When it comes to hard-earned money, we don’t plan or put away enough money for the future.
I know that feeling when you receive your paycheck. We are all tempted to splurge it on everything we think that we want.
Unfortunately, it doesn’t work like that.
Between now and the time when you plan to retire, a lot may happen.
You may get an increase or decrease in pay – your family may expand – your needs may change – you may face unexpected expenditures or who knows you may even win a lottery or lose a bet.
The wise thing to do is to strategize your current income into savings and investments since the future is uncertain.
How To Save & Invest Effectively?
Even if you make a vow to start saving, it may not always be effective. There is still a few extra hundreds or thousands you would want to spend on stuff that is not useful.
So, here are a few tips to kickstart your savings effectively.
1. Make a Budget
I know, you have heard this one a thousand times before and must be thinking “It is so boring”.
But, making a budget is like having a timetable in school. It helps you organize your finances and plan for the future. If you have decided to make a budget, the next essential step is to stick to it. And this is the hard part.
To stick to your budget, some things to keep in mind are:
- Be realistic about your financial situation.
- Set rational goals that are within your capacity
- And stay committed to your budget.
2. Understand Your Cashflow
Cashflow means the amount of money that flows in and out of your account. Understanding your income and spending will give you a better grip on your finances.
Make it a habit to review your income and expenditure.
Keep a check on where you are spending more and analyze your wants and needs.
3. Differentiate Wants & needs
Most of us are unable to tell the difference between what we need and what we want. The modern world of marketing has advertised products so that we tend to believe that some things are a necessity even though it may not make a difference to us.
So, understand the difference between your wants and needs. Before you spend on something, make it a habit to ask yourself if it is essential.
Understanding what you need and trying to cut down spending on what you want could spare you a lot of money to save.
4. Pay Yourself First
Paying yourself first takes you a long way in your financial journey. Whenever your paycheck is credited in your account, every month or week, make it a habit to allocate the amount to your savings and investments first.
Suppose you are investing some money regularly in fixed deposits or cryptocurrency. In that case, distribute the salary among those funds first before spending it. It is always helpful to save first and spend what is left after saving.
5. Spend Wisely
I know we have talked a lot about spending already. But I can’t stress enough on how much spending wisely can be directly linked to financial gains.
Before you purchase anything, analyze its long term benefits and drawbacks. You may want to ask yourself, How long will this item last? Will, it put me in debt?
This drill may sound silly while buying a small thing, like a chocolate bar, but is very useful for more significant purchases.
How To Invest Your Savings?
Now you might know how to save effectively, but what do you do with the money you have saved?
- Just leave it in the savings account?
Well, if that is your answer, think again.
Studies have shown that interest earned from the savings account hardly even beats inflation. So if you want to build your wealth, you may need to put your money somewhere to grow better – Investments.
In the present day, there are many avenues of investment ranging from traditional assets such as Fixed Deposits, Bonds, Stocks, etc. to alternative assets such as Cryptocurrencies, ETF’s etc.
You may choose to invest your savings in any or a few of these assets based on your goals, needs and risk tolerance. No matter where your money is invested, here are a few habits that will help your investment grow effectively.
- Think Long Term: Sure, it is not wrong to invest in short term investments, but you may need to put some of your savings away keeping the future in mind.
- Define your Goals: Ask yourself why you are investing? Define your goal for investment. You may want to buy a car or pay for your child’s education. So, whatever your goals maybe keep a separate asset to achieve those goals.
- Stay Consistent: Investment need not be a one-time thing. Make it a habit to allocate your income towards investment regularly. This will help you build a corpus over time, thus, generating more wealth.
After considering the points mentioned above, we can safely say that saving and investing is the backbone of a persons financial success.
Like always, no one way works best for everyone. Each individual has their own way of saving and investing. Find out what works best for you, and soon you will find yourself on your way to financial success.
[su_note] KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. [/su_note]
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
Table of content
Subscribe to Our Newsletter with exclusive content.