Learn How to Save Money

You are not alone when you are puzzled by the ways of saving money. Although some may think to save money is pretty easy, there’s almost nothing one in every 3 Indians has saved. Although it might be more fun to spend money, you should focus on saving that extra cash. There are loads of strategies to conserve funds which also does not require taking compromises. Often the best way to start saving money is simply to make your finances and spending pattern more conscious. Once you do that, you will start putting away more money than you ever expected with an appreciation of your budget and your true needs.

Use the below tips to get some extra cash into you pocket

Tip 1: Summarize your expenditure

When you start trying to save money very first thing you should do is to find out how much you actually spend. Record of all those outgoings whether it’s some random coffee, household products, luxury or even cash tips.

Tip 2: Make Budget & Pay yourself first

When you get an estimate of what you’re spending then you can start organizing your identified expenditures into a feasible budget. The budget will detail whether your spending scales up to your income, so that you can organize your expenses and reduce your over-expenditures. Ensure you are factoring in expenditures that occur frequently but not every month.

Now, setup one more Expense Item in your list and that should be your safe saving account which you will not touch for any personal expenditure at all. The best way is setting up an automated transfer from your salary/business account to this savings account every month may be on pay day.

Tip 3: Set Goals to save money

One of the easiest ways of saving funds is to visualize what you are saving for. Set saving goals along with a timetable to make saving easier. Do you like to buy a house in next 5 years or perhaps you’re getting married, planning a vacation or saving for retirement. Then find out how much capital you’re going to need and how long it could take to achieve that goal.

Here are some short and long term goals which can be on your list as well-

Keeping an emergency fund worth 6X of your monthly earning is essential. Your goals are likely to have the greatest impact on how you divide your money after your expenses and income. Keep in mind long-term goals, it’s crucial that retirement planning should not lose priority to shorter-term aims.

Build an Emergency Fund

Some experts recommend setting aside six months worth of living expenses in case of emergencies. This helps you avoid going into debt if you ever lose your job or have to pay unforeseen medical expenses.

Tip 4: Trim unnecessary expenses to save money

Warren Buffett purchased a five-bedroom house for $31,500 in 1958 and has never really moved out of it. Its net value? An outstanding 90.3 billion dollars. He can afford a better, costlier house. Yet his minimalism may very well be the secret of him being one of the wealthiest men in the world.

On the other hand, Kanye West isn’t shy to advertise his wealth. He resides in a house that is worth 20 million dollars. But at one stage he asked Mark Zuckerberg for a billion-dollar on Twitter as he was in 53 million dollars debt. The fact is, there are many rich people who don’t appear really rich. Zuckerberg basically carries the same ordinary denim and t-shirt each day.

Below are few steps to free up some cash:

• Eliminate Unnecessary Subscriptions
• Switch to Streaming TV from Cable operators
• Slash Your Cell Phone Bill
• Restructure Your Insurance if possible
• Shift your home loan to a lender with lower interest rates
• Sell out useless luxury and unused items
• Do not take club memberships or long subscriptions
• Cancel newspaper and magazine subscriptions
• Consider reducing/eliminating other regular paid services
• Cook (and pack) your own meals at home
• Reduce or eliminate eating out or getting take-out
• Buy generic when you can
• Time Major Purchases Around Sale Periods
• Teach Yourself Skills You Would Otherwise Pay For

Tip 5: Avoid Debt and save money

Pay out your cards bills every month before the due date to stop ending up by paying huge interest amounts. Whenever, possible avoid using credit cards, use Credit Cards only if you are getting better offers and discounts and do not spend more than what you can afford.

When paying the Credit Card bills never opt for minimum payment options as the remaining amount will still incur the interest which are generally 20-30% in case of Credit Cards.

Avoid using overdraft limits and/or withdraw cash from Credit Cards these will incur interests from the very first day of withdrawal equivalent to your Credit Card interest rates. You should also avoid taking luxury & leisure loans from banks or financial institutions.

Tip 6: Delay Spending Using the 30-Days Rule

Whenever you feel the urge to make a big purchase always think about it. Whether it’s a new cellphone, a new video laptop or a new vehicle – the first thing you should do is force yourself to stop.

Now write down what it is and how much it costs and stick it to someplace visible every day if you believe it is still important after 30 days, buy it (But do not use credit to do so)

Tip 7: Try Envelope Budgeting to save more money

Credit cards help you escape the pain of purchasing, which in turn might make you spend more. With cash, you are more aware of what you buy. Additionally, you can divide your cash into envelopes with allocations for different purchases, ensuring you don’t spend too much in one place.

Typically, the person will write the name and average cost per month of a bill on the front of an envelope. Then, either once a month or when the person gets paid, they will put the amount for that bill in cash in the envelope. When the bill is due, the money is taken out to pay for that bill.

This prevents the person from spending the money out of their pocket or bank account because it is already allocated to the bill.

Tip 8: Annualize Your Spending

Imagine you spend Rs.250 a week for the snacks on your office’s cafe, it seems a small amount but now multiply it by 52 it that’s Rs.13,000 you’re chopping out on soda and snacks per year from your budget. Suddenly the habit adds up to a large amount of money which you could have invested otherwise on some conducive thing.

Ashish Agrawal

Ashish is passionate & enthusiastic about coding and developing new skills. He has over a decade of experience in the Software & IT industry. He loves to code, design websites, and finding automated solutions to everything.  He loves writing on topics like investment, nutrition, leadership, etc.