A penny saved is a penny earned, to use an age-old phrase that will remain relevant at all times. In order to grow your wealth, you need to invest a portion of your income in high yield investments. Over time, it’s your savings to meet your long-term goals. Besides investing, you need to know the steps to save money in your day to day life and even spending money. Every rupee saved and invested wisely goes a long way in creating wealth in the long run.
As a beginner and even for others, there are three areas that you need to master firmly: spending, borrowing, and investing. After all, you will be spending most of the essentials and utilities, taking out loans at some point, and investing to achieve your life goals.
Here are some ways to save and spend wisely so you get the most out of every rupee.
Start early: You need to start saving as early in life as possible. Even saving a small amount will not only create a habit, but also give you a head start. The power of compounding will work in your favor over the long term and you could see your savings grow exponentially. Don’t delay and start saving early as you will need a small amount compared to a larger amount if you are starting late.
Save, then spend: The general rule of saving is to spend what is left over after saving from your income. If you spend first, then save what’s left, you need to reverse the process. So the income minus the savings should be the expense.
Check bank accounts: Most of us have more than one bank account. Keep an eye on bank statements to see if there are any charges deducted for different reasons. See if they can be canceled by the bank, and take steps not to let the banks repeat them. Also check the minimum balance fees and act accordingly.
Hedging risks: if you have dependents financially, obtain adequate life insurance, preferably through a term insurance plan. In addition, benefit from health coverage for all members of your family. By paying a small premium cost for these risk coverages, you ensure that your savings won’t be hit when emergencies strike and family life goals aren’t derailed.
Credit card fees: If you have a habit of deferring your credit card contributions every month, you are seriously damaging your finances. The annual interest rate is close to 40 percent or even more in some cards. Plus, if you don’t pay back in full, there’s no interest-free period on your subsequent purchases. Make sure you pay the outstanding credit card amount in full before the due date to avoid late fees and other charges.
Mortgage loan: If you already have a mortgage, continue to prepay it and don’t wait to end it based on the length of your initial occupancy. The earlier you terminate the loan, the more you save on interest charges. Also, maintain a lower occupancy time if the EMI load is comfortably borne after household expenses and long-term savings.
Go digital: Whenever possible, use digital platforms for shopping. Whether it’s the needs of your home, utility payments, or even purchasing life insurance. The premium for term insurance plans is typically nearly 25% lower than for the offline version of the same plan.
Once you get into the habit of saving on small transactions and day-to-day accounts, the end result will be visible over time, and you’ll discover new ways to keep saving more while spending. The two things can go together to save a significant amount of money in the long run.