Guidelines for Saving Money – It is often dream of most common people to become rich. The definition of “rich” for some people means to have a big house, a big car and to have a big bank balance. However this definition is not true in complete sense. To justify this ask yourself one question : As of today do you have more money than you had in the last month? If answer to this question is yes then you have taken one step towards becoming rich. If the answer is no then you have to begin self-introspection regarding your habit of spending money.
When it comes to habit of spending money I’m reminded by famous saving money quotes which goes as :
“A penny saved is a penny earned” – Benjamin Franklin
This means it is very useful to save money than you already have as compared to earning more and spending more. I’m also reminded of another quote when it comes to money
“Time is money” – Benjamin Franklin
This particular phrase was used by Benjamin Franklin in advice to a young tradesman. This means that you can generate good amount of money by utilising time efficiently.
Now I will be helping you to save money which is same as earn money. These saving money tips will not only help you to get rid of your old habits of over-spending but also to incorporate new habits which will help you to save money is consistent manner. It should be noted that your spending habits were not formed in one day and also it cannot be changed in a day! If you have consistency as well as dedication then you can succeed in saving money.
How to start saving money
Let’s begin with simple guidelines to start saving money :
Avoid plastic money
Plastic money refers to financial transaction done using debit or credit cards.
There are several different advantage of using plastic money such as it eliminates the need to carry huge cash, can be used anytime and anywhere, can use of online payment and also there is provision of credit facility. On the other hand there are disadvantages of using plastic money such as use of cards can be risky (hack etc), cannot be used at small retail outlets, transactions charges are levied, service charges are applied, can lead to impulsive purchases.
According to researchers people tend to spend more using debit/credit cards as compared to cash. This is because when you make transactions using plastic money it has little impact on you because you are not parting with real money i.e. cash. Hence you spend more easily and without any worry. Use of debit/credit card also encourages you to buy unnecessary stuffs and often takes you out of shopping budget. Hence it is recommended to use cash in most of financial transactions.
Select good savings account
Instead of going with a regular bank deposit look at savings account that offers additional benefits along with attractive interest rate. Kotak Mahindra bank offer 6% interest rate on your savings account which is substantially better when you have huge balance in your account.
Below chart shows interest rate on saving accounts offered by different banks:
|Name of Bank||Account type||Interest rate|
|Kotak Mahindra Bank||Savings||6.00%|
|Other Nationalised Banks||Savings||4.00%|
There are banks that offer free demat facilities along with savings account. Some banks (such as SBI) allow zero-balance facility which is great feature in case of emergency (ICICI bank maintains minimum balance of INR.10000 for savings account). There are banks (such as Punjab National Bank, Corporation Bank and State Bank of India) that provides regular freebies, student’s saving accounts, free demand drafts for paying examination fees or buying applications forms.
Today banks also provide life insurance cover for privilege savings accounts holder. This saves your money from spending additional bucks for life insurance cover.
Save electricity for saving money
This tip seems to be negligible change and even you may wonder how can saving electricity can save money. This can be better explained with example that I learned with my neighbour. Our neighbour is getting monthly electricity bill of INR.4000 with only two members in family. He always complains of inflating electricity bill. During our discussion on inflated electricity bill I suggested him to use electricity in responsible manner i.e. to turn-off lights, television, fans or any device that consumes saving money electricity when not in use. After using this tip diligently for one month the saving money electricity bill generated for next cycle was INR.2100. He thanked me for advice.
Now, lets make quick calculation on amount that is saved in above scenario.
Earlier bill amount : INR.4000
New bill amount : INR.2100
Monthly amount saved : INR.1900 (4000 – 2100)
Annually amount saved : INR.22800 (1900*12)
Based on above calculation you may be wondering that using electricity in diligent manner you can save huge amount!
Below are few saving money tips to save electricity :
- Replace ordinary light bulbs with LEDs
- Keep computer/laptop to sleep mode when not in use
- Turn off lights when it is not in use
- Switch off main power button when you are out for vacation
- Inform government officials if street-light are on during day-time
Use free ATMs
If you withdraw amount from another bank ATM after certain number of limits additional charges are levied for transaction. This number of transaction limits vary from bank-to-bank such as SBI offers three transaction where as ICICI offers four transaction. If number of transaction limit is exceeded then additional charges of INR.20 per withdrawal is imposed.
If you are regular withdrawal from ATMs that are outside your bank’s network then it can be expensive! You can avoid this by properly planning your withdrawals.
Fix a budget and stick to it
It may sound funny of having budget for your monthly expenses but it is must.
It helps a lot to curb as well as to control the outflow of money. While preparing budget make sure there is savings and then from the balance chalk out a monthly budget. You should keep 20% of salary as savings and with remaining 80% to be used as monthly budget.
Save money by planning taxes
You can save significant amount of money by planning taxes properly. You can do this thing only if you are aware of exemption offered by Income Tax department. Let’s check various exemption that Income Tax department offers to Indian citizen :
- Investment specified under Section 80C :
This is the most popular income tax deduction that comes under Section 80C. It allows you to make investments in certain specified instruments. Some of the instruments are mentioned below :
- PPF account
- Tax saving mutual fund
- Tax saving fixed deposit
- Repayment of principal on your housing loan
- Premium of life insurance policy (LIC)
- National Savings Certificate (NSC)
- Contribution towards Employee Provident Fund (EPF)
- Investment specified under Section 80CCC & Section 80CCD :
Deduction under Section 80CCC allows for payment of any amount done towards annuity plan of any insurance company for receiving pension i.e. contribution towards Pension Funds.
Deduction under Section 80CCD allows individual who has made contribution towards pension scheme of Central Government i.e. National Pension Scheme (NPS).
