How to save money - tips of saving money

Everyone wants to be financially strong and wants to enjoy their life after retirement. But you know what if you want to enjoy that and want to be financially strong the important thing is how much you have funds in your account and its all depend on your savings and investments. The strategy of every rich person is simple save, invest and compound whether he is bill gates or warren Buffett. They all know the power of compounding . They all have used it very well thats why they are on that level of success.

Usually people have lots of doubt in their mind like- My income is too less, Will it matter that much if I save 10$ a month?...and many more doubts. So, we are going to talk about how to save money and tips of saving money.

Importance of savings

Before we talk about how to save money. We should know the importance of savings.

Retirement- Everyone probably have to be retire one day, in that case you need savings or investments to survive which can replace your income.

Education- Almost every parents want to teach their children in a good school or college but not everyone can afford that high fee. So, they usually decide to take the loans to educate their children. So on they have to pay too much interest for that loan. But yeah if you have savings in your account you don't need those high interest loans.

Emergency situations- Suppose you have got disease that even your mediclaim policy don't cover. In that case you have to bear all the treatment costs which may end up all your savings and yes most probably you have to take debt from your friends or relatives which will always suffers in your mind. So, from that point of view savings is very important.

Something you want to buy in future- suppose you are planning to buy a car or a house in future. So, you have to start savings from 2-3 years before so atleast you can pay the down payment for that.

To multiply your money- If you want to build a good wealth in long term then you should start savings from now and start to invest. Probably you have heard that "compounding is the eight wonder". So start savings, invest it and allow it to compound. That small savings can help you to create a big wealth.

How to save money (tips of saving money)

1. 50-30-20 money rule

This rule is mentioned in the book " All Your Worth: The Ultimate Lifetime Money Plan(2005)" written by elizabeth warren. The rule is simple and very effective that 50% of your income should be spend on needs, 30% should be spent on what you want and 20% should be saved.

50% should be spend on needs which includes your bill payments, room rent, groceries expenses, car payments, insurance and many other things which is necessary.

30% should be spend on what you wants. It includes go out to movie, hangout on weekends, netflix, shopping etc.

And 20% of your income should be saved but sometimes it is not possible for every families but still you should save atleast 10%.

2. Make it priority

Sometimes people use to save the funds that have left after all the expenses in the end of month. Please don't wait for the end of month as sometimes we spend all of our income on unnecessary things and we don't have that much money to save in the end.

To make it priority open up a savings account and transfer atleast 10% to that account instantly when you get salary. Atleast you will spend less money on unnecessary things after that.

3. Make a budget

Note down all your expenses. It should include every single thing where you spend like groceries, payments, room rent, EMI, hangout, education fee, etc. It should include all your needs and wants. After that make a budget for it and try to balance the budget and expenses.

Your budget should include a fixed percentage on your wants like 5% on hangout, 5% on shopping, 5% on movies. By doing this you won't spend too much on single particular thing.

4. Identify the ways you can cut out from the expenses

There are many unnecessary things on which we use to spend too much. These are some examples-

Like when we go for shopping we cannot be able to control ourself and spend too much. We should have control on ourself and we should buy from sales which has some discounts.

Usually many people use to smoke and we don't even know that when we spend too much money on smoking. Simply try to consume less cigarettes or cigars. If you consume 5-6 a day try to decrease it as you can save some funds from that also.

You use to hangout on every weekend. You can decrease it to 2 weekends and can save that money.

5. Do not use credit card too much

Yes definitely there are many advantages of having a credit card. You can get some discounts on many things by making payment through it. You get some reward points which you can redeem in the future as discount.

But there are many disadvatanges of using a credit card-

Indirectly when you make a payment through a credit card, you get a loan from credit card company. And you will be shocked when you see the interest you have to pay for that. It is around 40% per annum. Credit card company charges the interest as per month but when you calculate as per year, it will be around 40%. So when you are trying to earn 18-20% interest from savings on the other side you are paying 40% interest on loans.

6. Reward yourself

Give a tip to yourself whenever you do a good thing. It could be anything like when you finished a book put a note instantly in your pigibank as a reward. When you save some money from something put a note instantly in your pigibank or whereever you use to save. And when these small rewards become a lump sump amount invest it mindfully. Believe me these small rewards can effect a lot in your wealth building in long term if you invest it to right place.

7. Set a goal

Set a goal of 3-4 year as a goal encourages you to save money. Your goal could be anything you want. Like buying a car, buying a house, a foriegn trip, it can be anything. And be focused on your goal. When you concentrate on your goals the savings become easy.

8. Save extra

When you get a bonus from company on occasions. Try to transfer some extra amount in your savings account. This will definitely help you in making a good wealth in future.

9. Insure yourself, your loved ones and your assets

Now you all have learnt that how to save money. Now the most important thing is that if you didn't get insured, your all savings will end up if any unfortunate incident happen. Like a family member has been hospitalized, your car has been damaged. It could be anything. So make sure to insure yourself and buy a mediclaim policy for every family member.

Click here to know the factors you should consider while buying a mediclaim policy.