How to Save Money for Short and Long Term?
Saving money is very crucial in one’s life, the sooner you realize the importance of saving your life better will be your future and this habit can be well inculcated or inherited from your parents.
If a child sees his parents saving and investing, then he/she also understands the logic of saving their life.
So it’s the best one should develop this habit in their kids at an early age by gifting them the piggy bank and setting some instance, which would make them realize how a portion of their pocket money can be saved and utilized at the time of need arise.
World most successful investor, Warren Buffet said,
“Don’t save what is left after spending, spend what is left after saving”.
If you follow this thumb rule, then at the time of need, you will have enough to meet these exigencies and never have to beg your friends/relatives for any financial help.
How To Save Money Tips?
Today, I’m thinking to give you an insight, How you can start saving and what you should do the same as the hardest part of saving is to get started and remain on track for the short and long term.
Here is the strategy which I follow once salary credit happens:
Records Your Expenses
It would be best if you have records of the expenses that incurred every month so that once salary credit happens, you can keep aside the money for their monthly expenses along with that 10% you can keep aside as an emergency fund so that if any new /sudden expense arise at least you have surplus to meet this need.
Budget Your Saving
Once you have your expenses records you can prioritize them in terms of need, wants, and desire and do a self-check whether wanting/desire expenses are needed this month or can be postponed for a later time of the year. Firstly, try to keep the money aside for need, only if the wants cannot be postponed then try using your current month salary for its expenditure.
Try not to spend on desire till it become a wanted need.
Set a Saving Goal
After prioritizing your expenses you have your goals determined so that you should be aware of whether you are going to save for a short- or long-term period.
Depending upon the horizon of the goal you need to decide how much money you would need to save for your respective goals.
Let’s one may plan to buy a car or a house, want to save vacation/marriage so depending upon the terms and amount you need to meet that goal you need to check out the saving avenues.
Pick the Right Tool
Depending upon the type of goal as discussed you may narrow down your approach in choosing the right financial instrument for meeting your goal:
If your investment horizon is short-term lesser than 3 years, then you can think of keeping your money in such instrument which has a lesser or no lock-in period with a secured rate of return as you would liquidate this money within 3 years.
Investment options can be:
- Fixed deposits
- Recurring deposits
- Sweep in FD
- Company deposits
- Debt/gilt mutual funds
- Post office time deposits
One should be aware of the fact for short term goal achievement,
one should focus on capital preservation rather than wealth creation,
and don’t overlook post-tax return basis your income slab returns will be added to your current income and will be taxed accordingly.
How To Save Money for long term?
In case one planning to save for their long term likewise for child education, child marriage, or retirement plan, then one should opt for the saving option as per their risk appetite, their current saving portion, and how much you can hike your saving percentage every year to meet these long term goals.
Let’s discuss in short, what options can be considered for long term saving:
Make Saving Automatic
When you have chosen the right tool basis your goal you may give instructions to your bank for deducting this specified amount each month once salary credit happens so that it should not be skipped from your mind that may result in going out of the track of saving journey.
Watch Your Saving Grow
It’s best to review your investment avenues every six months to determine whether their growth is still in alignment with your striving goals so that if any option not performing as the estimation you may switch your fund to a different avenue so that your goals term should not be delayed.
The Bottom Line for “How To Save Money”
The above-outlined plan can only be exercised,
If you bring strict discipline to your saving habits and have strong willpower not to touch saving portions for any expenditures.
If some desire comes in your way of saying don’t deviate from your standard plan instead try to use your yearly bonus or increment for such wants.