Importance of Saving Money
“Don’t save what is left after spending; spend what is left after saving” is the advice given by the world’s most successful investor Warren Buffet. The importance of saving money cannot be overemphasised.
Saving is an excellent habit that you must inculcate early on in life to ensure your financial security.
Life is always throwing new challenges. While you cannot predict these, you can always prepare for them. Learning how to save money for any future contingencies is one of the best things you can do to ensure that you are able to tackle life’s many hurdles. Your savings can give you a sense of power and protection that can help you navigate through obstacles and emergencies and enjoy your life to the fullest.
Major reasons to save money include:
- To have an emergency fund to cover unexpected expenses such as a medical emergency or an unexpected expensive repair for your home or vehicle
- To have a retirement fund to take care of your day-to-day expenses after you retire
- To make investments that can earn an income that beats inflation
- To make a down payment for your home or other big purchases
- To pay for your children’s education and marriage
Besides the above, you can also find your reasons to save, but save you must!
Top Ways to Save Money
Below are some tips to save money:
Do not keep too much debtDebt diminishes your savings. While you may get lump sum funds through a loan or a credit card, the high interest rates will erode your savings in the long run. Therefore, limiting your debt is crucial to save money.
Buy genuine productsA counterfeit or low-quality product may be inexpensive but would not last you as long as the original product. You may save money in the short term but would end up spending more on repair, maintenance, or repurchase in the long term. So, choose genuine products.
Create a budget and track expenses regularlyExpenses are a part of life. Some expenses are fixed and some are variable. Tracking your monthly expenses will give you an idea of where you spend your money. Once you do this, creating a budget is a simple way to get your finances in place. This way, you can use your money efficiently, plan for financial milestones and have something for emergencies.
Prioritise paying off high-interest debtsInterest is payable on any loans that you may have availed of. The higher the interest rate, the higher is your financial outflow. It makes financial sense to pay off all debts and loans as quickly as possible to save money on the interest component. This is especially true in the case of debts which have higher interest rates attached to them.
Build an emergency fundWhile emergencies can occur at any time, your regular expenses do not stop. This is why most financial planners would recommend individuals to build an emergency fund. An emergency fund should typically be in a multiple of 3 to 6 times your regular and unavoidable monthly expenses. This can help you in your time of need without having to rely on any debt.
Use credit cards wiselyCredit cards offer immense convenience and hence are a go-to choice when it comes to making payments and emergencies. However, not paying credit card dues on time can lead to multiple issues. This can be avoided by being mindful of your spending habits, using the card for emergencies or specific financial purchases, and avoiding late payment of your dues.
Smart shopping for major purchasesOccasionally, we all tend to make a major purchase. An appliance, a new vehicle or that odd piece of furniture that needs to be replaced are such things. At such times, looking for the best deals or offers available in the market to get the best price for your new purchase makes sense. Often these savings seem small but can add up substantially over time.
Make good use of any extra or unexpected incomeYou may earn money from various sources besides your salary/business income. Some examples include, a cash gift from a loved one, interest income from investments, bonuses earned at work, cash rewards from credit cards, a lottery and more. Instead of spending this money, it can help to prioritise saving it for your future needs.
Deactivate any auto-subscriptions or membershipsAuto-subscriptions can simplify your life, but they can also add up to your expenditure. You may often not realise the extent of your spending as they are automatically deducted from your account. It can help to go through them once and disable all subscriptions you no longer need or use.
Lower your energy costsYou can lower your electricity bill by being conscious of your usage. Turn off all electrical appliances when not in use, and switch to greener alternatives like solar energy, smart technology and more. It can also help to rely on natural light as and when you can.
Lower your cell phone billsWith several network providers in the market, you can easily browse through plans and pick something affordable. For instance, consider using family plans or couple plans to lower your cell phone bills.
Avoid spending money on outside food or entertainment purposesBeing mindful of your spending when you step out to eat or socialise is important. Many people end up losing track of their money when they go out. However, being conscious of your expenses can help you curb your spending.
