Start Saving Now
Ever since we were a child, we have been taught the importance of saving by our parents and our teachers in school. I remember I was given a monthly allowance when I was a small child and I bought a piggy bank in which I used to put in part of my allowance. Later when I needed to buy something, I used to use that stash of cash for my little treats.
But when we grow, we often forget the importance of saving and start to spend money on things which we don’t need or places we could have avoided. However, it is important to inculcate the habit of saving consistently to put that money someplace where it will be put better use to rather than on unnecessary expenses.
Now the question arises how much to save and how to start?
You must have heard of the unpredictable English weather. It is sunny now and the next moment it is raining, gets sunny again and in a jiffy it starts to snow. This is how life is. Today you may be earning well, meeting all your expenses and leading a happy life. But what if suddenly something happens and you lose your job? Or maybe a sudden need for money arises for something unexpected.
For these uncertainties, you need a ‘rainy day’ fund, which can be built only if you start saving.
Typically a ‘rainy day’ fund contains three to four months of living expenses in case you lose your job or meet with an unexpected need for the extra cash. First, add up your basic monthly expenses: Rent, utilities, food, commuting costs, toiletries/household items, etc. Multiply by three. That's the minimum number you're trying to save. If you can't realistically ballpark your monthly expenses are, track every rupee you spend for 30 days.
Start your emergency fund even if you are paying off debt. Try this: For every Rs 10 you can save, funnel Rs 7 toward reducing your debt and Rs 3 toward your emergency fund (so if you can save Rs100, put Rs 70 toward your credit cards and Rs 30 into your savings). When you get two months' worth of emergency funds in place, switch back and put all your capital into paying down your debt. When the debt is paid off, return to building your emergency fund. Stash your savings in an account that you can access quickly and easily; where there is no risk of losing your money; and where the monstrous inflation doesn’t eat up your money.
Here are a few options where you can stash your savings:
Here are a few options where you can stash your savings:
- Fixed Deposits >Liquid Funds > Fixed Maturity Plans of mutual funds
Tip: Make savings a permanent part of your budget.
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