Many individuals asking this question-
How should I save money? Many of them started with a lucrative career but after
a while they find it difficult to generate enough surplus from their income.
Different reasons can be attributed to it- a sudden increase in debt, high
lifestyle, insufficient increase in salaries etc. Whatever be the scenario, it's
always important that one keeps generating a healthy savings to have enough
money to cater to future requirements.
1. Know
what’s coming in and what’s going out
It is necessary that you should know
what you are earning. There is a difference between the salary package and the
net income in your hand. You need to pay taxes on the income you receive. You
have to plan your expenses and future with money that you get after paying
taxes on your income. For salaried employees, tax payment is done by employers
but you may still have to pay tax when you file your income tax returns. Do a
detailed analysis and find out how much money you will really get in your hand.
Once you know your right income, it pays to understand your outflows too. If
your spending behavior is your main concern then analyze your bills. This will
help you to know where you are overspending. It can be your outings or
impulsive buying which might be forming a major chunk of these. It may also be
high debt which you availed with expectation of increase in salary which never
happened. Whatever be the cause find ways to curtail your overspending. If your
cash outflows are high due to debt repayment then prepare a strategy to reduce
your interest burden so that you can have more savings in your hand.
2. Stick
to your budget
Once you know where your money goes and
how much money you have, budgeting becomes essential. It helps to keep track of
your money matters. It gives a very good picture of what’s happening with your
cash flows and why. When you are at initial stages of your career this exercise
may look too boring. Even if so, make it a point to prepare a budget. By making
a budget you will do well in restraining yourselves from spending on items
which you may want but are not needed today. You also get a glimpse of the
surplus you are going to generate in next few months- provided you stick to
your budget.
3.
Separate your savings account
Savings will not be there unless you
accumulate some money. Make it a practice of letting your savings go into a
specific bank account from where you can invest them. As we say ‘Pay Yourself
First’, this savings first need to be in practice to actually save money. You
can divide your expense and savings account so that both do not get mixed up
and you know clearly what you are saving.
4. How
can you earn more?
Many times, your job growth is not
decent enough to take care of rising expenses. But changing of job or a career
is easier said than done. Identify, if there can be earning opportunities along
with your job which can help you to increase your income. Part time teaching,
consultancy assignments can become a good source of your extra earnings.
5. Resist
impulsive buying
Youngsters fall prey to the
advertisements offering big discounts. Impulsive buying is spending money on
items which you have not planned to buy. If one goes on spending on things he
does not need in a reckless way, there is a high chance of the landing in
debts. Better plan what you want to buy and prepare a plan to fund that
purchase. This will help you resisting impulsive buying and save for a brighter
tomorrow.
6. Avoid
credit to satisfy ‘wants’
If you are borrowing to pay for your
‘wants’ and not needs, better to avoid such borrowings. If you avail a personal
loan to go for a long vacation overseas, you not only have to repay the money
borrowed but also have to pay heavy interest on it, which further reduces
possibility of saving money. Instead if you take a short holiday in India, you
may end up saving some money.
To make
savings a habit, it is necessary to remember below points:
§ Plan for all purchases.
§ Know what you need and
what you want. Wants are the things which brings overspending in your finances.
§ While buying things try
to negotiate. What is available in a mall may be available at an old shopping
market but at a reduced cost. No harm in going there.
§ Fix time wise target
for savings and follow it rigorously. Maintain a minimum saving rate of 10%-
higher the better.
Source: MoneyControl.com
