Maintain a budgeting exercise
Making a budget and reviewing it periodically are critical to an effective savings plan. You must initiate a budget by taking stock of your fixed expenses. The next step is determining your discretionary or variable expenses. You must find a way to cap them in order to maximise your savings. After a few months of following this budgetary plan, you may review it and make necessary adjustments.
Have clear financial goals
When you have a goal, you can determine the best ways to achieve it. For each financial goal – be it short, medium or long-term in nature – there’s a variety of savings and investment instruments that can help you achieve it. For example, if your plan is to buy a house in 10 years’ time, you can start investing in PPF or a balanced mutual fund for 10 years to raise your down payment. Do not overlook to factor in for inflation. For example, a car costing '5 lakh today may cost twice that much in 10 years.
Shortlist the right financial instruments
The investment you pick should gel well with your savings objectives. For example, if your objective is to create an emergency fund, you need to pick an instrument that keeps your money safe, helps earn steady and assured returns, and is liquid. This brings you to options like fixed deposits, liquid mutual funds, or high-interest savings accounts. Avoid picking an instrument just because a friend or a relative found it useful. Pick it if it helps you meet your goals.
Embrace compulsory savings every month
After selecting the best instrument, you must commit yourself to them for the duration of the investment. One of the best ways to do this is to make compulsory investments at the beginning of the month. You can set your SIP or recurring deposit dates in the month’s first week. This would help you compulsorily meet your savings targets for the month.
Automate your bills
A great way to increase your savings is to cut down on avoidable costs and discretionary spending. For example, any fines you may be paying for delayed monthly bill payments like electricity or water bills, loans EMIs or credit card dues should be avoided. Set up your netbanking account or credit card account to automatically pay your bills before their due dates.
Don’t forget health insurance
If you think health insurance is not related to savings, think again. Instead of spending a high amount of money on hospitalization, it is better to spend a little amount upfront on health insurance premium. The rising medical costs mean that any unexpected medical emergency can quickly deplete your savings. Keep a health insurance plan handy to safeguard against any such eventuality.
— BankBazaar. com
