Having a good amount of savings is a goal worth aiming for. However, setting financial goals is a critical starting point, followed by smart financial decisions that will help savings grow and multiply in the long run. Broadly, this is what personal finance management enables – it may seem difficult at first, but once it becomes a habit, it is really easy.
Here are a few ways you can increase your savings and make your money grow, without taking any unnecessary risks:
- Spend half of what you earn:
This is a good way to bring in discipline and control overspending. Let’s say you earn Rs. 20,000. If you spend just Rs. 10,000 and resolve to save the rest, you will have reasonable savings every month, and will gradually develop a habit of forced savings. Additionally, your spending will become more disciplined too, and you will soon start spending on things that you need and not on things you want.
- Get insured:
Getting a health insurance and life insurance policy is a great idea to save money immediately, and also protect oneself from big, uncertain expenses in the future. So, when you actually need money for hospitalization, the policy will protect you from spending huge sums of money on medical bills. Life and health insurance premiums are also eligible for tax benefits – so they end up saving taxes for you and putting more cash in your hands, which in turn, can help higher savings. Another important factor to consider is that the earlier you insure yourself, lower will be the cost of insurance.
- Don’t keep your savings idle:
Letting your monies languish in a savings account means that you are not making your savings work hard enough. When you try to make a beginning with your own personal finance management, the first thing to avoid is to deploy it in an investment product that gives you optimum returns. Based on your risk-taking capacity and a host of other factors, these could range from fixed deposits to mutual funds to stocks, where you can earn more than in a savings bank account.
- Get a credit card:
Contrary to popular belief, credit cards can help you save money if you use it in a disciplined manner. This is because you can spend now on your credit card and pay later at the end of the interest-free credit period, typically between 15-45 days. The cash flow thus saved, earns interest even if you leave it in your savings account. If you are savvier, you can consider liquid mutual funds which can deliver a slightly higher tax-free return. Get a credit card that has dine out / shopping rewards and cash-back features. This can help you save as you spend. Credit cards also earn you reward points. All of these can be used for expenses viz. you could redeem rewards points to buy an item etc. If you want to be strict with your spending, have the company set a lower limit on your card. This way, you don’t go overboard, as well as contribute to your savings.
- Re-evaluate your investments:
Investing your savings in an appropriate product is only a beginning. Make sure you keep a tab on your investments and ensure they are yielding what you expected. If they are not, withdraw the investment, consider alternate avenues which can deliver better returns for you. Sometimes, it is better to suffer a temporary loss at withdrawal than let the amount be eroded continuously.
- Invest in a property:
Property is a good investment. If you have enough of money for the down-payment, you can take a home loan to pay the rest. Whether you want to stay in that house or not, it is a good move for your personal finance management that you invest in an appreciating asset. However, make sure that you do enough checks on the property you are buying, the person you are buying from etc. Another good tip is to never over-borrow for anything, even if it is buying a property – ensure that you are able to service the loan comfortably, and are well within your means. Interest on home loans are eligible for tax rebates, resulting in higher cash in your hands to save and invest.
These are a few initial tips on how to manage your money so that your savings increase. As a young adult, saving seems like something that is to be done later in life. But it is a good idea to start saving as early as possible so that you start securing your future, giving you more financial independence.