When it comes to saving money, most of us end up in a muddle. If you are among the countless young millennials rushing through life and struggling to save up – don’t fret! Here’s an easy guide to help
Saving money is like being on a roller coaster ride – you are apprehensive at the start because you can’t predict the outcome. As the ride gathers momentum, your inhibitions wear off and a childlike glee replaces the feeling of doom. Towards the end, you are on top of the world and in all probability; you want to do it again.
Why Do We Struggle To Save?
Our endless struggle with savings has got less to do with the act of saving itself and more to do with our psychological makeup. The majority of millennials, who find the whole idea of saving up as repulsive, believe that it’s mundane and that it cuts out the fun. While it is understood that your short-term needs may take a momentary hit – think of the bigger picture. Imagine how much more you can do with your money if you save it for the long haul.
Take The First Step
Saving money is a matter of practice and discipline and thus, it is something that takes time to master. Start with analysing yourself. Try to figure out the blockers that are stopping you from saving up. Next, study your spending habits over a month or two. Are you overspending on salary day? Is your Credit Card gnawing away at your wallet? You will find the answers glaring right at you the second you review your account statement.
Get Rid Of Debts
Whether it’s an Education Loan that’s piggybacking on your savings or a massive spend that you are still trying to pay off in instalments, debts are common and sometimes, quite difficult to avoid. If you have one, make it your primary mission to settle all the outstanding debts first. Live on a bare-minimum budget if you have to and ensure that all the extra cash goes towards debts.
Additional Reading: 5 Tips On How To Get Out Of A Debt Trap
If you are hailing a cab to your office every day, try carpooling. If you order food online most days of the week, try cooking your own meal on weekends. Excesses are everywhere and they are calling for our attention. All we need to do is shake off our inherent laziness, and take action.
Do keep in mind that you can’t change your habits overnight. Cut one out before moving on to another. While you are at it, don’t forget to have fun. It’ll motivate you to keep pushing harder.
Have A Monthly Budget
If you love numbers, use the help of spreadsheets to monitor your day-to-day expenses. Make sure to account for every single rupee that you spend. Review the sheet at the end of the month and try to figure out ways to cut back on the excesses as you go along.
For those who are not a big fan of spreadsheets, use your smartphone to keep track of your spending habits. It may seem a little demanding at first, but give it some time and you will soon get the hang of it.
Additional Reading:How To Become The Rockstar Of Budgeting
Follow The 50-30-20 Rule
The 50-30-20 rule is a basic rule that was made popular by Elizabeth Warren in her book ‘All Your Worth: The Ultimate Lifetime Money Plan.’ The idea is to divide your income into three components – needs, wants, and savings. She advises not to spend more than 50% of your income on needs, 30% on wants, and spend at least 20% on savings.
Where Should You Begin?
For those of you just starting out, begin your journey with these two primary savings components.
When the markets collapsed in the USA, millions of people lost their jobs overnight. There were no forewarnings – no notice periods. How do you prepare for a situation like this? Short answer – emergency fund.
Financial advisors recommend setting aside an equivalent of at least six months of income towards an emergency fund. Plan ahead and keep a cash reserve ready so that you can keep troubles at bay even when the money is tight.
Additional Reading: Why Build An Emergency Fund?
Even if you are young and have a solid career trajectory, start planning for retirement right away. Yes, you have your EPS and EPF, but they are hardly enough to take care of the burgeoning cost of living.
Millennials often brush aside the idea of retirement planning and mistakenly put it off for later. What remains misunderstood is the fact that they are losing time.
In matters of retirement planning, time is of primary essence. If you are on the younger side of 30 and keen on making the most out of your savings, you may want to take a look at what Mutual Funds have to offer.