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How to Save Money?

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5 Easy Ways of Making a Habit to Save Money
January 23, 2024

Most individuals have big financial dreams. Everybody is saving up for some goal, such as purchasing a car, putting a down payment on a home, or saving up enough to go on a trip overseas. However, they struggle with saving money. Without savings, people cannot invest. And without investment, they become unable to fulfil their goals. Let’s look at how you can make it a habit to save money regularly:

1. Set SMART Goals

People make the mistake of setting vague goals. Use the SMART policy for your finances. Start by creating a specific target. Instead of saying you will try to save every month, give yourself an amount. Next, ensure you can measure the goal. Instead of simply attempting to increase your savings each month, try and save an extra INR 1,000 each month. Your goals should also be attainable. Do not set yourself up to fail. Finally, your goals must be relevant and time-based. Ensure you give yourself a timeline to save a specific amount. SMART goals set you up to succeed by giving you specific targets.  

2. Spend Within Your Limits

Some make the mistake of using their credit cards or overdraft facilities impulsively to purchase items they do not necessarily need. Using such facilities without planning properly and evaluating the usage from time to time can lead to a cycle of debt that becomes dangerous and makes it difficult to save. Always try and live within your means and avoid spending more than you earn.

3. Save First

Put your savings away in a separate account once your salary gets credited every month. Pay yourself first, and then pay your bills and other dues. Making saving a priority helps you cultivate a habit of saving every month. You can consider investing in a savings plan   to develop the habit of saving systematically.  

4. Use Automated Debits

Set up an auto debit feature if you put your savings in a separate account. Every month, the money will automatically get transferred, so you have to save before you do anything else.

5. Track Your Finances

Even after you put your savings away, always track your savings and try and save an excess amount every month. Check your statement at the end of every month and see if you can cut costs on certain unnecessary items.

A habit of saving helps you inculcate good financial habits. Once you save up a corpus, you can start investing and secure your financial future.

6. Understand your expenses

To save more money for your future, begin by recording your daily expenses. You can use a notebook to track your expenses the traditional way or resort to new-age apps that can be linked to your bank accounts and credit or debit cards. Either way, ensure that you account for every rupee that you spend. 

7. Draw up a budget 

A budget helps you track the money you earn and the money you spend. Once you have understood and tracked your expenses, match them against the income you earn during the month. This will give you a clear idea of whether you are spending more than you earn or vice versa. 

8. Reduce discretionary expenses

If your expenses exceed your income, you need to prioritise reducing your unnecessary costs right away. They may include entertainment expenses, the cost of eating out regularly or any hobby-related outlays. You can start saving up money each month more easily once you cut down on these avoidable expenses. 

9. Have a savings goal 

When you spend less than you earn, you can begin saving up small sums regularly. Various budgeting rules can help you with this. For instance, by following the 50-30-20 rule, you can save around 20% of your income every month. Over time, this can add up to a sizable emergency fund. 

10. Find ways to save money every day

By making a few small changes to your regular habits, you can redirect more money to your savings each month. For instance, you could cook at home instead of eating out regularly or carpool to work instead of driving your own vehicle. You could also save a lot on your electricity bills by turning off unwanted appliances around the house. 

11. Use your coupon codes well

For the expenses that you simply cannot eliminate, there’s always the option of reducing them wherever possible. Coupon codes on groceries or provisions are excellent practical examples of this. If you earn rewards on your credit card or UPI account, make sure to redeem them on time to reduce your non-discretionary costs as much as possible. 

12. Pay your debts on time

Unpaid debts and delayed repayments can lead to penalties and high interest charges — both of which can reduce your savings drastically. To avoid this, ensure that you pay all your debts on time, whether they are credit card dues, loan EMIs or even buy-now-pay-later (BNPL) app balances.

13. Prioritise your money goals

Merely saving is not enough; you need to save with a goal in mind. This will allow you to make the transition from saving to investing easily. An investment calculator can be particularly useful here because it helps you calculate how much you need to save and invest for any specific goal like buying a house or retirement planning. 

14. Invest in a guaranteed return plan

You can use the money saved each month to pay the premiums for a guaranteed1 return plan, which gives you the dual benefits of a life cover as well as assured long-term savings. This way, you can enjoy the benefit of guaranteed1 returns if you survive the policy term. If you do not, your financial dependents will have the safety net of the death benefits paid out. 

