We all grew up on “a rupee saved is a rupee earned” and we know that it is not how much we earn but how much we save which determines how successful we are in realising our financial goals. However, we’ve all felt at one time or other that no matter how much our income goes up, our savings continue to plateau. Unlike popular assumption, it may not always be the thrill of spending money that makes saving difficult.
So, as we step into the new year, here are a few ideas that will help you stay on track with your savings goals.
Remember Why You Are Saving
Every goal is different; saving to buy a new car is not the same as saving for a Black Friday shopping spree. The overall importance for the two goals may be different, you may be working on different timelines, and the amount you intend to save may be different. So, figure out your goals and tell yourself why you are saving. Have an individual saving plan for each your goals instead of putting aside a specific amount of money every month into one savings bucket. This way, you actively know what you are putting money aside for, making it easy for you to remain committed.
Be Realistic With Your Goals
While you aim for the moon, bear in mind that you cannot afford to save 80% of your salary continuously. Savings happen when you save regularly for the long term. So you need to put aside a certain amount of money every month no matter what, and that is possible only if you don’t overextend yourself. Keep your savings goals to what you know you can spare every month without fail, and take pleasure in doing it regularly. Else you would end up dipping into your savings to make up for the shortfall caused by excessively large saving goals.
See Where You Stand
It is always easier to stick to a task when you can see how much you have achieved and how much more you need to do to reach your target. This is no different for a financial goal. Make a chart or board or even a spreadsheet that tells you what your goal is and update it regularly so that you can see for yourself how close you are to your target and keep yourself motivated.
Figure Out Your Wallet
How much you can save is directly connected to how much you are spending. So get a clear idea of where your money is going. Keep a tab on what your monthly expenses are, where you spend the most, and which are your biggest expenses. You can do this the old-fashioned way with pen and paper or spreadsheets. But today, you have apps that that not just keep track of all your expenses but also automate your analysis, sends you payment reminders, lets you set expense alerts, and even informs you when you have exceeded your specified budget for a particular month. This can go a long way in helping you prioritise saving over spending.
Use The Right Instrument
Every saving instrument comes with its own set of pros and cons. Do not pick up the first one that comes to your mind just because it is easy or convenient or was recommended by your best friend. You need to understand if it would work in your specific situation if you are to use it effectively. For example, if you are saving for your child’s school fees payable six months down the line, you need to opt for something that is as secure as it gets and will give you decent returns. So you may want to invest in a recurring deposit. But when you are planning to buy a car three years down the line, you would be better off investing in mutual funds as the scope of gains is higher.
Manage Your Debt
Debts from unsecured credit is expensive and can eat into the amount of money you can save. However, not taking credit can also difficult, as you will be under pressure to build a bigger corpus in a much shorter span to meet your life goals. This path leads to resorting to risky investments that promise quick returns and is best avoided. So the trick here is to use credit to your advantage so that you get to eat the cake and keep it too. Restrict credit card debts and personal loans to a minimum and use secured credit such as home loans to reach your milestones faster and easier. At the same time, work towards building a bigger corpus that helps you pay off your loans earlier and lets you focus on the other pleasures of life.
Ask For Help
It may not be possible for many of us to know all aspects of saving and investing in detail. If you think that you are unsure about what you are doing or need additional help in figuring out things, reach out for professional help. Having a professional to help you with your financial matters can streamline matters and give additional perspective on how to save and where to invest. So work with your financial planner to help you build a plan that can provide the best returns when needed.
You can reach your financial goals without overstretching yourself provided you are disciplined and consistent. However, as go about saving, remember to maintain a balance between saving too much and saving too little. While you need to optimise your savings, it should not necessitate compromising your lifestyle too much. Ultimately, you are savings today to ensure that you can up your lifestyle in future, so find avenues for enjoying your income as well.
The writer is CEO, BankBazaar.com, India’s leading online marketplace for loans and credit cards.