One must invest a portion of their income in high-yielding assets to increase the wealth. That is the amount of money you will save over time to achieve your long-term objectives. Apart from investing, we should be aware of how to save money in our daily life and even while we are spending money. Every rupee saved and invested contributes to long-term wealth creation.
There are three areas in which you must have a strong grasp as a novice, and even as an experienced investor: spending, borrowing, and investing. After all, you’ll need to spend money on necessities and utilities, take out loans at some point, and invest to achieve your life objectives.
Here are some tips on how to save and spend wisely.
Save first, then spend: The basic rule of saving is to spend what’s left after you’ve depleted your savings account. You should reverse the procedure if you spend first and then save what’s left. As a result, expenditure should equal income minus savings.
Check your bank accounts: The majority of us have multiple bank accounts. Keep a watch on the bank statements to check if any charges have been deducted for various reasons. Check to see if the bank can undo them, and take steps to prevent banks from doing so in the future.
Risk must be covered: Buy enough life insurance, ideally through a term insurance plan, if you have financial dependents. Also, be sure that everyone in your family is covered by health insurance. By paying a little premium for these risk covers, you can ensure that your funds are not depleted in the event of an emergency and that your family’s life objectives are not compromised.
Credit card balances: If you tend to roll over your credit card balances each month, you are seriously jeopardising your financial situation. In certain cards, the yearly interest rate is close to 40% or even more. To prevent late penalties and other costs, make sure you pay off your credit card balance in full before the due date.
Home loan: If you currently have a house loan, keep prepaying it and don’t wait to pay it off according to the terms of the loan. The sooner you pay off the loan, the more money you’ll save on interest. Also, if the EMI load is comfortably satisfied after household costs and long-term savings, retain a shorter term.
Go digital: When purchasing, use digital platforms as much as feasible. It doesn’t matter if you need money for your home, utilities, or even life insurance. Term insurance policies have a premium that is about 25% cheaper than the offline version of a similar plan.
Once you’ve established a practice of saving on little purchases and a daily basis, the main outcome will become complex over time, and you’ll discover new methods to save even while you’re spending. Both of these things can help you save a lot of money in the long run.