Saving money is one of the most basic ways to start working on personal finances. This is a very effective strategy for people who don’t seem to put money away for a rainy day. Today the market is filled with wide variety of options that lure people to splurge their income. Therefore, saving money in this scenario is challenging but not impossible.
It is important to keep in mind that saving can help fund financial goals and so the importance of saving is rarely disputed. Saving money can give you freedom from debt and help with big ticket purchases, emergencies and unexpected expenses. Saving money also provides financial security. It helps you stay confident and stress free. Diversifying savings will help you remain well prepared for any sort of emergencies.
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Listed below are some effective tips that will help you curb your expenses and save money every month:
You may have different reasons to borrow money from friends or financial institutions or avail credit cards for a big ticket purchase or to fund an emergency. But, not settling debt within stipulated time can lead to problems. To make your life easier, the first step you take is eliminate existing debt.
Make a list of borrowings from different sources. The next step is to make sure you repay loans in time. If you are not able to save much money from your monthly salary, then create a plan to save as much as possible.
Stop unnecessary expenditures and spend your money on what’s necessary like grocery, utility bills, rent or basic necessities. Look at monthly expenses and chalk out ways through which you can save money. Reduce eating out; cut spending money on multiplexes or gaming/sports. Borrowing to buy things that you cannot afford leads to the debt trap. If you have a credit card, borrow as less as possible to reduce debt.
SEE ALSO: Eliminate Debt
You must acknowledge the fact that saving is one of the best options to create wealth. To help yourself stay motivated, you must first identify and set specific saving goals. This will help build savings. To set your saving goals, first prioritize your short term and long term goals. You may save money each month in your bank account, but it is easier to withdraw the money if you are saving without any specific reason. So setting your goals helps you retain or hold the money for that specific purchase or the goals that you want to meet.
Determine what you are saving the money for i.e. short term as well as for long term. You must next develop a goal chart where you can write your financial goals, decide whether they are for short term or long term, determine how much money you need to fulfil these goals, write down ways through which you can save money and so on.
Saving money is easy when you pay yourself first. Each month when you receive the salary, make sure to set aside some money in your savings bank account. This is saving for a rainy day. Once you get used to saving, then you can see your savings bank account starting to accumulate a good amount of money when you previously struggled to save. To make this easy, you can automate your account so that this happens automatically. You can instruct your bank to automatically transfer that amount into your savings account on your payday each month.
You can focus on increasing savings, by slashing expenses on unnecessary articles. Making a monthly budget is one of the best ways to keep your expenses in check and increase savings.
You can do this by incorporating an effective “spend to save” strategy. With this you can generate a good proportion of savings by curbing spending habits and excluding some non-essential items from the monthly grocery list or shopping list and spending money on only those items that you consider necessary to maintain your life style.
The most important part of “spend to save” strategy is to limit the shopping list and restrict yourself from impulsive or expensive purchases.
SEE ALSO: Spend to Save
One of the basic rules of spending money is to look for avenues where you can cut expenses. So while listing some non essential items, make sure to list how you can also save those extra bucks on utility bills and prevent finances getting drained out. Some of the basic ways in which you can save money on utility bills is buying appliances that consume less energy, use low flow fixtures, consider using energy efficient lights and bulbs, switch off the lights and fans when not in use. You can also unplug your appliances when you are not using them.
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To grow your savings, you must find a suitable account for your savings goals. If you are looking to invest money for a period of five years or more, then you can choose to invest in mutual funds. You can also look for other alternative investment options like a recurring deposit or a fixed deposit. You can also invest in money market mutual funds. This not only helps save each month, it also amplifies savings and gives better returns.
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