In today’s world where eCommerce companies are announcing sales every now and then, where credit cards are easily available and banks have started offering even personal loans it is very difficult to suppress that urge to spend more. Then how can one save enough for attaining financial freedom?
The answer is not that difficult. As a rule of thumb, one needs to save at least 10% of his monthly income and with time he should keep increasing it slowly. Instead of viewing Income-Expenditures = Savings, one should see it the other way around, i.e. Income-Savings = Expenditures. Pay yourself first. Before you spend money on paying the rent, home loan EMI, electric bill or any other thing make sure that you move away from the money for your monthly savings and lock it in a safe place. This will be the sacrosanct treasure box that you should not touch no matter how strong the urge to spend is. If you want to achieve financial freedom, you have to learn to live below your means. Those who spend more than they earn are calling for big trouble.
Below are some of the ways that one can follow to save more and achieve financial freedom to fulfill all his dreams and aspirations:
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Save money on time by automating your savings
The best way to ensure that the money allocated for savings is actually saved every month is to move it away to some other place from your salary account before you can spend it. You can set a Standing Instruction (SI) to your bank to automatically debit your salary account on a particular date every month and move it to a liquid fund or a debt fund. If you receive your salary on the last day of every month then you can set the SI on the first day of the next month.
Financial freedom by making a budget and sticking to it
One of the main reasons why people spend more is that they do not have any monthly budget set up for their expenses. It is very important to identify the expenses that one usually incurs every month. He should then break them up into different categories. For each category he should set a maximum limit that should not be exceeded at any cost. Also, it is important to separate the expenses into two heads:
- Need-based expenses
- Want based expenses.
Need-based expenses are those which are compulsory and one has to spend money on them. Some examples can be your monthly rent, home loan or any other loan EMIs, money spent on purchasing required groceries or food items, etc. Want based expenses are usually those that one spends on items that he does not need. These are the expenses that one can still live without like buying a new pair of shoes although one already has a pair, spending too much on movies or dinners in expensive restaurants, etc. It is important to identify these expenses and reduce them if one wants to be financially independent in the future.
Purchase a Netflix subscription or become a Prime member
Instead of going out for a movie to an expensive theatre it is much better to enjoy it in the comfort of your home with a hot cup of coffee. When you go out you invariably end up spending more on other extra items as well like popcorns, snacks, transportation costs which can be avoided if you watch it at your home. You can become a member of Netflix or Amazon Prime and get access to their huge catalog of movies. If you want you can buy a pair of speakers for the even better movie experience.
Purchase online and look out for cashback
Whenever possible purchase online rather than buying it from a local store. The reason being that online price for the same product is usually much less than it would be if you bought it from the store. The products that are displayed online do not have any physical store linked to them. So, there is no headache for the seller to maintain them and show it to the customers like they do in physical stores. Hence the reduction in cost. Also, while purchasing online, check if you can make the payment through digital wallets like Amazon Pay, Paytm, etc. Digital wallets usually have tie-ups with eCommerce websites and offer attractive discounts/cashback when you purchase through them.
Cut back on smoking/drinking habits
If a person (say Rakesh) smokes 15 cigarettes per day, each costing Rs.3 and around Rs.5 for chewing gums or polo mints to accompany the cigarettes then the total smoking cost per day would be Rs.50. Now, what if he decided to quit smoking and instead invest that money systematically in a mutual fund? Let’s say each day Rakesh would drop the Rs.50 in a collection box then at the end of the month he would be saving a total of Rs.1500. Now if he invests this money systematically through SIP in one of the top-performing mutual funds then at the end of 15 years he would be a crorepati !!
Checkout below similar link:
https://www.askmoneyguru.com/2018/04/07/ppf-account-benefits/