Published: Dec 26, 2021, 9:00am
Saving money seems like a very simple task. However, this is not the case for everyone. Considering that we have varying incomes, necessities, expenses, responsibilities, and likes, it’s evident that we also have different saving capabilities.
The good thing is this doesn’t mean that it’s impossible for us to save. With a little change in our spending behaviors and mindset, it’s safe to say that we can reach your goals in 2022. In no time, you’ll find yourself not worrying about being financially stable and having enough for both expenses and savings.
So, if you’re interested to know the ways and tips to save more money, read on to the following sections.
The first step to saving money is awareness. Knowing how much you spend on a periodic basis will let you know things like:
Thus, let’s start with a simple task that will help you get an overview or idea about who much your daily, monthly, and annual expenses are. This will consume only a little bit of your time for the whole day.
To do this, you can either:
At the end of each day, you can get a journal and list down everything that you bought and paid for. This will be helpful if you want something to reflect on daily. Continuing this even when you’re able to spend enough will also enable you to keep track of your progress.
If you don’t like writing that much, then you can simply type in your expenses on your phone’s notes. Just like a journal, you can write on it at the end of each day. Alternatively, you can readily type in on your phone immediately after buying something.
Just choose whichever of the two you are most comfortable with.
Either way, make sure that you record even the littlest amount of money you spent. May it be for a single candy that you always buy or the daily necessities that you can’t miss.
After a month, you should add up all of your expenses for the period. Multiply the amount you got by 12 to get your average annual spending. Doing this will help you get your annual spending and the most efficient amount of money that you can save in a year.
Once you have an overview of your expenses, you can now set a fixed budget for the whole month. This will prevent you from overspending. Similarly, you will also be able to save a certain amount of money every beginning of the month while still being able to shoulder all your necessities and occasional wants.
In setting a budget, there are four things that you need to consider:
The most important thing to consider points to your monthly income, or weekly if that’s how you get paid. For a more managed finance, however, it’s best to turn to the former.
Nevertheless, this is where your future expenses and savings will depend on. The question as to whether how much you can spend and save will vary depending on how much money you make.
Next up, you should also consider your average monthly expenses. This is the amount that should be included in your budget. For instance, if you spend at least $500 or around 30,000 INR a month, then your budget should not be less than this.
Of course, saving money doesn’t necessarily mean depriving yourself of your occasional wants. You may want to eat out once or twice a month or just buy new clothes.
If this happens, you can’t make it a habit to take out a little portion of your savings. Instead, allot a small amount reserved for this specific purpose. Just remember not to go overboard and stick to only how much you can let out without ruining your goals.
Apart from your wants, you should also set aside finances for emergencies. Although your savings can also be used for this, it will be hard for you to go back to zero, especially if you’re far off in your savings journey.
Of course, you can also add other factors that you want to include in your budget. It will all depend on your preference. The only important thing is there will be enough for you to add to your savings.
To efficiently stick to your budget and ensure that your savings will be kept untouched, you should analyze your priorities. The things that come first should be the ones that you spend your budget on. If it’s on the last of your priority list or it isn’t there at all, then it means that you should delay that expense for when you have extra money to pay for it.
This is where the concept of necessities and luxury wants will come in. Here is a more in-depth explanation:
Necessities refer to those that you need for daily living. These include food, water, utilities, transportation costs, and likes. These should be at the top of your priority list. Meaning, your budget should be mainly allotted between them.
Luxury wants are those that you can live without. From the name, these mainly point to shopping sprees and likes. You should only spend money on these if you have already settled all your expenses and you have extra from the budget you set.
Understanding which of the things in your life belong to which will improve your spending habits. Eventually, it will also be the key to being disciplined about financial control.
Enjoying life doesn’t always need to involve spending large sums of money. Finding fun in simple things will definitely save you from all the luxurious yet unaffordable wants. It may also get you over your FOMO or fear of missing out since you will also be basically experiencing the same things as other people, just in a different method.
To help you see this in a clear light, let us give you an example.
Suppose that everyone is going on their own vacations, but you don’t have the budget to go out of the country. In this case, you can do your own “staycation.” Here, instead of having to go to other cities, you can enjoy the sunlight in your backyard, go to local parks, and still have memorable times alone or with other people. You will still have fun without having to spend a lot.