The maximum amount that is allowed to be claimed for deduction under Section 80C as well as 80CCC is INR.1,50,000 for every financial year. It has been announced that from financial year 2015-16 onwards an additional deduction of INR.50,000 is allowed for investment done in NPS.
Overall the cumulative total under this deduction should not exceed INR.2,00,000.
- Investment specified under Section 80TTA :
Deduction of INR.10,000 under Section 80TTA is allowed to be claimed from interest earned from Savings Account. This interest income is first added under category “Income from other sources” and later on deduction from this income is allowed under Section 80TTA with constraint of INR.10,000 per annum.
- Investment specified under Section 80CCG :
Investment done under Section 80CCG is also known as Rajiv Gandhi Equity Savings Scheme. This deduction is applicable to individual who has invested in shares or mutual funds that are listed for a given financial year. The deduction allowed is 50% of the amount invested with maximum limit of INR.25,000.
- Investment specified under Section 80D :
Individuals or HUF (Hindu Undivided Family) who has made any payment for medical insurance premium for himself or any of family number then the amount can be claimed as an income tax deduction.
- Investment done under Section 80DD and Section 80U :
If individual himself is disabled then he is allowed a deduction under Section 80DD whereas any of dependent family member of the individual is disabled then he would be allowed deduction under Section 80U.
These are most commonly claimed deduction. For detailed study of deduction under Income Tax act you can visit www.incometaxindiaefiling.gov.in
Use free facilities
There are few facilities that is available as free such as:
- Newspaper/Books available at library of club house
- Internet in form of free Wifi
- Dance classes
- Gymnasium which can be done at office or society club house
- Meditation classes offered by Om Shanti
- Yoga classes by Patanjali group
- Training for courses which can be accessed for free from YouTube
- You can utilise these facilities to save money.
Invest money in mutual funds or equity markets
Investing money in mutual funds or equity markets or in the real markets is wise decision of earning money from savings. People tend to avoid investing in this schemes due to lack of knowledge. However, there are several links available that will help you in learning about equity markets and mutual funds (such as moneycontrol, jagoinvestor). You can even subscribe to channels on YouTube that gives training on share markets.
There is misconception with people that it is better to have a fixed deposit (FD) account rather than investing in market. According to financial advisors it is better to invest in market rather than going for FDs with your bank since FD gives you 7% to 9% interest rate per annum. However, they are kept in dark that FD interest are taxable and hence the interest you earn is negligible as compared to inflation at the end of the day.
It is better to diversify your investments rather than investing all into one scheme since markets are risky at times. Diversifying your investments means to invest money into a variety of different areas such as the equity market, mutual funds or in share markets.
To explain with an example my dad invested in UTI mutual fund MasterGain 92 (which is UTI equity now) with 100 units worth INR.1000 rupees. Every year dividend was paid based on market value. After few year the units redeemed completely and the amount after redemption was INR.79000.
People who are looking for tax saving scheme can use Rajiv Gandhi Equity Savings Scheme (RGESS), Equity Linked Savings Schemes (ELSS), United Linked Insurance Plans (ULIPs) etc.
Party at home
If you throw party at restaurant then it will cost you thousands of bucks. If this is done at your home or in backyard then you can save huge amount! You can even ask for farm-house of your friend to organise a party. The only expense you need to pay is for food that you order.
If you order food in bulk then you can ask for additional discounts which is generally given by most of restaurant. Try to order food from restaurant which you are already familiar so that you can get loyalty discounts.
Tap your mobile phone usage
Use of mobile phone is an essential in day-to-day life. You may constantly require data-packs, unlimited calls, night calling packs and other schemes. In using such scheme you forget to tap your actual mobile phone usage. If you are post-paid user then you need to surely keep track of usage. If you don’t keep track of usage then you may end-up with bill out-of-budget.
I’ve been post-paid user until last year I received monthly bill of INR.2300. Thereafter I decided to switch to prepaid which was really wise decision for saving money. When you are prepaid user you can top-up as per need and are completely aware about mobile usage. After opting to prepaid my monthly bill was reduced to INR.750 which was significant change.
Let’s make some quick calculation about money saved after switching to prepaid mobile.
Post-paid bill (monthly) : INR.2300
Pre-paid bill (monthly) : INR.750
Amount saved (monthly): INR.1550 (2300-750)
Amount saved (annually): INR.18600 (1550*12)
You may wonder after looking above statistics. The amount saved annually is sufficient to buy health insurance policy for your family.
There are some bill payment service providers (such as PayTM, Mobikwik, Freecharge) that offers cashback when bill is payed using their service. This too adds to amount saving on mobile bill.
Check with part-time positions
If you are already working professional with fixed weekends off then you can get a part-time job to supplement you income. Even people such as students, house-wife can opt for part-time position in order to increase income.
There are several different profiles such as online trainer, content writer, brand executives, transcriptionists, recruitment agents, tour guide etc. There are online jobs can be done from comfort of your home such as marketing executives, data-entry etc.
However, you need to be extra cautious before applying to such jobs since most of them are scams. There are job search engines such as first naurki.com, internshala.com, letsintern.com and searchmycampus.com, which are designed particularly for college students for part-time jobs. You can even seek help for part-time job from your contacts such as family and friends.
Compare and bargain
You should bargain as if it’s your birth right. Since everyone has margins when goods are sold. In today’s scenario were economy is slow, traders generally go with the maximum margins. You can compare prices of stuffs online on various e-commerce site such as Flipkart, Snapdeal, Amazon, Ebay etc. While visiting a store keep the price handy and using that you can bargain. Such bargains may not result much but will definitely bring down the price by at least 5-10%.
If you are practicing above saving money tips and tricks then you will have sufficient bank balance at the end of financial year.
Here are some articles that will help you to get more detail about the Saving Money so just go through the link.