The web is full of stories elucidating how people who invest regularly can create a huge corpus at the end of a decade or two. Not many people talk about the need to save some money regularly. Savings is essential, yet continues to be underrated. The first step in saving money is to set aside a portion of your earnings on a regular basis for an emergency fund. You may start putting in 10 per cent of your earnings to this fund till you have 12 months’ expenses worth of savings.
Saving money is important and you need not wake up to its importance only on “World Savings Day” which falls on October 30 every year. You must strive to save every time you earn or spend your money. Even to invest, you must save enough. Setting aside enough to save and then invest will ensure that you keep putting in more money to create more wealth in the long run.
While many investments allow you to start with as low as ₹500 every month, increased investments from your savings help to earn more returns on the money you invest. After all, money attracts money. However, to ensure consistent savings and subsequent investments, you must first curtail your expenses. This you can do by putting a limit on your spending habits.
Your financial habits matter
If you are unable to save enough, it’s time to relook at your financial habits. Your habits can make or break you depending on your willingness to adapt or your tenacious attitude toward money. We frequently see cases where even the wealthiest people have lost money due to poor financial management. Those who are knowledgeable and disciplined about money have managed to accumulate a corpus that will take care of them in their later years. Good financial habits are not the outcome of knowledge of personal finance alone. One must be persistent to stick to the tenets of savings and habits to be successful.
How to save money?
Instead of brooding on your inability to save money, you must focus on ways to manage your money. Start with noting down all your expenditures, no matter how trivial they are or may sound. At the end of every month, check which expenses were unnecessary and could have been avoided. The more you manage to get rid of your unwanted expenditures, the more you can save money. More savings translate to quicker wealth creation.
Track your finances
Are you aware of your financial goals? Have you calculated how much money you would need by the time you retire? Have you considered the effect of inflation while estimating your retirement corpus? Are you aware of how much you must invest to achieve those goals? Do you step up your investments regularly? Do you earn and save enough to step up your investments? You won't know how much to save each month or how much to put toward investments unless you know the answers to these questions. While it is logical to save and invest every month, an early realization of how it can help you earn more money will help you save more.
Focus on diverse investments
You may argue how saving alone does not help grow your money. True, but can you think of investments without having saved enough? Allocating your savings to a variety of investment opportunities will allow you to grow your wealth in the future. Aside from that, seeing your investments grow will provide you with the much-needed impetus to save your money.
Even the greatest investors of all time have shared their views regarding savings. Almost everyone has reiterated, “Do not save what is left after spending, but spend what is left after saving.”