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Struggling With Your Investments? Here Are Some Expert Tips To Get You Started

Saving is easier when you have a plan. Follow these steps to create one.

Nivedita Jayaram Pawar

“Don’t save what is left after spending—spend what is left after saving” is the advice of the world’s most successful investor Warren Buffet. The importance of saving money cannot be over-emphasised. A solid saving can give you a sense of power and confidence to navigate through life’s emergencies. The good news is there are plenty of straightforward ways to save money. Here are money-saving tips from financial experts to help you tweak your spending and get on the fast track to saving money.

1. Start early 

Sometimes the hardest thing about saving money is just getting started. But the truth is that saving is an excellent habit that you must inculcate early on in life to ensure your financial security. Start saving right from your first job, advises Ravi Saraogi, co-founder, Samasthiti Advisors—a Chennai based investment advisory firm. “Even a small saving can grow dramatically if it is given time to grow. When it comes to savings, the earlier you start, the better. This gives your savings adequate time to multiply. Start the habit of savings with simple and safe products that are relatively risk free. This way you can earn a higher return than money kept in your savings account and access the money easily in case of any emergency. Once the saving habit has taken root, more complex products can be explored.”

2. Make a note of all your expenses

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The first step to start saving is to figure out how much you spend. Start keeping a track of all your expenses. This includes your fixed monthly expenses on groceries, household items, EMIs, monthly bills, money spent on coffee with friends, entertainment expenses, etc. Choose your mode of tracking—from pen and paper, digital record on phone, excel sheets, and free online spending tracker or app. At the end of the month you will be able to clearly see where your money is going. Seeing what you spend in total on food, shopping, etc. can be both an eye opener as well as a humbling experience. 

3. Make a budget and stick to it

At the heart of any savings plan is a budget. Budgeting helps you prioritise your expenditure and find a balance between spending and saving across a whole year. “Budgeting is an incredibly effective method of inculcating a savings habit. Preparing a weekly or a monthly budget and sticking to it will ensure that you have a very good understanding of your income and expenses, based on which, a savings target can be arrived at. Don’t get entangled with a very detailed and elaborate budgeting exercise. Just a general sense of the broad income and expenditure items will go a long way in sorting out one's finances,” advises Saraogi. You can always update your budget annually or as and when there is a significant change such as a promotion, loss of job, or having a baby.  

4. Start small. Think big

The truth is, people save more successfully when they set a short-term goal. Start with a small amount each month. Once you reach the short-term goal, you will have created a habit of saving. You can then keep going strong with a new and higher goal. “When you see your savings grow, it motivates you to save more. You can start a monthly SIP of as little as Rs 2,000 in an Equity Linked Saving Fund or ELSS. Section 80C of the income tax allows tax deductions of up to Rs 1.5 lakh on investments in ELSS mutual funds in a financial year. There is a mandatory lock-in period of three years which means you will not be able to touch the savings for that period. So three wins with one sip! You can also increase your EPF (Employee Provident Fund) contribution. This reduces your take-home salary but helps in compulsory savings. This is a long term saving tool,” says Shweta Jain, founder, Investography Pvt Ltd.

According to Saraogi the best way to save for short term goals is to use simple products like fixed deposits. “For short term goals, it is best to avoid riskier products like mutual funds or shares. Mutual funds have the potential to deliver better returns than fixed deposits, but they also carry more risk. Hence proper research is required before selecting a mutual fund suitable for you.”

5. Make your savings automatic

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Setting up automatic savings is the easiest and most effective way to save, and it puts extra cash out of sight and out of mind. “One hack that I have relied on heavily is to not leave money in the bank account. Money left idle in the savings account almost always tempts you to spend it all. You can start a small RD (recurring deposit) in your bank. This will ensure that you save money while also having access to liquid cash when needed,” explains Jain. Almost all banks offer automated transfers between your savings accounts and a RD. You also can choose when and how much money to transfer every month. Additionally you can put all your bills on auto-pay. This ensures they are paid on time, in full to avoid late charges. As a bonus, some service providers offer a small discount if you enroll in auto-pay.

6. Let it grow

If you want to see your savings grow, it is important to not disturb them, believes Saraogi. “You must be patient and allow your savings to grow. For the power of compounding to work, you must let your savings grow and do not use it for spending. It is also important to invest wisely. Saving is half the work done. The other half, and equally important part, is to invest your savings in products that will grow your savings and lead to wealth generation.”

7. Save with a purpose

Don't just save money, save for a cause—such as a new car, a dream home, retirement, or for emergencies. And yes, this does make a difference. Those with a saving goal are twice as likely to save successfully than those who don’t. Set a goal and make a plan. 

8. Control your impulses or use the 24-hour rule

Credit cards, ATMs, and online shopping have made it easier than ever to spend money. Especially on things we want rather than need. A good way to avoid the trap is to use a self-imposed 24-hour rule. When you see something you want, wait 24 hours before buying it. While shopping online simply add the items to your cart to purchase later. Come back after a day and see if you still want them.  

9. Review all automatic subscriptions and memberships

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Chances are that you may be paying for multiple subscriptions such as Netflix, Hulu, Spotify, gym memberships, trendy subscription boxes and Amazon Prime—but using only a few regularly. Review your subscriptions and cancel those that you don’t use on a regular basis. And make sure that you turn off auto-renewal when you make a purchase. You can always subscribe again (only if it fits into your new and improved budget) if you realise you can’t go without it.

10. Put extra or unexpected income to good use

When you get that bonus or a tax refund or an inheritance, put it to good use. And by good use, we don’t mean that dress you have been eyeing or a new handbag. Use the surplus fund to pay off a debt (if you have one) or put it in an investment scheme. That way you will be free from the temptation to spend it and the money will start earning for you.

The truth is, you don’t need everything to magically line up perfectly before you start saving money. If you wait for the “right time”, it’s never going to show up. The best time to start saving is right NOW.

Photo: Shutterstock
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