10 Smart Money-Saving Tips to achieve your financial goals
Contrary to popular belief, saving money does not mean you need to forgo enjoying the good things in life. In fact, by using smart money-saving tips, you can enhance your quality of life and achieve your life and financial goals much faster. This article offers practical and innovative money-saving tips to help you get started on your journey toward financial freedom.
Importance of Saving Money
Saving money helps you bolster your financial security and freedom. With ample savings, you can freely pursue your goals and dreams and lead a more comfortable life, without being completely dependent on your monthly pay-cheque. If you have enough savings to fall back on, you can take major life decisions without worrying; whether it is changing your job, planning a vacation, getting married or starting your own business
The best thing to do is start the journey of saving as early as possible and build the habit. At first, it may seem a bit difficult. But as you start seeing the results of your efforts, you will feel motivated to accelerate your savings rate.
Smart money-saving tips
These money-saving tips, if practised daily, will ultimately put you on the path to financial stability. You can get a friend or relative to embark on this journey with you and become your accountability partner. Here are 10 easy ways to save money:
Track your expenses
Most people complain that they have no idea where their money is going every month. Staying on top of your financial goals requires being mindful of where and how much you spend every day. The key is to note every transaction you make — how much money is coming in and going out. You can use a money-tracking app to automate the process.
Your spending pattern will emerge clearly when you track expenses over 6 to 12 months, and access to this data will help you plan your finances much better.
Follow the 50-30-20 rule
This rule is all about understanding your essential needs and wants, being able to pay off your debt and start saving. According to this rule: 50% of your monthly expenses should go into your ‘needs’, which typically include fixed expenses such as rent, utilities, groceries, transportation, medicines, clothes, and essential bills; 30% can go towards ‘wants’ such as eating out, vacations and shopping; 20% should go towards savings and investment. When individuals struggle to keep their budget in check, this rule allows them to keep track of their expenses and enables them to save for a rainy day fund.
The benefit of investing in instruments you cannot pause is that you build a consistent investing habit. Over the period, your investments will compound and bring you close to achieving your financial goals. If you have trouble setting aside money for investment, one approach is to let technology do the work. For instance, you can invest as low as Rs 500 a month in a mutual fund scheme using the systematic investment plan (SIP). The money will automatically get deducted at the frequency set by you every month.
Also Read: 10 Simple Money Management Tips
Carpool or use public transport
With rising fuel prices, private transportation modes have become very expensive. It would be wise to carpool with friends and colleagues if you drive your own vehicle or use a shared cab. Taking the metro, train, or shuttle service also results in considerable savings, which you can channelise towards your investments.
Set targets with a budget-tracking app
The same app used for tracking your expenses can also be leveraged to budget and set targets for your monthly spending. You can select a target for each expense category, especially those you tend to overshoot, such as eating out, entertainment, and shopping. This is the best way to save money. You get a notification every time you overshoot the budget in a particular category. It helps you take immediate action and stop spending further.
Cut down on impulse purchases
You may not realise it, but a big chunk of your disposable income often goes into impulse purchases. It could be ordering take-out when you don’t have time to cook or buying a new outfit even if you don’t need it. Tracking your expenses will help you realise the impact of impulse purchases on your financial health. You can use this knowledge to curb impulse purchases and make more informed spending decisions.
Get a cashback credit card
Another easy way to save money is to earn by spending! You can opt for a credit card that offers cashback on your spending. The idea is not to spend more, but to pay for your needs and budgeted wants using your cashback credit card. At the end of the month, you will receive cashback in your bank account. Over time, the cashback adds up to a significant amount, which you can use to pay for groceries and other essentials. However, ensure that you consistently pay your credit bill on time. Late payments attract penalties and interest, which can push you into debt.
Select a bank that gives good returns
When opening a savings account, check the interest rate offered by the bank. Every quarter the interest is credited to your account, which eventually adds up to a significant amount. Banks also provide additional investment opportunities such as fixed and recurring deposits. Check the interest rates on all these opportunities and then make a well-informed decision. You can claim a tax deduction of up to Rs 10,000 for interest earned on savings accounts.
Look for ways to increase your income
Besides earning from your regular day job, you could build multiple income sources:
- You can invest in equity, mutual funds, bonds, debt instruments, and other asset classes, which can help you earn interest, dividends, and capital gains.
- You can put your property or a room in your home on rent to earn rental income. This is an easy way to save money.
- Another creative way to save money is to put your skills and passion to use and earn an additional income.
Invest in preventive healthcare
Adopting preventive healthcare practices, such as adequate nutrition, fitness training, and positive mental health, can keep illnesses and the expenditure associated with hospitalisation and treatment at bay. It is also wise to purchase a medical policy that covers potential treatments and hospitalisation. Ensure that the sum assured is in proportion to the premium paid.
As you implement these money-saving tips, you will see a marked difference in how you spend and on what. In addition, these money-saving ideas will undoubtedly reflect well in your bank account.
How much should I save per month?
There is no upper limit on how much you should save per month. The more you save, the sooner you can achieve your financial goals. You can even start by saving a small amount of Rs 500 per month to begin your investment journey.
Why is investing from a young age important?
The sooner you start investing, the more time your money has to compound and create wealth. Even a loss of 6 to 12 months can result in a much lower net worth when you retire. However, if you have not yet started your investing journey, there’s no reason to feel demotivated. It is never too late to start. So get started today!
What are some common risks of using a credit card?
Credit card usage can be risky if you are not correctly informed about its features, charges, and benefits.
Another risk is that credit card holders are unaware of the penalty and interest rate in case of late payment. If the payments are not automated, and you miss the due date, it could result in heavy penalties. Understanding and analysing its benefits and usage policy against other cards in the same category is essential before opting for one.
When should I start saving for my retirement?
You should start saving for retirement as soon as possible with schemes such as the Public Provident Fund (PPF), National Pension Scheme (NPS), and other long-term equity investments. As your retirement corpus grows, you may also be able to quit your job early and pursue your interests because you no longer have to depend on your salary for your living expenses.