How to save money and become rich?

Save money and invest to become rich

Introduction

India is a developing country where the middle class has gotten financially stronger over the years and, as adults spending power has increased, even the young have become free spenders and heavy consumers in some instances.

With a strong economy, a large population of the young and vibrant generation who are fascinated with emerging clothing brands, unique tech gadgets, food, travel & tourism, have seen comfort in spending. I mean People spend well nowadays.

None to blame here. But, the current generation has quite good taste in terms of selective purchase but this has come at a cost. 

Look at the Gross savings rate;

 Since 2010, the drop in savings rate is real!

In this India today article, it says,

It took us a Pandemic to realize that we are doing something wrong!

A great part of the blame goes to the health crisis. But, the way the situation has arisen and with lesser savings in hand. People tend to suffer. 

So, what’s the solution?

Think of this, Inflation hasn’t been kind to us. With an annual salary increment of say 6%-7%, you are not making any material progress in building your wealth unless you cut down your expenses and increase your savings.

Because, if not, with little or no savings and a 5-7% inflation rate, people tend to go broke by the time when they really need money.

Have listed down these points. So, just give consideration to them next time you think of saving:

How many of you do Budgeting?

It’s one skill each and every one of us should know.

And, it’s not that complicated either. All you got to do is list down your income and major expenses, see to what extent of expenses can you pay without putting in more money.

Meaning, Let’s say your savings is at Rs.10,000 and your monthly expenses are at Rs. 5,000. Now your job here is to cut down your expenses without materially affecting your living standard. And, see how long can you rely on just the savings.

Rainy day funds

Now, you might have heard this statement. It says “You should have sufficient sayings that could feed in for your 1 year or 6 months of expenses”. That’s all it really is. Have savings come investment such as “Public Provident Fund”, “National Pension Scheme” and you’ll pretty much cover this point.

Spending preference

Now, this is very important. Wherever you go, you are being persuaded in purchasing new products or services. The entire marketing industry starts feeding on you once you step out of your home.

These billboard ads, window advertisements, internet-based ads, they see that you open your wallet and start spending.

Now, your job is simple. Click on these colorful ads and buy whatever they are selling. Right?

WRONG!

Spendings can be segregated into 3 parts.

  1. Need-based spending
  2. Want based spending and
  3. Luxury

Need-based spending

This is nothing but your basic needs such as food, clothing, shelter, etc. You have to spend on this!

Want-based spending

See the watch you wear. It’s not a basic necessity for you. It was a purchase you made because you liked it. It is a want, something that you wanted. Right. So, this is want-based spending.

Luxury spending

This is just the next version of want. But, in this case, you expect more than usual. If you had an apple watch with you then that could be labeled as a luxury.

This is it! So, next time you make any purchases, all you need to do is. Put the said purchase in any of the brackets and you’ll see a pattern. Now, do this for a month and you’ll surely know where your expenses are going wrong!

Spending preference matters! Cause, your spending habits ultimately define the wealth that you could make Or not make!

In this article by “Financial Express”

Now you see the pattern right? We do the right thing when the situation demands us. But, my question is why wait until the last movement. Why not make it a habit and work on our savings and Investment? 

Well, I have done some research and listed down some key points for you people. Just concentrate on these points and you’ll pretty much start managing your savings well and maybe save some money for investments too.

So, let’s check them out.

  1. Avoid credit cards at all costs. They charge high interest!
  2. Cut down (or completely stop) on the consumption of sin products Ie.  Alcohol, Cigarettes, and other tobacco items.
  3. No loan unless absolutely necessary! We don’t want unnecessary EMI burdens.
  4. While purchasing, make efforts to cut down the bill by subscribing to various coupons and discounts. Or, just make purchases on such occasions that provide discounts.
  5. Take help of government offered schemes to reduce tax. Schemes such as PPF, NPS, NSC. (And, If you want more information about how middle-class Indians can save on taxes. Check out the description) Check this article link!

Watch the YouTube video for more information:

Disclaimer: All the information on this website is published in good faith and for general information purpose only.

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