17 Feb 2014

How Do I Save?

This is a question I get asked often.  I posted an article where I mentioned that we should all set aside an emergency fund. This fund should consist of six to eight months of living expenses and is for emergencies like loss of a job, car and house repairs or any sudden need for income in the family. My friends asked me how to save. The answer is simple. Savings are an ongoing process. We have to be at  it for a while and then it becomes the normal way to live
I sat and thought about how anyone saves money and here is what I could come up with :

1.       Cut Down On Entertainment
Entertainment expenditure in urban life can come to quite a bit. If we could eat out less and watch one less movie in a quarter, the savings would add up to quite a bit.

2.       Start a Recurring Deposit (RD)
An RD is where the bank takes money, locks it away for a period of time and gives higher interest rates than a savings account. Remember to automate your RD. E.g. take money out on the tenth every month automatically.  Once your RD matures, roll the money over to a fixed deposit. 

3.       Sell Stuff on Craigslist and OLX
Whenever I have things I do not use anymore I sell them online. It is unbelievable but almost everything sells. I have sold clothes; kitchen utensils; kitchen electronics like hand mixers, microwaves, handbags, shoes and cardboard boxes! Yes, I have sold a bunch of stuff on these online portals. It is a good way to earn money and clear the clutter in your house. 

4.       Switch Your Cell Phone Plan
Too many of us a have a postpaid cell phone plan which is way over our needs. Try switching to a pre-paid plan and stash away the amount you save

5.       Make Use of Public Transportation and Walk
Petrol and diesel are expensive. If you can take a bus or walk, it is definitely the healthier and cheaper option.

6.       No Shopping
I am not telling you to stop buying groceries. Pledge not to shop for clothes, shoes, accessories for six months. It will greatly help to add to your emergency fund.

7.       Try Second Hand
If OLX and Craigslist are great to sell stuff, they are great to buy items too. If you have to buy something, consider buying second hand. I have friends who bought furniture from one of these websites and are very happy with it.

8.       Ban Restaurants
Pledge not to eat out for eight months and see yourself save a pile. Restaurants are getting quite expensive and it is best to eat at home.

9.       Save Your Bonus
Every time you get a raise/bonus/gift, stash it away. Extra money should be looked at savings instead of an opportunity to go shopping

10.   Differentiate Between Needs and Wants
There is a difference between needs and wants. You need to eat and you “want” to go to a restaurant. Sometimes, the distinction may not be so clear. Urban life has created an illusion of too many “needs”. E.g. do we really need cable ? Do we really need internet in our house ?If your internet bill is Rs.1000 and you cut the line for a year you can save Rs.12,000. These are somewhat extreme measures to save but I have seen people do it.

These are some of the ways I could think of to save. If you have others to suggest, please chime in. I will be happy to add it to the list.

1 comment:

  1. It certainly is very important to save, but one has to live one's life too.

    We really need to strike a balance between spending and saving to be able to enjoy the finer aspects of life.

    In my opinion, both spending and saving must not turn into obsessions.