Look for discounts, coupon codes, and cash backsLooking for discounts, coupon codes, or cash backs can be a great way to reduce your expenses. Many brands offer rewards and discounts from time to time. You can plan your purchases when the seller is offering a festive discount and cut your spending considerably.
Do It YourselfYou can follow online tutorials and do-it-yourself videos to do small repairs and chores yourself instead of hiring help and reducing your monthly expenditure.
Sell anything that you no longer needYou can sell your old clothes, gadgets, shoes, watches and other items, that you no longer use. This can help you in two ways – you can earn money from the sale and you get to save money on the maintenance of some of these items.
Make saving a habitTry to make saving a part of your life. Once it becomes a habit, you will no longer need to go out of your way to save money. You will automatically think about your financial future and the well-being of your family.
11 Things to know about how to save money
Below are the top tips to save money not just for your short-term goals but also the long-term ones:
Tip #1 - Keep track of your expensesYou can track your expenses on a mobile app or document your expenses in a notepad. This can help you identify things you can eliminate to boost your savings.
Tip #2 - Make savings a priority in your budgetIt is important to add savings as a part of your monthly budget. It is also crucial to fix a savings rate and stick to it each month, irrespective of expenditure.
Tip #3 - Establish your financial prioritiesInstead of mindlessly saving or spending, fix specific short-term, mid-term and long-term financial goals. This can offer you a roadmap and help you achieve your goals in a structured manner.
Tip #4 - Allocate a budgetThe most important thing when saving money is to exercise strong will power to not touch the money earmarked for savings. It’s possible that you may give up your resolve to save and utilise the funds for some unwarranted expenditure. Be wary of this. Stick to the budget and do not exceed it. Instead, make all efforts to try and save even from a tight budget.
Tip #5 - Evaluate your spending habitsConstantly evaluate your shopping and spending habits to take advantage of any extra savings possible. You can consider looking at your bank account statements or credit card history for the last few months to get an idea of what, where and how you spend. Based on your findings you can try to avoid some expenses. Make a conscious decision to set aside the amount saved. This will help to enlarge your savings kitty.
Tip #6 - Involve your familyAnother good strategy is to involve your family members in your savings habit. You can also create a competition among your family members to see who would save the most every month.
Tip #7 - Find ways to reduce spendingTry to spot the things you can do to lower your expenses, such as unwanted subscriptions, not tracking your weekly and monthly expenses and more. Being conscious of your spending habits can help you curb the need to spend.
Tip #8 - Set savings goalsSetting goals while saving money can help you save in a systematic manner. Goals can be either short-term or long-term:
Short-term goals are events that you expect to happen in the near future. For example, buying a vehicle or going on a vacation. On the other hand, long-term goals are events that have a longer time horizon. Buying a house or planning for your retirement are usually considered as long-term goals
Knowing your goals beforehand will help you identify the right plan to invest in. For example, if you are saving for a long-term goal like your child’s wedding, you can consider investing in a plan like ICICI Pru Guaranteed Income for Tomorrow. This plan provides guaranteed* returns that can help you achieve your long-term goals. It also provides a life cover` that can protect your loved ones financially in case of an unfortunate event.
Tip #9 - Open a savings accountThe best way to bring discipline in your savings habit is to open a separate account for your savings, apart from your regular salary or business account. Transfer the amount set aside for savings to this separate account. You can then invest in different savings instruments directly from this account.
Tip #10 - Invest in savings plansLife insurance savings plans can help you save to take care of your needs and the needs of your family. They help in developing a regular saving habit and can give good returns. This keeps you financially prepared for any emergency.
Tip #11 - Automate your savings and investmentsInstead of automating your payments, consider automating towards the choice of your savings and investment plans to ensure you prioritise your future financial security without fail.
*Terms & Conditions applicable.
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* Guaranteed benefits in the form of lump sum will be payable under Lump Sum Plan option. Guaranteed benefits in the form of regular income will be payable under Income Plan option and Early Income Plan option provided all due premiums have been pai
` Life cover is the benefit payable on death of the Life Assured during the policy term. ICICI Pru Guaranteed Income For Tomorrow UIN