Ever faced a financial emergency like a home appliance or your vehicle breaking down but not had the funds at hand to get it fixed? Or have you wanted to save for something special for your spouse or child, but struggled to get going?
Savings is a trouble to many youngsters regardless of their earnings. And as its said, higher the earnings higher the expenditure. Here we are about to look at the practical side of it and effective methods on how to start savings from your next salary date.
Be it a business or a person, the first step to saving is to find n patch the hole in your wallet. Its unlikely to earn more interest on your savings than you pay on your borrowings, so plan to pay off expensive debts like credit cards, store cards and overdrafts before you start to save.
A common beginners mistake is trying to implement the 25% rule (will discuss later), and you cant always do that unless you have tracked and evaluated all your expenses. So, trust me even tiny amounts add up if you can save regularly. For example, saving just 50/- a day adds up to 18,000/- in a year, which can pay for that family vacation you always planned of having.
If you leave the money in your wallet or bank account, it is much more likely to get spent. It helps to keep your savings separate, in a joint account with your spouse or on a short term guaranteed return investment, which brings us to the next important point.
Make sure you have an account with your bank or a reliable financial institution, which can pay highest interest on your savings.
If you are setting up an emergency fund, look for accounts where you can get access to your money when needed, rather than tying it up for a long time. If you have a savings goal with a longer deadline you could go for a top-paying fixed-rate account.
As a rule of thumb, it’s helpful to set aside an emergency fund with enough money to cover your essential outgoings for three months. So if you spend 10,000/- a month on bills like your rent or mortgage, tax, utility bills, food and so on, you will need to save up 30,000/- and keep it as benchmark of your savings, in case of a recession or a highly unstable situation like COVID19.
A standing order is an instruction to your bank to pay money from one account to another (the joint account or unattended savings account) at regular intervals. If you set up a standing order to pay money into your savings account each month, your fund will soon start to grow.
If you set aside savings straight after you are paid, you are less likely to miss the money. Wait until the end of the month and the cash is much more likely to disappear in every day expenses.
Write down what you are saving for and how much you need to save each month to reach your target. Then set a date when you aim to have saved enough. Make sure you have discussed this your partner/spouse and they too are aware of its progress (unless its a solo- bullet-trip to the Himalaya's that you are planning)