Do you always end up broke at the end of the month? Do you always go for impulsive shopping and land up regretting later? No matter how many hikes you get you are not able to save? Well, you are reading the right article that will guide you in the best way on how to save money from salary at the end of every month.
Here are some of the most practical steps that will assist you in saving some amount of money each month after you are sorted with your spending and expenses and will give you answers to one of the most requested questions – how to save money from salary?
Keep a track of your finances
As soon as you start earning, it would be best to keep trail of the influx and outpour of money. You can be lured to spend as and when you wish and not care about where you have spent your funds.
You must note the amount credited into your salary account every month. Next in action should be to document every expense you make and divide it into two categories, namely - fixed and variable classifications. Under the fixed expense category, you can put up the expenses like house rent, electricity and water bills, basic groceries for the month, and anything important. Under the variable classification, you can add investments that will recur each month, such as eating out, travel, medical needs, etc.
Make a monthly budget
Making a budget might sound like big work but it actually isn’t. We are not asking you to create a ledger and have a day-to-day budget of earnings and expenditure rather just noting down your monthly expenses, spending and savings will be of great assistance. A monthly budget will create a picture in your mind as to how much money you are spending on your fixed and variable expenses and how to save money from your salary every month.
Open a separate savings account
Opening a different saving account is another great idea when it comes to saving your funds from each month’s salary. You can simply transfer the savings amount to a different savings account and keep it safe for times of need. You can also save the amount in the savings account for different purposes like buying a car, down payment for your new home, savings for your child’s future, etc. Also, you can earn interest on the money saved in the particular account.
Define your financial goals
Defining your financial goals for short, medium, and long terms will set your savings plan set in action. You must know for what you are saving your money. For instance, if you want to save for buying a car it can be termed as a medium-term saving. If you looking to buy a high-end handbag from a luxurious brand it can be counted in short-term saving goals and if you want to save money for your kids’ education, then it can be termed as a long-term savings goal. Set your savings plan accordingly.
Pay your EMI on time to avoid penalty fee
Paying your credit card bills and EMI’s on time will save you the extra cost you have to pay as interest charges. Paying the charges on time will save you from the penalty fees that charge as late fees. You can also opt for Debit cards that have EMI options and charge less percentage of interest as of late fees in case of any default.
Start investing
Investing your money smartly in different government and non-government schemes will save you a lot of money and will help you earn interest on the same. Here are some of the options in which you can invest and save money as per your needs.
Stock
Stocks and shares are one of the old school investments that you can opt for if you are looking for smart investing options. However, it demands research and knowledge to invest in the share market and stocks as it is subject to market risk.
Mutual fund
Another in the list is mutual funds, they are popular in attaining constant returns. People who are not so willing to invest in options that are dangerous and risky can invest in debt mutual funds and save money from their salary and invest in their long-term goals.
National pension system (NPS)
It is best for people who are looking for better returns after retirement. The scheme and its processes are handled by the Pension Fund Regulatory and Development Authority (also known as PFRDA). This long-term retirement plan demands Rs.1000 of minimum annual grant for NPS Tier -1 accounts to stay active.
Anyone can choose this if they are looking for a systematic saving scheme while they earn. You can ensure a stable income after retirement by investing in this particular scheme. The best advantage of NPS is the low investment cost. Thus, anyone can opt to invest in this plan.
Bank fixed deposit
It is one of the securest investment plans that most individuals choose over equity or mutual funds for its safety factor. The returns are assured with good interest over specific times. There are several options present, and you can choose the ones which will serve people in the best way in the forthcoming years.
The interest given on the principal amount is taxable, but people can spread the investment over monthly income and bank FDs to secure the lowest tax penalty.
Public provident fund (PPF)
You can opt for the Public Provident fund (PPF) for tax-free returns. The tax-free interest is deemed the best benefit along with the long-fixed duration and getting returns that are not taxable is the best investment component.
If you're investing your funds in the hope of saving and getting good returns, then PPF might be the best choice for you. PPF is also securer than most other investments, as handed by the sovereign. The zero risk characteristic and no tax liability make it the best savings plan for most of us.
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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
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