15. Increase your income

To accelerate your savings, look for ways to boost your income. This could include taking on part-time work or exploring side hustles. Increasing your income means you have more money coming in, making it easier for you to boost your savings. It also opens up opportunities to redirect your extra savings into the best investment options in India.

16. Focus on your savings growth rate

Your savings growth rate is the percentage of annual increase in your savings. To boost your savings over time, you can set a specific savings growth rate of 10% to 20% (or higher if you can afford it). For instance, say you save Rs. 10,000 a month this year. If you set a savings growth rate target of 2%, you could increase your monthly savings to Rs. 12,000 next year. 

17. Look for high-interest saving options

Consider depositing additional funds in a high-interest savings account so you can earn more interest on idle money. Alternatively, you could also opt for flexi deposits, where you earn the benefit of high interest without compromising on liquidity. Higher interest rates allow your money to grow faster and contribute to quicker capital accumulation.

18. Invest your savings

Investing idle funds is an excellent strategy to grow your savings in an accelerated manner. Depending on your risk appetite, you can choose from the best investment options in India. Remember to diversify your portfolio of investments so the risk is not concentrated on any one asset or asset class. 

19. Tap into the power of compounding

Compounding can significantly increase the value of your savings over time because it involves reinvesting the earnings from your savings so they can, in turn, earn their own returns. An investment calculator can help you understand how compounding can grow your savings over any given period. To truly tap into the power of compounding, start investing early.

20. Align your credit card rewards with your spends

Choose credit cards that offer rewards or cashback on your regular spending categories. For instance, if you travel frequently, a card that offers travel discounts can help you save more each time you book flight or hotel tickets. This strategy is a simple way to boost your savings without altering your spending habits.

21. Make use of budgeting apps

Budgeting apps can also be extremely useful if you’re looking for insights about growing your savings. They can track your income and expenses, offer insights and reminders to save regularly and streamline your financial management. They also simplify budgeting and help identify additional opportunities for saving.

22. Rebalance your investments 

Depending on changing economic and market cycles, different investments may perform well at any given time. For instance, when the repo rates rise, fixed deposits may offer higher interest rates. Alternatively, during bullish stock market phases, market-linked investments may perform better. Rebalance your investments to benefit from these changes and optimise your savings.

23. Avoid impulsive buying 

Impulsive purchases can derail even the well-planned budgets. To prevent this, take a moment to reflect before buying anything unplanned. Ask yourself if you really need the item or if it's just a passing desire. It can also help if you wait for a day or two before making such purchases. This practice helps you cultivate a more mindful approach to spending.

24. Try a no-spend month

Challenge yourself with a no-spend month, where you only spend on the bare essentials like recurring bills and groceries. This temporary measure can help you see how much you can actually save simply by cutting out non-essential spending. It's also a great way to reset your spending habits because it makes you more aware of where your money goes.

25. Skip the coffee shop

Regular visits to the coffee shop can add up quickly. By brewing your coffee at home instead, you could save a significant amount each month. This small change in your daily routine can contribute to a substantial increase in your monthly savings over time. Plus, experimenting with different home brews can become a rewarding hobby in itself.

26. Fix your current finances 

Review and restructure your current finances to see if you can squeeze out some immediate savings. For instance, you could renegotiate terms on loans or credit cards, eliminate unnecessary subscriptions and consolidate debts for better interest rates. By tidying up your financial commitments, you can reduce monthly outlays and save more. 

27. Learn the power of ‘no’

By simply saying ‘no’ to many things, you can bolster your savings significantly. This essentially includes declining offers or opportunities that may lead to unnecessary spending, like dining out frequently or pricey outings. By selectively saying ‘no,’ you not only preserve your financial resources but also ensure that your expenses are aligned with your long-term goals. 

28. Be tactical about shopping online

Online shopping is convenient, but it can often lead to overspending. To counter this, be strategic about your online purchases. Use price comparison tools, take advantage of cashback offers and subscribe to alerts for discounts on items you truly need. Also, practise the habit of adding items to your cart and reviewing them after a day to see if you still need them.

29. Earn more than you spend

Focus on increasing your income by actively seeking promotions, exploring side hustles or developing new skills for higher-paying opportunities. Simultaneously, it also helps to keep a close eye on your expenses to ensure they don't add up as your income grows. This approach helps you boost your savings while also maintaining a sustainable and healthy financial lifestyle.

