Smart savings plans to secure your future

Dreaming of financial freedom? Discover savings strategies that work for you! 

In a country like India, where the cost of living continues to rise and financial uncertainties are ever-present, saving money is not just a luxury but a necessity. 

Whether you’re a young professional just starting your career, a parent planning for your children’s future, or an individual nearing retirement, having a solid savings strategy can make all the difference in achieving your financial goals and securing your future.

In today’s article, we will look into some unique strategies to save money as per your financial goals. Be it daily, monthly, or annually—we’ve got you covered.

What is saving?

Saving is the act of putting aside a specific percentage of your income for your future rather than spending it at the moment. It is a fundamental practice that can help you build a financial cushion, accomplish your dreams, and ultimately attain financial freedom. 

Why should you save money?

Here are several compelling reasons why saving money should be a top priority for everyone:

Emergency fund: Unexpected events like job loss, medical emergencies, or natural calamities can strike at any time. Having an emergency fund can provide a much-needed financial cushion during these challenging times, ensuring that you and your family are not left stranded.

Financial goals: From purchasing a home or a vehicle to funding your children’s education or starting your own business, saving money can help you achieve both your short-term and long-term financial goals. With a well-planned savings strategy, you can turn your dreams into reality without relying heavily on loans or debt.

Source: Freepik

Retirement planning: With increasing life expectancy and the lack of a comprehensive social security system in India, saving for retirement is more crucial than ever. The sooner you begin to put money aside, the more time it has to grow thanks to compound interest, ensuring a comfortable and financially secure life after your working years.

Also read: Achieve your dream retirement funds: Quick start guide

Financial independence: Building substantial savings can provide you with financial freedom and the ability to take calculated risks, pursue your passions, or make career changes without being overly dependent on a regular paycheck. It can also help you withstand financial instability more effectively.

Wealth creation: Saving money is the first step towards building wealth. By continuously saving a portion of your earnings and investing it wisely, you can lay the groundwork for future wealth accumulation and potentially beat the growing inflation rate.

Source: Researchgate

Strategies for different financial goals

Different financial goals require different saving strategies to ensure you are on track to achieve them. Whether you’re saving for a short-term objective or a long-term goal, having a tailored approach can help you stay motivated and maximise your savings potential. 

• Daily saving strategies

For short-term goals or building an emergency fund, daily saving strategies can be highly effective in accumulating savings gradually but consistently.

Put your savings on autopilot: Establish a system wherein your checking account is automatically deposited into a separate savings account. This “out of sight, out of mind” approach can help you save consistently without having to remember to transfer funds manually.

Suppose you aim to save ₹1,25,000 for a vacation within a year. By automatically transferring ₹342 (₹1,25,000 / 365 days) from your checking account to a dedicated savings account each day, you can achieve your goal without much effort.

Gamify your savings: To make budgeting more fun and exciting, several applications and services use gamification features. Some may also offer virtual rewards or badges for achieving daily or weekly savings goals.

Keep your spare coins: Put all of your spare change into a designated jar or box every day. Once the jar is full, deposit the funds into your savings account. This simple strategy can help you save a surprising amount over time.

• Monthly saving strategies

For mid-term goals like a down payment on a home, funding education, or building an emergency corpus, monthly saving strategies can provide a structured approach to accumulating funds consistently.

Prioritise self-payment: Prioritise your savings before spending on discretionary purchases, just like you would a monthly payment. 

For example, you may automate a transfer of ₹10,000 from the day your paycheck is deposited to your savings account if your monthly income is ₹60,000.

Increase savings with bonuses: Whenever you receive a raise, bonus, or tax refund, consider allocating a portion or all of the extra income towards your savings goals.

For example, suppose you receive a 6% annual raise. Increasing your monthly savings by the same percentage can help accelerate your progress. If your salary increases from ₹60,000 to ₹63,600, consider increasing your monthly savings from ₹10,000 to ₹10,600.

