At a time when inflation is still hovering above the comfort zone and economic growth has slipped to new lows, it only makes sense for the general public to spend its money judiciously.
Here's how you can boost your savings rate
- Avoid excessive use of plastic money: We often find instant gratification while buying things we love and regret later while paying our credit card bills. In order to develop the habit of saving, start paying bills by cash. Try to reduce or nullify the usage of credit cards.
- Avoid impulsive shopping: Make a list before going for shopping, and stick to it. Avoid making any irrational decisions while making any purchases. Don't get lured by the deals and end up buying things that are not a necessity.
- Start small, save big: Don't postpone making investments till a substantial amount is accumulated. Start making investments even in smaller amounts. Pick an SIP based on your risk profile and make payments towards them even if one has a monthly surplus of Rs 500. The sooner one starts, the greater the benefits of the power of compounding.
- Postpone spending, not saving: The best way to make sure that we don't spend in excess is to transfer our money to savings during first few days of the month. This ensures that we know the exact amount we are left with to maintain our monthly expenses. Stick to the monthly saving routine. Postpone any major non-committed expenses, but not the monthly committed savings.
- Stick to the monthly budget: Make a list of monthly expenses. Set the target amount to be saved. Distribute the remaining amount under different monthly expense heads. Stick to the plans being made. If one of the expenses exceeds the limit, make the provision by cutting down an expense. Don't accommodate additional expenses from the savings. Never fund an expense with the savings.
- Try to reduce one expense per month: Find that one expense you can cut back on. For example, if you have tea from outside thrice a day, bring it down to once or twice. Packing a meal for work can also be an option. Though you will save just Rs 20-30 extra each day, it will add up to Rs 600-900 at the end of the month, which can be used to improve monthly savings.
- Continuously monitor and assess your savings: Monitor your budgets and make sure that savings are always at the optimal levels. Whenever there is a change in the financial situation, revise the budget. Savings should take the top priority before designing a new budget. This helps in maintaining a healthy fund to counter unnecessary debts during emergencies as well.
Nitin Vyakaranam is the founder and chief executive officer, ArthaYantra, an integrated online personal finance company.
Disclaimer: The opinions expressed in this article are the personal opinions of the author. NDTV Profit is not responsible for the accuracy, completeness, suitability, or validity of any information on this article.