscribed to Amazon Prime to watch their favorite series or two. Reviewing whether the subscription still needs to carry on is essential. Unsubscribing from anything no longer useful can save a lot of money.
10. Automate the investments and savings
We must consistently save and invest to achieve long-term and short-term goals. The most efficient method to do it is enabling autopay for things such as recurring deposits and SIPs. It can ensure that a fixed amount of money is saved every month.
Saving money is not rocket science. With a few saving tips and disciplined financial goals, one can spend money cautiously and plan personal finances more meticulously.
In addition, having a separate savings bank account can be of great assistance during unforeseen circumstances such as sudden hospitalization, urgent home repairs, family crisis, or even job loss. Creating a budget, paying off debts, automating investments and savings, and reducing non-essential expenses are great tips for saving money.
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- Why is it important to save money?
One of the critical components of accumulating wealth and having a stable financial future is saving money. We may escape life’s uncertainties by saving money, which also allows us the chance to live a decent life.
- How much of the available funds should be allocated to expenses?
Consider allocating no more than 50% of our take-home salary to basics. Try to set aside 15% of the pretax income for retirement (including employer contributions). Keep 5% of the take-home earnings in short-term savings for unforeseen expenses.