Best ways to save money

Saving is a virtue. And we should convert it into a habit. Once any activity converted into a habit your efforts to do it regularly reduces and you keep on going with it efficiently. Savings converted into investment makes money work for us. We should start saving for the future from the first pay cheque itself.

Saving is the first stepping stone in Personal Finance. The wealth creation process starts only when we start saving. Saving is the first process which leads us to Financial Freedom. Saving always starts in your mind first then you implement it in reality. Many people find it very difficult to sacrifice their current enjoyment for the future which is uncertain. They want to live today and take the day as it comes. This philosophy is very risky. One should give proper importance to Saving and Investing which in turn assures us a bright future.

Most of the time we think of saving after all our expenses are met. This is not the right approach. By this way, we never are able to save. Expenses are bound to happen if we have money by our side. Expenses are never-ending. We should reverse this. It means we should keep aside some percentage of our monthly take home and spend the rest. Senator Elizabeth Warren popularized the 50/20/30 budget rule in her book “All Your Worth: The Ultimate Lifetime Money Plan.”

What is the 50/20/30 rule? How does it work?

According to this rule, we should spend 50% of our take-home salary on our Needs. 30% on our Wants and we should save at least 20% of our monthly take home. If we keep this rule in mind and allocate the given proportion of monthly salary to our Needs, Wants, and savings segments we can able to save from our income. The allotment of monthly income in given heads will make sure that we control our spending. Our Needs are taken care of properly and we don’t spend much on Wants.

Saving can be done from One rupee also. Saving means your income — your expenses. If you have One rupee and you spend 85 paise you still manage to save 15 paise. Here I am trying to say is Saving should start from the mind and accordingly, we should follow the process to control our expenses which will result in a saving.

Saving rate depends upon your age and your responsibility. People from 20 to 30 age group can save more than those who are in their 40s as their family responsibilities are less compared to those of 40s.

You should save at least 20 to 30% of your monthly income. If you are single and no big responsibility on your shoulder then saving rate should be more than 50%.

Check the following pointers to make savings possible.

Open a separate bank account. Transfer the amount you decided. And lock it. Withdrawals for any kind of expenditure should not happen from this account. Once you are used to this arrangement you can start investing this saved amount.

 Record your expenses We should have the track of our expenses. Many time we spend more money on our Wants rather than our Needs. Consider using your credit card or bank statements to help you with this. Penning down of each and every expense will help you to know where your money is going.

Make your monthly budget. Once you have an idea of what you spend in a month, you can begin to organized your recorded expenses into a workable budget. The budget will help you to plan your spending and limit overspending.

Categorize your expenses. Expenses can also be categorized as Needs and Wants. You should understand what is your need in general and what expense you incur for your want. Try to avoid spending on hoteling, a short vacation, outings, cinema, parties often. Focus on your needs first. This helps us to reduce our expenses on unwanted things.

Save before you spend: We normally follow Income-Expenses = Saving formula and end up in saving very minimal. Try to reserve this formula to Income — Savings = Spending. This will help us to achieve our monthly saving target as well as curbing implosive expenses.

Start it right now: Action is most important than thinking. Set aside 20 to 30% of your income on the day of your paycheque in the separate Investment Account every month. Never touch it. Keep and forget. Start investing through it.

Decide your saving rate and be firm in implementing it every month. One should save and invest at least 30% of his/her salary. When you are young try to save as much as possible. Every single rupee you save can make a huge difference in the longer run. It helps to multifold your wealth.

Choose something to save for. One of the best ways to save money is to set a goal. Decide your goals first. Investing without a goal means investing randomly which may not be sustainable and can be stooped any time if any emergencies happened. Goal-based saving helps to be focused and disciplined in investing until the goal is achieved.

Decide on your priority. Your goals can be short term as well as long term. You have to prioritize the goals and keep saving accordingly. Map percentage of saving amount with every goal.

Make saving automatic. Almost all banks offer automated transfers between your checking and savings accounts. You can choose when, how much and where to transfer money or even split your direct deposit so a portion of every paycheck goes directly into your savings account

See your savings grow. Review your budget and check your progress every month. Not only will this help you stick to your personal savings plan, but it also helps you identify and fix problems quickly.

this help you stick to your personal savings plan, but it also helps you identify and fix problems quickly.

These simple ways to save may even inspire you to save more money every day and hit your goals faster.

Saving is very subjective and personalized. Fix your saving target and work on it. If you follow above-mentioned points you can save substantially as you have started really early.