Cut optional expenses: Look over your monthly expenses and see where you may save money such as dining out, entertainment, or subscription services. Redirect the savings towards your financial goals.

Let’s say you currently spend ₹5,000 per month on eating out and ₹1,000 on subscription services. By reducing these expenses by half, you can contribute the saved ₹3,000 towards your savings. 

Embrace the 50/30/20 rule: This budgeting strategy suggests allocating 50% of your income towards essential expenses like rent, utilities, groceries, and more, 30% towards optional spending, and 20% towards savings and debt repayment. 

Take this scenario: you have a monthly salary of ₹60,000. Out of this, ₹30,000 should go towards necessities, ₹18,000 towards discretionary expenditure, and ₹12,000 towards savings and debt reduction. We’ll discuss this rule with two other strategies to maximise your savings later in the article.

Participate in savings challenges: Various savings challenges, such as the 52-week money challenge or the no-spend challenge, can help you build a savings habit and boost your monthly contributions.

For instance, with the 52-week money challenge, you’ll save more and more money every week for a whole year. You may tailor the challenge to your financial situation and objectives. So, in the 52-week money challenge, you save ₹100 in the first week, ₹200 in the second week, and so on, potentially saving ₹1,37,800 by the end of the year.

• Annual or long-term saving strategies

For goals like retirement, building generational wealth, or achieving financial independence, long-term saving strategies that leverage compound interest and tax-advantaged accounts can be powerful.

Invest in appreciating assets: While saving in a traditional savings account is a safe option, investing a portion of your savings in appreciating assets like stocks, real estate, or a business can potentially generate higher returns over the long term.

For instance, suppose you create a trading account and invest ₹10,000 a month in an array of mutual funds. In 20 years, with a yearly return of 12% on average, your investment has the potential to exceed ₹1 crore.

Source: mordorintelligence

The 3 rules of savings

Some tried-and-true budgeting principles can serve as a guiding framework for developing a sound savings strategy. These principles aren’t one-size-fits-all solutions, but rather starting points that you can adapt to suit your unique financial circumstances and goals. 

• The 50/30/20 approach

This approach suggests dividing your after-tax income into three distinct categories: 50% for essential expenses (rent, groceries, transportation, etc.), 30% for discretionary spending (entertainment, hobbies, etc.), and 20% for budgeting and paying off debt.

By allocating a dedicated portion of your income towards savings and investments, including retirement contributions and emergency funds, you can ensure that your long-term financial goals are consistently funded without neglecting your present needs and enjoyments.

• The 80/20 simplicity

If you prefer a more straightforward approach, the 80/20 rule might be the right fit. This principle suggests allocating 80% of your income towards overall spending (both essential and discretionary) while dedicating the remaining 20% to savings and investments. 

The beauty of this method lies in its simplicity; you don’t have to meticulously categorise every expense, making it easier to implement and maintain. By automating the transfer of 20% of your income into dedicated savings and investment accounts, you can build wealth without overthinking the process.

• The balanced 75/15/10 split

For those juggling multiple financial objectives, such as retirement planning, saving for a child’s education, and building an emergency fund, the 75/15/10 rule offers a well-rounded approach. 

This principle proposes allocating 75% of your income towards overall spending, 15% towards retirement savings, and 10% towards other savings goals like an emergency fund or a down payment for a home. 

By adhering to this framework, you can simultaneously address your present needs, secure your future through retirement contributions, and work towards achieving other essential financial milestones.

Conclusion

Ultimately, the key to successful saving lies in finding a budgeting strategy that resonates with your personal values, lifestyle, and financial aspirations. While these rules provide a solid foundation, feel free to adjust and customise them to suit your unique circumstances. 

The most important aspect is to commit to a consistent savings routine, treating it as a non-negotiable priority. By embracing a disciplined approach to saving, you’ll pave the way towards financial security, independence, and the realisation of your dreams.