By knowing the importance of saving money, most people want to save their money, but without a proper plan and good habits, getting diverted and falling short of financial goals is easy. Sometimes the hardest thing about saving money in India is just getting started. When decided it's time to start saving money, people begin searching for the best ways of saving money. Some start looking for a jackpot that leads them directly to wealth and happiness.
While others realize it's an excellent time to begin eliminating debt and unnecessary expenses. Thus everyone's journey to success is a bit different, but there is one thing common among all successful people is good saving habits. Like so many things in life, setting money aside as savings is a habit that needs to be developed. If you are having trouble getting into the habit of saving, you can follow a few money saving tips that might help you to build saving habits and achieve your goals.
"You must learn to save first and spend afterward." – John Poole
Now let's understand how one can develop a saving habit with the example of Rohit, 24, who just started his career in information technology. Rohit has a dream to own a house, car, travel around the world, and build a corpus for retirement. To achieve all his goals, he needs a considerable amount. He knows that to make this wealth, he has to save. But due to his impulse spending habit, without even realizing his income gets vanished. For a young investor like Rohit, it's challenging to keep motivated to save for a long term goal like retirement, which is too far for him. Rather they tempt towards immediate joys.
However, Rohit can develop saving habits by following a few steps.
Set Achievable goals -
One of the main problems in saving is not having a goal. It is essential to set a specific goal that will drive to a culture of saving. Without knowing the purpose of saving money, it is hard to stay motivated and much easier just to spend it. Hence first, Rohit had to create some achievable goals that give purpose for his money. As we discussed earlier, Rohit has a goal of owning a house, vacation, and retirement corpus; now, he needs to estimate the required cost to achieve those goals and assign deadlines to keep him motivated.
Record Expenses -
Secondly, he needs to track all his expenses to figure out where his money is going and how he might be able to allocate better. Each month, Rohit needs to record everything he and his family purchased using credit card statements, bills, and bank account statements to make sure they're accurate. He can use a notepad or spreadsheet to track expenses. There are also some free-spending tracker tools which can also be used.
Eliminate Unnecessary Savings -
Now, as all costs are known, he has to make sure that all purchases are in line and what he wants. After noting all his expenses, he can now identify non-essentials that he can spend less on, such as dining out or watching a movie. Need to negotiate on bills that can help him to reduce fixed monthly expenditure like cable, internet and cell phone service so he can put more money into savings.
Budget for Savings -
Once Rohit has the idea of how much he spends a month and how much money he can save. He needs to create a plan of his money and has to stick to it and also need to prioritize the things that are important to him and develop a strategy for his money and limit overspending. Now he knows how much he can save but had confusion about where to save as there are many financial products.
Save where it grows -
The best way of saving money and putting it into better use and increasing them at the same time is by investing in appreciating assets or high yield accounts. If he is saving for short term goals, he may consider investing in high interest-earning savings accounts, Liquid funds, fixed deposits, and National Saving Certificates, for long term goals can consider equity, mutual funds, bonds, and real estate. However, he needs to be aware that some of these options are subject to investment risks, including the possible loss of your capital.
Automate savings -
Automating savings is one of the easiest and best ways of saving money and also for developing saving habits and helps to stick to the plan without getting diverted. As Rohit has already chosen where to invest, now he needs to set the automatic transfer of money straight from his paycheck or have a portion of money go into his savings account whenever he makes a deposit. Setting up an automatic transfer to saving account forces him to save money before he has a chance to spend it. If he doesn't automate his savings, he most likely reaches the end of the month and realizes he spent everything he decided to save.
Watch savings grow -
Now, Rohit has set up a savings plan to passively work behind the scenes and allows his money to work for him. He should also need to review his budget and check his progress every month to help him stick to the plan and identify and fix problems immediately. During this process, he might even find more ways to save and reach his goals faster.
Reward yourself -
After reaching certain milestones depending on the length of his intentions, rewarding himself will help to track his progress and keep him motivated. These should be a small reward; he shouldn't just blow all his savings while enjoying it.
Just like Rohit, anyone who is serious about saving money and wants to develop the habit of saving these strategies might help them to start saving. It is never too late to start saving money. It may be difficult in the beginning, but you will soon get used to saving, and it will become a habit and a natural way of living. Little by little, you will begin to notice that the changes you make are helping to grow your money.