Do you ever think you're spending too much of your income on shopping, eating out or even on partying through the weekends? If your answer is yes, then you've come to the right place. Sometimes the hardest step to saving your money is just getting started. This easy to follow, step-by- step guide will help you develop a logical strategy to save your money, so that you could achieve all your financial goals. Welcome to personal finance 101!
Learn to Budget:
If you learn how to control your budget, you will be able to have control over your finances. Now where to begin?
Track and record everything you spend and buy:
You need to start tracking your finances, inflows and outflows. You might be working upto 3 jobs and have multiple streams of income; but you still have to keep abreast of all the inflow of money into your account and the outflows (expenses) such as your Netflix subscription, your gym membership, your groceries. Remember, everything needs to be accounted for.
The first step to saving your money is to figure out how much is leaving your bank account. You will need to keep a tab on all of your expenses, ranging from groceries to those fresh Nike Air Force 1s you bought to even the 2-3 sodas you had on the weekend.
Keeping a record of your expenses is important. You can choose a method that suits you best- be it an old school way such as using a simple pen and paper, using an excel spreadsheet or you can even leverage tech by using a free online spending tracker app. Once you’ve collected all your data, organize them into categories such as electricity, groceries, and rent, and then arrive at the amount which will be your total expenses.
Pro tip: remember to tally every expense no matter how small or big.
Look for ways to reduce the amount you spend:
If the budget isn’t working and you aren’t saving enough maybe it is time to start cutting down on your expenses. Keep a lookout for your variable or non essential expenses such as sneaker shopping, OTT subscriptions and dining out at your favorite restaurants. Identify areas of where you can save money from your fixed expenses. Other ways of trimming down your spending could be:
Set your saving goals
Take a step back and think about your short term and long term financial goals. Short term goals could be saving for a holiday, an Iphone or even just creating an emergency fund for a rainy day. This is categorized as a short term goal as it is in a time frame of usually 1 to 3 years. Long term goals are financial goals that would usually take you 4 or more years to build up to, such as a downpayment on your future home, paying off student loans, starting your own business endeavors or even your retirement fund
Learn to prioritize your saving goals. After your expenses and income, your financial goals are most likely to have a massive impact on how you spend your money and how much you save. Be sure to remember your long term goals, but don’t forget your short term goals. Hitting these incremental goals can give a huge psychological boost as achieving these small steps immediately will reinforce the importance of saving money, which will then turn into a habit.
Decide on the right financial tools
There are numerous ways to meet your short term and long term financial goals. In India, you have an abundance of savings and investments options available to you. It's important to keep in mind the balance minimums, fees, interest rates and the amount of money you will need in order to choose the right mix of options to help you meet your saving goals.
For Short term Investment goals, you can go with these:Open a savings account Fixed deposits Recurring Deposits National savings certificate (NCS) Liquid funds
For long term Investment goals, you can explore the following:
Automate your savings
You have the ability to choose when, where and how much money that gets transferred from your checking account into a savings account. Based on your saving goals, split that percentage of your paycheck so that it will automatically enter your savings account. Remember your savings must be least 15% to 20% of your income.
At the end of every month, take the time out of your day to review your budget and see the progress you’ve made. This will help you in identifying the problems and fixing them quickly . This will help you,in turn, to keep track of your saving goals.
Like the Grammy award winning rapper Kendrick Lamar said “ Money Trees are the perfect place for shade.” Remember spending is a choice and saving is a need.
Disclaimer: The information in this article is compiled from various sources and is an opinion piece only. This is not to be taken as a substitute for professional advice on managing finances, reader discretion is advised.