30. Take the 50/30/20 approach 

The 50/30/20 rule is a simple and effective budgeting technique. It means you allocate 50% of your income to necessities like rent and groceries, redirect 30% to wants like entertainment and dining out, and commit 20% to savings and debt repayment. This balanced approach covers your essential expenses while steadily building your savings over time.

31. Automate your savings

If you’re having trouble cultivating financial discipline, it helps if you automate your savings. Set up a direct transfer from your primary salary account to a savings account each payday. This ‘set and forget’ method ensures you save a portion of your income before you have a chance to spend it, effectively making saving a seamless and consistent part of your financial routine.

32. Shop around for insurance

Before you purchase insurance, reviewing and comparing your options can give you substantial savings. Whether it's for your car, home, health or life, shopping around for the best insurance coverage and costs can help reduce your premiums without compromising on the benefits. Bundling different insurance policies with the same provider may also unlock further discounts.

33. Set big (but achievable) savings goals

Setting ambitious yet attainable savings goals can be a powerful motivator. Whether it's for the down payment on your home, a dream vacation or your emergency fund, having a clear target in mind gives purpose to your saving plans. Break these big goals into smaller and more manageable milestones to track your progress and stay motivated. 

34. Identify spending triggers

Everyone has some triggers that prompt unnecessary spending. They could be emotions, social settings or specific environments like malls or exhibitions. Recognising your triggers is a crucial part of managing your finances and improving your savings rate. Once you know what drives you to spend impulsively, you can develop strategies to avoid or counter them.

35. Make your payments on time, every time

When you consistently pay your bills on time, you avoid unnecessary late fees and interest charges. This practice makes it easier to save more by reducing unexpected costs. It also helps you maintain a healthy credit score, which can be beneficial when you require credit facilities in the future. So, set reminders or automate your payments to ensure you never miss a deadline.

36. Save for retirement

Integrating retirement savings into your current financial plan is a simple yet effective strategy to boost your savings. Begin by designating a portion of your current income, however small, to a retirement fund. Making retirement savings a regular part of your current budget instils a strong savings habit that compounds over time, ensuring you build a sizable nest egg gradually.

37. Bring a list

A well-planned list that is based on meal prepping or household necessities ensures you purchase only what's necessary. This simple habit can have a surprisingly significant impact on your monthly budget. So, when you’re shopping for groceries or provisions, always go with a list. This helps you stick to what you need and ensures you avoid impulse buys. 

38. Be flexible

Flexibility in financial planning makes it easier for you to adapt to changing circumstances and opportunities. This might mean adjusting your budget based on seasonal expenses or taking advantage of unexpected income boosts. Being flexible also means being open to modifying your financial strategies as your life goals evolve. 

39. Stop smoking

Quitting smoking is not only beneficial for your health but also for your wallet. The cost of cigarettes, along with potential medical expenses due to health issues caused by smoking, can drain your finances over the years. By giving up this habit, you can redirect a significant amount of money into savings or other healthier and more rewarding pursuits. 

40. Diversify your income streams

Depending on a single source of income can be risky. To improve financial security and boost your savings, focus on diversifying your income streams. You can do this by picking up a side hustle, trying some freelance work, or tapping into passive income sources like rental properties and dividend-paying stocks. Multiple income streams also offer a buffer against job losses.

41. Beware of recurring subscriptions

Review and audit your recurring subscriptions regularly. They may include streaming services, magazines or gym memberships. It's easy to overlook these small, regular deductions, but they can add up if you’re not careful. Cancel any subscription you don’t frequently use, or find less expensive alternatives to free up a considerable amount of your monthly budget for savings.

Summing up

Ultimately, the journey to fulfilling every life goal begins with the simple decision to spend less and save more. If you have had hard time saving money diligently, the steps outlined above offer a reliable framework to get started down this path. 

On the other hand, if you’re already earning more than you spend and want to boost your monthly savings, a combination of some of the strategies outlined above can be highly effective. Once you find the techniques that work best for you, you’ll find it easy to save and invest for every financial milestone in life — right from repaying your debts or buying your dream home to paying for your children’s education and retirement planning.

Related Articles:

Tax Saving Investment Options for Tax-Free Income

Managing Your Finances in the Digital Age

Smart Tax-Saving Techniques for a Salary of Rs. 10 Lakhs

How to create an investment strategy for beginners

What is Investment?

When to stop saving for retirement?

What is the 50/30/20 Rule?

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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