Survey after survey reveals the worrisome state of retirement savings in the India.
24 Aug 2017, RBI survey revealed that,77% of Indian households either do not expect to retire, or have not actively planned for retirement, Interestingly, despite the large share of real estate in household wealth, only very few households expect to benefit from this part of accumulated wealth to finance expenses in old age. Instead, most households (more than 50% of the population) expect to rely heavily on help from their children.
For Many people who find saving a struggle, the question is: Where do I begin?
We all know how to spend but not all of us know how to or actually save
Here are five ways to jumpstart your savings
Have a written blueprint of your Budget
If you are one of many individuals who scratch their head after every month trying to recall where your whole month salary went, it times to stop thinking and make written blueprint of your expenses.
It’s a common practice people usually say they don’t make budget but do it mentally.
A budget tells you where your money is actually spent, according to Dave Ramsey So, before each month starts, sit down (with your spouse if you’re married) and write down your financial action plan for the month and stick to it.
Give every Penny a mission and the total of budget must be equal to zero every time.
Also, pay off your debt as fast as you can and stay out of debt. That’s way you can set aside money for your needs and Savings.
If it is required try to install spend tracker on your phone so you can monitor the expenses or write them down, if you will do this activity for consecutive 3 months, it will become a habit
Build Your Reserve
As you start earning, first and foremost step should be to prepare the Emergency reserve.
Emergency Fund must be the fundamental pillar of fundamental approach which every family should adopt. According to Investopedia.
An emergency fund is an account for funds set aside in case of the event of a personal financial dilemma, such as the loss of a job, a debilitating illness or a major repair to your home.
The purpose of the fund is to improve financial security by creating a safety net of funds that can be used to meet emergency expenses as well as reduce the need to draw from high interest debt options, such as credit cards or unsecured loans.”
The Emergency Fund can be looked at as a form of your own “self-insurance”. A way to cover an expense, up to a certain amount, without it putting you in a tough spot.
Ultimately, you want at least three to six months’ worth of living expenses in your emergency fund.
Don’t buy if you don’t need, even if it is on Sale
Do you Remember that Microwave you bought that was 30% off months ago? Or the New Branded Shoes you bought for half the price.? Now they are just gathering dust in the corner of your house.
We all have these purchases that seemed enticing in the beginning because they are on sale and now are just park in the junk we store at home.
Remember if you bought a pair of shoes you don’t need that is 1500 Rs, because it was on 20%, you did not save 2o% on it, you spent 1500 rs on it unnecessarily.
Buy in Bulk only what you will actually use
Set aside some amount every month from your groceries purchases for Perishable items, which you have to buy regularly and buy them as needed.
Don’t bulk buy those items which you have not used it ever, if you did not like it, end up will not using them or throwing them away.
Allot a specific fund for your consumables that have longer shelf-life like laundry soap, cooking oil, bath soap, toiletries, that can be bought in bulk.
For example, if you’re buying all these stocks that would last you three months for 1000 Rs, set aside 200 Rs each month so by the time you run out and you need to restock, you have the funds for it.
Automate Your Savings
One of the best method which I thoroughly believe, ensure every month you save from your salary some percentage of it. It depends how much do you want to save it, but even you can start with small amount and increase that saving rate every year as your salary increases.
I have shared it this method so many times in my blog or guest post, If you raise a Question “How to start Saving and how much percentage should I save from my salary “
Let’s say you start your career at age 22 and you’re making Rs 40,000 in an entry level job. Save 10% of your income or Rs 4,000. As you advance, change companies, get a pay-hike, etc. save half of each raise.
Got a raise for Rs 5,000 to Rs 45,000? Save Rs 2,500 of that and add Rs 2,500 into your annual budget. Now you’re saving Rs 4,000 + Rs 2,500 or Rs 6,500 which is 14% of your income.
Another raise of say Rs 50,000? Save Rs 2,500 more. Now you’re saving 18% of your income.
This method allows you to increase your savings and your lifestyle using a healthy & balanced approach. It allows you to take advantage of pay-hikes on both sides of the coin: the saving side and the spending side.
Some other Bonus Tips
- Use or set aside some amount every month from your salary that might be due in the coming months or you have to pay, setting aside a specific amount ahead of payment schedule.
For example, you know your car Insurance is due in August and it would cost you 8000 Rs. Start setting aside 1000 Rs each month beginning January, so you’ll have Rs 8000 by August.
Just break down the target amount according to the number of months you’re planning to save up for it. And don’t touch it! You can have this type of fund for almost everything. And come the time you need the money, it won’t feel like an “emergency”.
- It is always Suggested to start saving for your Retirement early, as early you start you get the taste of Power of compounding
Take an example to understand it better. Say Ram is 28 years and wants to retire at 60. he has 32 years to go.
If he starts investing Rs 1,500 per month for the next 30 years, then at the rate of 15 per cent (assuming he is doing a systematic investment plan in equity mutual funds) he will have a corpus of Rs 1.03 crore.
Whereas if he doesn’t start at an early and at 50 he decides to start investing then to have a corpus of Rs one crore he will require an investment of Rs 41,500 per month!
OK, fair to say this isn’t some secret miracle that will make you instantly rich but start saving gradually will help you in long term.
Savings is a continuous process that will be a part of your habit if you persist. You’ve worked hard for your money, so make sure you spend it on the things that you value most!
Hopefully that any or all of these tips will start to become part of your though patterns. They have helped me 100% to decide how much to save and where to spend. Healthy Habits!