Tips To Save Money
Are you stuck in the ‘earn more, spend more’ cycle? In this blog, you will learn how to track expenses, identify areas to cut down, set SMART goals, prioritise savings, and control non-essential spending. Take the first step towards your financial independence today!
Think the road to financial independence starts from earning big? Unfortunately, the more you earn, the more you spend. And this becomes a never-ending cycle to reach your financial goals.
As per a survey, most investors start investing in equity only after they reach the age of 35. Luckily, there is one habit we can start early on, which is fundamental to any financial success—the habit of saving.
Join us as we explore 5 tips to help you transform your savings habit into a life-long routine.
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Habit #1: Track Your Expenses
Any financial planning starts with savings, and any savings plan starts with knowing your expenses. If you are unaware of how much you spend each month, no amount of planning or advice will work.
Tracking your expenses provides a clear picture of your spending patterns and allows you to identify areas where you can cut back. You can do this easily by using a budgeting tool or having a habit of noting down all your spending in an Excel sheet. Review this every month to note how much you are spending.
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Habit #2: Find Areas To Cut Spending
Once you have gained insights into your spending pattern, it is time to make some tough decisions. Finding areas to cut spending can seem like sacrificing your quality of life, but that is not true if you do it smartly.
For example, if you have a high-speed internet connection, evaluate if you need the speed or features for that plan. Can you go a level below and still enjoy the same lifestyle? If yes, that’s the way to go.
From renegotiating your bills to evaluating your subscriptions and other expenses, you can make minor adjustments that will help you in the long term.
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Habit #3: Set SMART Financial Goals
SMART is the acronym for:
- Specific – why do you want to save?
- Measurable – how much do you want to save?
- Achievable – is it realistic?
- Relevant – is it ideal for you now or in the long term?
- Time-bound – in what time horizon? Long-term or short-term?
Setting SMART goals is key to your financial success and is crucial to ensuring that your saving plan fits your lifestyle perfectly.
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Habit #4: Pay Yourself First
A great way to plan your budget and spending is using a habit called ‘Pay Yourself First’. What does this mean?
Instead of waiting till the end of the month to save money for your financial goals, why not do it as soon as you get paid?
For example, if you get your salary on the 1st of every month, you should first spend on essentials like bill payments, housing rent, loan repayments, etc. You can even start a monthly SIP (Systematic Investment Plan) into a mutual fund or other financial instrument.
Next, keep money on the side by transferring it to a dedicated savings account, your retirement or emergency fund. Do this as a habit.
Finally, the money you are left with is the amount you can spend as per your liking. This way, you can plan your expenses properly without worrying about savings.
Habit #5: Control Non-Essential Spends
Are you tempted to buy a dress, a new smartwatch, a gadget, or any other item that may eat into your financial goals? If you find yourself impulse buying, we recommend following the 5-day wait rule.
As per this rule, if you are tempted into making a non-essential purchase, you should wait at least 5 days to see if you still want it. In most cases, the temptation may be due to Fear Of Missing Out, a limited-time discount, or other external pressures.
If you still feel like purchasing that product, why not make a wise financial decision and plan your spending? For example, if you want a gadget for Rs. 50,000, control your finances and save Rs. 10,000 for 5 months.
This way, you can purchase wisely and without burdening your financial health.
We hope these habits help you create a life-long savings habit. It is the crucial step towards becoming financially independent and can help you craft a brighter future for yourself.
The road to financial prosperity starts here. So, go forth with confidence and the knowledge that your diligent efforts will pave the way for the prosperous life you deserve. Happy saving and investing!