This is the same with meals. Since food takes up a large part of expenses, you can look into more affordable ways compared to eating out.
For instance, you can look into meal planning. This will take a lot more time and effort since you have to prepare ingredients, but it will be much more cost-efficient compared to eating at restaurants. Even fast-food diners can get expensive (not to mention unhealthy) if taken daily. Meal planning, on the other hand, will let you cook dishes that can last for one week straight.
Practically speaking, it’s not motivating to save money if you don’t know where you can use it. Although it being an emergency fund is the safest option, it’s a much better choice to set goals.
More specifically, we’re referring to setting goals in terms of the amount and the specific purpose. Doing this will help you be more determined to save money since you have something to look forward to.
There isn’t really an ideal target savings amount. This is because it will depend on what you want to do with your money and how much you can save considering your earnings and expenses. Nevertheless, the task will be a good addition to your savings routine.
If you’re an adult, using toy-like piggy banks will initially sound ridiculous. However, this is actually a handy tool to have with you, especially if you often work with coins and spare changes. It may not look like it, but collected coins can actually amount to large savings in the long run.
This being stated, it’s just right that you consider having a piggy bank by your side. This simple task will help you make the most out of your budget.
Apart from a piggy bank, you should also consider availing a savings account from reliable and legitimate financial institutions.
There are banks that offer high interest rates, which are definitely helpful if you want to grow your savings. Although you can’t really expect hundreds of dollars as a raise, monthly additions can actually make up a lot if you consider the whole year.
Overall, a savings account will require effort in the application stage, but it will be worth it. Not to mention, this will also allow you to keep your money safe. You won’t also be able to get money from it in an instant, so there’s a better chance that you can avoid impulsive buys.
Another one of the many essential tips is to avoid debts. If something isn’t necessary or worth buying, then save your credit card from the additional bills. You should also avoid bank loans if you’re not planning to use them for businesses and other things that can generate profits.
If you’re looking into improving your credit score and maintaining a good status for it, then consider only putting small expenses like a cup of coffee or a small meal on credit. In this way, you won’t have to worry about financial issues at the end of the month.
Suppose that you don’t really get loans or go under debts and choose to pay cash instead; it won’t be of any help if you still pay for unnecessary things.
Avoid spending more than what you can, and stick to your budget. Remember the previous tips, especially those about priorities and certain expenses. Otherwise, you may go into unhealthy spending habits and leave your savings at zero balance and unstable progress.
It can be overwhelming to just deposit money into your savings without knowing what it’s for. Even if you have already set a purpose for it, a more efficient practice would be allocating your savings to certain goals.
For example, you can set 25% for your future vehicle, 25% for getting your own house, 25% for business, and so on. This is optional, and you can choose not to do this, but you can expect better results if so.
Even if you follow all the tips above, you won’t get to see growth and satisfaction from your progress if you don’t have the right mindset. You have to be fully determined and set on reaching your goals to be immersed in your task.
Another kind of mindset that you should have revolves around financial control. It may look like a broken record, but spend only what you can afford to lose. Don’t exchange short-term happiness from shopping with your long-term goals. Keeping this in mind will better help you improve your habits.
Saving money is an essential thing that you have to learn early in your life. It’s necessary for you to enjoy living without going through financial difficulties in the long run. This applies, no matter if you’re well-off or not.
All in all, we will boil down to the importance of discipline. This is the main key to being able to practice all the money-saving tips we discussed above. It’s also important to have full control over your money and not the other way around.
On a side note, if you’re a big spender who is just starting out in thrift practices, don’t expect to see immediate changes in your finances. This will especially take time since you have to get rid of your unhealthy habits before being efficient with money.
Rachit Chawla is the founder and CEO of Finway FSC. In the last decade, he has worked across financial sectors including stock broking, lending, wealth management, and investment advisory. Rachit is a SEBI-registered investment advisor, a certified investment advisor from the National Institute of Securities Markets and holds a Insurance Regulatory and Development Authority (IRDAI) license. He graduated from Aston University, Birmingham, UK.
Armaan is the India Lead Editor for Forbes Advisor. He has more than a decade’s experience working with media and publishing companies to help them build expert-led content and establish editorial teams. At Forbes Advisor, he is determined to help readers declutter complex financial jargons and do his bit for India’s financial literacy.
Published: Dec 26, 2021, 9:00am