We all know savings are the keystone to building a secure, hassle-free financial future for anyone. When we begin earning a regular income, the most important advice we repeatedly hear is that we must save money. Financial independence gives us a heady sense of freedom and seemingly endless access to money. At least that is what it initially feels like in those early days. But to manage your finances well, it is very important to learn how to save a part of your hard-earned money regularly.
Many of us wonder how to begin saving money. Well, we are here to tell you.
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Setting specific savings goals will give you a concrete reason to save money. If you only put money into your Savings Account every month, it can be tempting to overspend on a whim since the money is easily accessible.
You can earn a higher interest than what your regular Savings Account gives you when you put your money in a Fixed Deposit or a Recurring Deposit. Plus, if you have a savings goal in mind, it will keep you from touching the money that you salt away.
Choose a specific reason to save
The first step towards building successful savings is to define why you are saving money. Your savings may go towards paying the down payment on your home or for a dream vacation. Maybe you are planning to buy a new car? You could be saving to create an emergency fund. The reasons are varied. Choose one or more and work towards achieving the goal. Once you have identified your savings goal, it acts as a motivating factor to encourage you to save money and not stop.
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Set a timeline within which you want to realise your goal
If you have a specific savings goal and a savings target set, the next step you need to take is to set a timeline for your goal. This is the time within which you want to achieve your goal. This is simply another reason to motivate you to save money.
You are probably hoping to get that new car within the next six to twelve months or have the down payment for a home sorted in the next two years. Remember to set a realistic timeline for your goal.
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Set a monthly goal to achieve your deadline
If you only decide to have a certain amount of money in your bank account by a specific date in the calendar, but not actually work towards achieving it – well, that leaves you at a loss. You must set a monthly goal for your savings. This will help you reach your final savings target. How much money should you put aside to achieve your savings target within the decided timeline? Well, you decide the amount based on your income and expenses.
Don’t overshoot your monthly budget
They all say at the beginning of the month that you must pay yourself first before attending to the monthly bills. Based on the amount of money left after putting money in your savings, create a monthly budget. Try not to overshoot the budget before the month end. If you do, it will leave you with less money in hand. This will lead you to consider the forbidden possibility of dipping into your savings. Don’t go there. That will defeat the purpose of saving regularly.
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Choose the appropriate savings tool
Simply accumulating our monthly savings in a regular Savings Account may give your money very slow appreciation in value. Choose to save your money in Liquid Funds or if you want more traditional options, opt for a Fixed Deposit or a Recurring Deposit. These savings options will offer you a higher interest rate compared to a Savings Account.
Saving your money using a higher-interest savings tool will possibly help you reach your savings target sooner. Yay! Start making your money work for you.
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Automate your savings
Automate your savings by issuing a standing instruction to your bank. This will save you the worry of depositing the required amounts every month. You must also remember to keep your salary account separate from your Savings Account. This will help you keep track of how your money is multiplying.
Why should you keep your salary account separate from your Savings Account?
Keeping your savings and salary in the same account does not seem like a wise idea because you will be making regular withdrawals from your salary account. This will make it difficult to keep your savings intact. However, if your savings are kept far away from your salary account, you can exercise more control over that account.
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Reward your milestones
In case you are saving money for a substantial goal like the down payment on a Home Loan, we understand that it could take a fair bit of time. Stick to your goal and keep saving money regularly. To help you stay motivated, remember that you can reward yourself for achieving savings milestones.
When we say reward yourself, we don’t mean take out the reward expenses from your savings. Not at all. Keep that account off-limits. Treat yourself to a fancy dinner or an evening at the movies: you pick your reward.
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The most important factor to consider when creating savings goals is that you must ensure that your goals are realistic and achievable.