Life is uncertain, and the COVID-19 pandemic has given a reality check to the entire world. Millions of people across the globe have lost their jobs and faced medical emergencies, leaving them with huge debt and monetary constraints.
Financial challenges can significantly increase your stress levels. Therefore, saving for the future is important than ever. Being in charge of your spending habits and savings can help prevent distress. So, here are some of the best ways to save money.
10 best ways to save money
Wondering how to save money? Well, it is an art mastered by a few. One common excuse most people give for not saving is that their salaries are low. However, saving even 10% of your salary each month can add to your overall financial stability in the long term.
Budget your money
Determining a budget is one of the most important things to follow. Prepare a monthly budget and adhere to it. Although it may seem cumbersome, it is one of the best ways to save money.
The budget allows you to keep track of your expenses and avoid unnecessary expenditures. The money saved can then be invested to build wealth.
Save money through health insurance
You may wonder how to save money from salary by purchasing a health insurance plan. However, it is possible when you pay an annual premium.
It is beneficial to pay the premium rather than spend a huge amount due to an accident or sudden illness requiring hospitalization.
Keep debt under control
If you have one or more loans, a one-time restructuring to settle smaller loans is beneficial. The money saved can be invested for future growth.
If you have a larger loan, you may make partial prepayments by using your bonus or other surpluses to reduce the tenure. This helps saves the interest outflow.
Divide your salary wisely
You may request the human resource (HR) department to pay your salary in your savings and checking accounts separately. When you deposit money in the savings account regularly and do not spend it, you can save a huge amount over the years.
Moreover, the rate of interest on savings accounts is higher when compared to other types of accounts.
Lower your electricity bill
Want to know how to save money at home? Reduce your electricity bill. Compared to regular bulbs, LED and compact fluorescent lamp (CFL) bulbs are more energy-efficient and last longer, which helps save money.
Plugged-in electronic devices consume electricity; therefore, unplugging these when not in use is recommended. Moreover, seal your home to avoid loss of air, which can significantly add to the electricity bill.
Avoid late payment fees
Lack of planning may result in unnecessary late payment fees, which can reduce your income.
Using an app to remind you of payment due dates and enabling autopay help to avoid these penalties and save money.
Use money management apps
Using a money management app is one of the best tips on how to save money. The app ensures all your bills and other dues are paid on time.
It also helps you pay off outstanding dues and build a realistic plan for your monthly savings and expenditure. However, being disciplined is important to maximize the benefits of such an app.
Save on transportation costs
Using your vehicle for daily commute can be convenient; however, with the skyrocketing fuel prices, it can also be quite expensive.
You can save a significant amount by opting for alternative ways to travel. To reduce fuel costs and maintenance expenses, use public transportation.
Moreover, consider carpooling to the office and back or use shared cabs to reduce your travel expenses.
Cut down the entertainment expenses
Now, how is this the best way to save money? With various over-the-top (OTT) platforms, you may rarely watch anything on cable television. So, you may cancel your cable connection or pay only for the channels you watch regularly to save money.
Moreover, most newspapers and magazines have free online apps, so canceling subscriptions to these can help reduce your costs. You may also discontinue the memberships for recreational activities that you do not use regularly.
Further, booking movie tickets online can help save money via special offers.
Prepare a budget for miscellaneous expenses
Miscellaneous expenses include impulse purchases, home and auto repairs, and maintenance costs, and much more.
You must estimate the budget for such unforeseen expenses. Classify these expenses into food, housing, shopping, and more, identify what is necessary, and set a predetermined amount for every category.
Ensure you stick to the budget and track every expenditure.
Make savings automatic
It is recommended that at least 20% of your salary should directly be transferred into investment funds. Opting for an auto-debit systematic investment plan (SIP) is a good way to ensure financial discipline and regular savings.
Prioritize your expenses and goals
List down your goals and expenses and prioritize these as per their importance. This allows you to determine the ones that are necessary while avoiding those that can be delayed or eliminated.
Over a period, this can help you save a significant amount by cutting down unwanted expenses.
Use credit cards wisely
While credit cards when used wisely can be beneficial, you can fall into a debt trap if you do not use them responsibly. If you delay the payment or make partial payments, a high rate of interest is charged on the outstanding amount.
It is advisable to cancel your credit cards if you are unable to use these wisely. This helps avoid late payment charges and high-interest payouts, which enables saving a huge amount in the long term.
Unmanaged credit card expenses may not only result in a debt trap but also negatively impact your credit score.
Regularly delaying or paying only the minimum due reduces your score, which may hamper your loan eligibility in the future.
A higher credit score can help reduce the loan interest rate and provide beneficial terms and conditions.
Build emergency fund
Having an emergency fund to take care of unexpected expenses is important. The size of the fund depends on your income, existing liabilities, and the number of dependents.
Start by setting a goal and deposit smaller amounts during the month to build discipline. Ensure this amount is saved in a separate account like a liquid fund and is not used to meet regular expenses. Put in any lump sum received, such as a birthday gift or tax refund to build the emergency fund.
Invest in mutual funds/stocks
Investing in different instruments like stocks, mutual funds, provident funds (PFs), and others helps build wealth over the years. Fixed-income securities like bonds and deposits offer assured yet low returns.
If you are young and willing to assume higher risks, you may invest in stocks. You may also consider mutual funds that are managed by professionals and invest in different types of asset classes.
Saving money on food
Often, you may spend a lot of money on unwanted foods or eating out, which can drain your earnings. To reduce these costs, it is recommended you pack your lunch, which can help you save a huge amount over the year.
Eating out can be convenient, especially if you are busy, but you can cut down your dining expenses by hiring a cook. And if you need to order, you may use online food delivery apps that offer discounts, which help save money.
The tips mentioned above are some excellent ways on how to save money in India. Although it may seem challenging initially, once you start following these, you can build a sizeable corpus in the future.
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