Saving money is a common goal, no matter what stage you are in, in your life. With myriad expenses in today’s fast-paced world – be it rent, food or commuting costs, putting aside a large sum isn’t easy. This is especially true considering the rising inflation and the increasing cost of goods. That aside, there are the occasional luxuries you may want to indulge in, making it much harder to save.
While treating yourself occasionally is perfectly fine, you must learn how to manage expenses wisely. This means understanding how to budget realistically and sticking to it. However, saving your money under these circumstances is no easy task, so you must learn about effective methods on how to save money.
To help you manage monthly expenses using a better approach, here are 6 easy-to-follow ideas.
#1 – Eliminate your debts
Eliminating debts is a proven way of saving your funds. When compounded over a large period of time, the interest rate on debts can burn a significant hole in your savings. Start paying off small debts and work your way upwards gradually. This not only gives you the confidence to tackle bigger loans but also helps you save the interest you pay on these loans.
Credit cards, in particular, can charge exorbitantly high interest rates on your debt. Limiting credit card usage is the first step towards cutting down on expenses. Make sure you’re taking an instant loan instead to fulfil your needs. With affordable interest rates on instant loans, you can save a considerable amount while ensuring that you meet your obligations.
Allocating and planning your monthly budget based on your requirements is the best way to manage monthly expenses. Here are a few simple methods on how to save money:
Alternatively, you can make a financial calendar to remind you of your due payments. This way, you can avoid penalties and boost your credit score. All these simple tips go a long way in helping you save funds.
With banks and lenders flooding the market with deals, you get attractive interest rates on loans. Unfortunately, low-interest loans have stringent terms and conditions that may sound lucrative initially but may prove hard to comply with during the latter periods.
Before you avail loans, make sure to carefully research every available option in the market. Check out the interest rates and see if it matches your financial requirements. Without a proper analysis, you may end up paying hefty EMIs that can cause a strain in your monthly budget.
For instance, you can get personal loans to manage your requirements during financial emergencies. Instant loan apps like Fibe provide great options in this sphere due to their nominal interest rates and umpteen customer-centric benefits. Best of all, you get the option to choose a flexible repayment timeline, and this allows you to optimise for affordability as well as savings.
When discussing methods on how to save money, investing in SIPs is an option you can consider. SIPs (Systematic Investment Plans) are a great way to divert and grow your wealth simultaneously. As the name suggests, the concept is a planned way to invest money in periodic intervals.
The best part about SIPs is that they are flexible in their timeline, as they can be quarterly, monthly, or even weekly investment opportunities. Since these plans are flexible, you can choose to increase your investment or discontinue at any time. All you need to do is pay the amount you wish to invest. Nothing more.
Investing early and for more extended periods can give you a good return on your savings. Moreover, when working toward reducing your expenses, investing is a great alternative, especially if you invest at the start of the month. This way, you are left with a set amount for essentials only, and this can help curb impulse spends that would otherwise keep you from sticking to your budget or adhering to your plan to save.
In a nutshell, the 50-30-20 rule says that you allocate 50% of your income (after tax) for necessary expenses, like rent, mortgages or bills. Next, allot 30% to your ‘wants’, like small luxuries including movies, dining out etc. In case you’re spending more than 30% on ‘wants’, it’s time to reduce your expenses.
Finally, allocate 20% to your savings and investments. This will include emergency funds or the SIP investments you plan to make. Elizabeth Warren familiarised the golden rule of 50-30-20 through her famous book on money management, ‘All Your Worth: The Ultimate Lifetime Money Plan.’ It’s a proven formula that has gained acceptance in financial circles as a legitimate planning method.
It is essential to track your spends as that can help you understand your monthly budget easily. Many online apps make it easy to monitor the money you spend every day. Whether you use NetBanking, credit or debit cards for purchases, the expense management app tracks it all. Another advantage of using the app is it classifies your spends into different categories like recreation, utility, transportation, etc. What’s more, you can check your expenses in a pie chart that helps you easily analyse your budget.
The sooner you start following these simple tips, the sooner you can save money. This isn’t an exhaustive list but it’s a good place to start on your journey to financial wellness. For more tips, check out other Fibe blog on smart money management.