The importance of saving money cannot be emphasized enough in today’s world. Short term goals, like buying a new phone, are easier to meet; however, long-term goals like retirement planning, or emergency funds, are more difficult to meet. You will start saving money only when you develop healthy financial habits.
It may seem overwhelming at first, but you can develop and sustain healthy savings habits over time. So, here are 15 practical tips laid out for you to get started.
15 Practical Tips to Start Saving Money Today
- Strategize to pay off your debt
Sometimes applying for a collateral-free instant personal loan is essential, but if you get into the habit of swiping your credit card for each big-ticket expense, savings are unlikely to happen anytime soon. A typical Indian bank or financial institution may charge you anywhere between 3% per month or 40% per annum on your credit cards; more so if you miss any payment. And the longer you pay a debt, the higher you pay as interest. Thus, avoid purchasing anything further with your credit card and focus solely on paying off your existing short-term loans.
- But continue paying your EMIs
The only safe and effective way to close a loan is to pay the EMIs on time. However, most repayment takes a few months or years, and once the loan is behind you, do not divert the EMI amount to other expenses. Instead, allocate that amount into your savings fund as you were doing till date. Since you’re already used to spending a certain budget every month, it is unlikely you will need the extra amount any time soon. Create a separate savings account and keep transferring the EMI amount there every month. Once you have enough capital, start investing it.
- Consider SIPs, FDs, and RDs
Many people believe that investing small amounts of money is a bad idea. Others don’t have enough financial or investment knowledge. However, every bank offers recurring deposits and fixed deposits. You can also enquire if your bank has a systematic investment plan that will automatically debit your allocated amount from your bank. This not only automates your savings but also ensures that it keeps growing.
- Restrict your personal expenses
Once you have sorted out your debt and decided what to do with the extra money, it is time to sit with your daily and monthly expenses. Print out your bank statement and identify where all you can cut down. Set a cap on your monthly expenditure and just like your EMIs, place the extra money that you saved from cutting down into another savings account, SIP or RD. Gradually, this habit will grow on you, where you will learn to stay within your capped limit without working too hard for it.
- Monitor your bills
Similarly, write down all your expenses in one place, starting from your daily coffee to the electricity and phone bills. Segregate the expenses into categories and do not miss out on a single item. Constantly seeing the numbers will compel you to figure out where you can cut back. This surveillance will inspire you to cut down on your restaurant visits, air-conditioning use, or other discretionary expenses. Remember to allocate at least 10-20% of the total budget under miscellaneous and unforeseen expenses.
- Say no to recurring OTT subscriptions
Do you really need paid accounts on Netflix, Amazon Prime, Zee, and Hotstar? There is enough content on just one of those platforms that you can binge-watch for years. So pick one and let go of the rest. Or look for group subscriptions that are cheaper. And never, ever set these accounts to automatically deduct the amount from your card. Automatic debits do no good to your saving habits. Similarly, when you’re ordering online, try to opt for the regular delivery, and do not get swayed by offers on things that you don’t need.
- Avoid making purchase decisions when you are tired
Behavioral economists say that people are most impulsive when they are tired or emotionally down. Financial decisions are often obscured then, and we end up making purchases that we later regret. So, keep all buying decisions for the morning when you are most alert. Allow the impulsive feelings to pass when you are in a splurging mood. Not always can you exercise such control over your impulses, but do try your best.
- Pay a luxury tax to yourself
For those times that you ended up buying a smartphone that you do not need or the bag that is way too costly, pay a 20% luxury tax on the MRP to yourself and put it in your savings account. This way you can turn your regret to savings and invest in yourself without excuse. Do these for big brands as well. So, every month, take a look at your total shopping expenses and transfer a part of it to your savings. Either your savings will grow in the process, or you will refrain from such impulses in the future, and both of these options are good.
- Invest in retirement savings plans
Plans like the National Pension Scheme (NPS) and Public Provident Fund (PPF) provide substantial long-term returns that are also the most secure investment tools in the market. SIPs are subjected to market volatility and equity investments are not insured. NPS and PPF lock up your money for a long time, and you get its benefits when you retire. Consider these savings plans for conserving your returns and divert the rest to volatile investments. Quick gains are always not optimal when it comes to building your savings.
- Sell your junk items
Is your old bike sitting inside your garage? Do you hardly get time to use your treadmill? Sell such items on used-product platforms and convert the income into your savings. Living a minimalistic lifestyle is key to building your fortune (Warren Buffet’s office will surprise you), and the process starts with eliminating the things you do not need. You can also decide to settle for a smaller TV or standard refrigerator by selling your current ones if you aren’t using all the features they offer.
- Save the year-end bonuses
Yes, a bonus is exciting, and it is natural to want to celebrate, but splurging all this extra cash wouldn’t be wise. Instead of spending the extra money to throw a grand party, how about a small dinner with family and friends? Use a part of your bonus for celebrations and divert the rest to investments. Treat the amount as your extra income, and remember your hard work went into it.
- Explore tax-savings schemes
We all should pay our taxes. But there are schemes and plans that can help you reduce the tax burden. Along with the high-return plans, look into tax savings government bonds and funds. Also, time your filings right and take advantage of TDS. By simply submitting your tax-saving declarations in December rather than at the start of the financial year, you can make healthy long-term returns by drawing your entire salary for a few months.
- Avoid paying retail
The MRP that you see on products expands into Maximum Retail Price. And you should always want to pay less than the maximum suggested price. Time your purchases again to buy during sale seasons. Look for discounts online and make use of cashback or promo codes. Buy at wholesale outlets. All of these add up over time and can save 10-25% of your expenses.
- Keep an emergency fund
It might feel right to lock up all your savings so that you do not impulsively use it up, but you will lose money if an emergency comes unannounced. Set aside three to six months of your salary/expenses in an open savings account and access it only during health and other emergencies. Lock up the debit cards, if required, and use net banking minimally. Immediately start replenishing once you can start saving again.
- Create savings goals and funds
All journeys need a destination, and your savings will require a goal as well. Soon, you might become unmotivated if you do not know what you are saving for and might even give up midway. It is suggested that you partition your entire savings into different funds. Allot long-term and short-term names like emergency, retirement, a foreign trip with the family, or buying a car. Keep changing the goals over time and substitute one savings fund with another. Never place the extra savings back into your expenses.
There can really be no excuse for not saving. The spending comes naturally to human beings owing to momentary satisfaction, but it is ultimately our savings that take care of us when things start going south. Remember, you can never have enough savings. Start small and start right and see your money grow over time. Remember, savings is as much about a growth mindset and creating healthy financial habits, as they are about money. Changing a few habits can make a world of difference, and you can start your journey of being financially independent.
Aahna Gandhi is an enthusiast traveller, writer and a PR Professional. She likes sharing memorable moments from her travels and inspire others to live a life full of wonder. Known for her content, she has worked for travel, technology, lifestyle, health sectors as well as finance.
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