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How to save Money - Tips & Importance of Savings Money
Saving money can help you attain financial freedom. However, if you live from one pay cheque to the next, the chances of creating a savings account are negligible. Even if you have set some investments in place, there may come a time when you need to save more.
So if you are just starting your career or need to save more, here are some ways to save money.
What is the Importance of Saving Money?
If your question is how to save money, then it is important to understand the importance of money. Money is a mobile storage of economic value. Hence, saving money was and is the foundational element of financial security and freedom. Saving money provides you with a safety shield for unexpected expenses. That extra money saved can help you achieve your dream.
You can slowly build a reserve by regularly saving 10-30% of your income. Imagine this like a water dam, which is used to supply water during a shortfall of rainwater. Money saved acts like a cushion. Be it a medical emergency, an unexpected job loss, or a widespread economic downturn, money saved yesterday helps you survive tomorrow.
Another use of savings is to achieve your life goals, such as buying a car, funding a child's education, starting a business, etc.
Ways to save money
People save money for various purposes. These could be to build an emergency fund, to save for a downpayment on a home loan, or just to have better control over one's finances. But what is the best way to save money?
Build an emergency fund
Building an emergency fund is the first step towards financial stability. This dedicated savings acts as a safety net for any unexpected expenses. Aim to save six months to a year’s worth of living expenses in this fund.
One can start by setting aside a small amount each month. Once your income increases, you can also gradually boost your contributions. You can choose a savings plan as an investment or a bank account if you feel you may need liquid funds within a short period.
Automate your Savings
You need to understand and learn about harnessing the power of automation. By automating your savings process each month, you can sidestep hassles. Savings can be directed into a specific account. For example, channelling money for regular life insurance premiums cuts out the need for willpower. Automating savings is a step closer to your financial goals and future security.
So, set up automatic transfers from your bank account to a dedicated savings account or directly to your life insurance provider regularly. Many banks and insurance providers offer flexible options for automated payments.
Use the unexpected financial benefits wisely
Did you get a Diwali bonus? Was the annual incentive bigger than you expected? Using such windfall gains is one of the best ways to save money. Grab this opportunity to bolster your savings as you fast forward towards your financial goals. Save that income tax refund, the unexpected inheritance money, or simply a monetary gift from a rich relative. Don't splurge it on impulsive purchases. This is a live example of how to save money fast.
Use a mobile application for Savings
With the digital landscape becoming more secure, one should leverage technology to enhance their savings journey. Money saving apps are mobile applications designed for personal finance. They provide a convenient and intuitive way to track your income, spending, and savings goals. They offer budgeting tools, expense categorisation, and personalised insights. Such money saving apps help you regain control over your finances. You can even identify areas for potential savings. Additionally, life insurance apps can help you calculate premiums and manage your coverage.
Create your budget & expenses regularly
If you want to save money, creating a detailed budget could be an easy step. Most people struggle with where each rupee they earned finally went. If you prepare a budget and diligently stick to it, this could be the best way to save money. Interested? Start by listing all sources of income. Next, you should categorise your expenses. One more expert step would be to differentiate between essential housing, food, utilities, and discretionary spending for entertainment, dining out, etc. Do remember to set realistic spending limits. Monitor your progress daily. This process could offer valuable insights into your spending patterns and help you identify areas for potential savings.
Deactivate auto-subscriptions or memberships
Recurring subscriptions and memberships often make a regular dent in your wallet. They are primarily unnoticed outflows. Save money by regularly reviewing your bank statements and spotting payments for redundant services or products. Cancelling these subscriptions may be the best way to save money if you spend a king’s ransom on such auto-subscriptions. Once the money is freed up, redirect it towards savings or other financial priorities.
Lower your energy costs
Energy efficiency is the buzzword these days. Want to save money easily? You could start by cutting your energy costs: choose energy-saving appliances, install only LED light bulbs, and opt for smart thermostats. All these money saving tips can instantly work their magic. Additionally, unplug electronics when not in use. Even taking short showers helps conserve energy.
Avoid spending money on entertainment or meals from outside sources
Cut down on the frequency of dining out and other entertainment expenses to save significantly. Instead of frequenting restaurants, explore the joy of cooking at home. Try new recipes, experiment with different cuisines, and even host potlucks or game nights with friends. These activities can be a fun and affordable alternative to eating out.
Try to make savings a habit
Save as consistently and frequently as you brush your teeth. Set attainable goals, track progress, and celebrate when you reach a milestone. Make sure to pay attention to life insurance premiums, which contribute to your overall savings strategy.
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