Especially after the hard slap by COVID pandemic, even the majority of higher middle class too would say "yes"....its getting a tad difficult to save money, forget about investing.
The Monthly Rent
The Monthly salary to Maid
The Utility Bills
The Annual School Fees
These are some of the few things which keep pegging away at our income month after month without a break.
Majority of people are living paycheck to paycheck and just keep hoping that the next month would be better and keep slogging away.
But there is a huge gap between WANTING TO SAVE & ACTUAL SAVING. Especially , due to rising inflation and salary hike not matching up-to the hike in expenses.
However, there is a ray of hope, all this stress can be avoided if some simple steps are taken and adhered to.
Oh Really ?
Yes. You indeed CAN get out of this financial stress.
Lets look at some of them.
1. The Most effective Money Saving tip that works for almost every one is....HAVE A GOAL.
Even if it is a smallish goal of getting a new Mobile in in next 6 months, just the thought of getting WHAT YOU DREAMT OF will motivate you to save.
Gradually start increasing the amount as well as the time-frame of the Goal
Mobile after 1 year
A 2 Wheeler after 2 years
Laptop in 4 years
Family vacation to Europe in 5 years
Own House in 10 years
Having a particular goal ahead of you makes it easier for you to self-displine and actually save for the same and eventually achieve.
You can start with a very small goal of say,
Buying a Watch of Rs.2000 in 6 months
This will inculate the habit of SAVING into your genes and will help you in getting displine
2. DIFFERENT ACCOUNT FOR DIFFERENT PURPOSES :
I myself followed this technique and it is working brilliantly for me.
I have 4 Bank Accounts and each one is designed for different purposes
Bank A is for my DAILY TRANSACTIONS which could include Groceries, Petrol, Rent, etc.
The balance will be carried forward such that you have 2 months of expenses in the bank. Only if the balance exceeds 2 months of expenses then it goes into Bank D.
Bank B is for Spendings like Hotels, Shopping, etc
I never cross the limit in this account, (or in any account for that matter).
In fact, I make sure that there is still good percentage of money left over by the end of month.
The balance is carried forward and every quarter or so, 50% of this balance is moved to Bank D.
Bank C is for INVESTMENTS and Savings
My most favourite account.
In fact, the dividends also get credited to this account and that too gets added up making my kitty grow more.
I am very strict in ensuring that 30% of my income should straight away go to this account whatever may be the circumstances.
And in turn, from this account it gets invested into various asset classes like Equities, Debts, Gold, REIT, etc.
Any balance left over is straight away invested in Liquid funds till I review the overall portfolio and do the Asset Allocation.
Bank D is for Back-Ups and Emergencies
I very rarely use this account.
Whatever is left over at the end of the year, 50% is carried forward and the 40% is typically for SPECIAL TREAT to myself and my family in form of an outing or a Gadget.
And the rest 10% is for Spending on MY EDUCATION.
I too need to be constantly upgrade isnt it?
3. HAVE A BUDGET :
The most famous of them all. But not very effective because human mentality very rarely sticks to budget.
But, sticking to Budget is the best way to go about saving money.
In fact, you would have noticed that whenever you have a LIST OF THINGS to buy when you go to Supermarket, you spend less.
But, whenever you go JUST LIKE THAT....the budget shoots up.
So, its always better to WRITE things you actually require and go for shopping.
Other tips could include
Using only Debit Card rather than Credit Card unless you know how to use them effectively.
4. HAVE PROTECTION :
The major reason majority are not able to SAVE Money is that whatever they would have managed to save vanishes whenever a illness strikes the family. In fact, sometimes, even their thoughtfully saved long term savings is dipped into, hitting their long term plans for a toss.
This can be achieved by having a simple Term Insurance Plan and a Basic Health Insurance.
This way, you willl also become more confident and concentrate on SAVING, INVESTING money for future goals than keeping it away waiting for another illness to strike.
5. Focus not on Retiring Rich but F.I.R.E.
F.I.R.E is Financially Indepedent Retire Early which willl ensure that you are able to ENJOY your retirement and not having to constantly worry whether your retirement kitty is getting eroded and will last your lifetime.
is the ability to live comfortably without the fear of running out of money ever.
F.I.R.E in fact ensures that you continue to enjoy the lifestyle that you have at present and in fact, scale up too inspite of not having a Job or a Monthly Fixed Income Source.
I have highlighted all these in more more details and simplistic ideas in my book "DON'T RETIRE RICH".
Srikanth Matrubai Author of the Amazon Best Seller DON'T RETIRE RICH