As we all know that earning money is very important for fulfill our needs. Other than needs we need more money to secure our self’ & family future. If we will not save money for future then whole life we have to work for money.
Life is not just only earning money, it is to enjoy the time also and this will happen when we have regular income without giving time to the work. By this regular income we can spend money to enjoy life. This all will happen when we save our hard earn money and make as tool to create money making stream.
This saved money will create money making stream when we save it and invest in the tools where it will generate income with nominal risk.
“So saving money is equally important as earning money”
Now we have income per month and against which we also have expenditures per month. After expenditure whatever money we can save that money can be invested in right investment tools so the goal of financial security and further financial freedom can be achieved.
Also as much you save you will get as much returns on your savings. Small saving will help us to create big corpus. Every single rupee has importance which actually help us to make corpus large.
So how we can avoid unnecessary expenses which actually eating our prospective savings. Only we can evaluate our expenses and can find out where money is unnecessarily draining out which can be restricted.
First we will see what are those major heads of expenditure due to which our major earnings are going.
- House Rent or House loan EMIs
- House maintenance
- Food/ grocery
- Spouse & Kids
- Kids Education
- Utility bills – Telephone, Water/Property Tax etc.
- Instalment of Loans if any
- Premium pay-outs for Insurance
In all mentioned heads of expenditure we have to evaluate the head wise expense and should explore the possibility to reduce expenditure so more saving can be done. We will see in detail major head of expenses.
House – Most of us are purchasing the house by borrowing loan from banks or financial institutions. Before opting the loan we should see which institution are offering lowest interest rate and understand the applicable hidden fees. Also we should see the tenure of the loan which will be such which can allow us to close the loan at earliest.
The financial institutions has designed the housing loan format is such a way which is benefited to the institutions if we close loan early than the tenure.
For example if we take housing loan of Rs 20 Lakhs with interest rate of 8.5 % for tenure of 20 years, EMI will be around 17.30k per month. The interest component which bank will recover from us in 20 years is Rs 21.66 lakhs other than principle amount of Rs 20 Lakhs, in which bank will recover interest amount of Rs 14.83 lakhs in 10 initial years and rest Rs 6.83 Lakhs they will recover in another 10 years. If we are re-paying loan in 20 years, we will pay 41.66 lakhs in 20 years. But if we close the loan premature in 10 years than the total pay-out will be 34.83 Lakhs which is at very much higher side. Hence it is always advisable to complete full tenure of the loan to get right interest rate. If any time we are planning to close the loan at early then better to close in 5-6 years so the interest amount will be less around 8-9.5 Lakhs.
House maintenance – To maintain our house we are spending lot of money to do the interiors of the house and always choosing items based on their good looks. While choosing the décor items we should also see the durability of interior, finishes, furniture which can save lot of money. Also if we are buying furniture from wholesale market then we may get good deals or if we buy in discounted sale period then also lot of money can be saved.
Many interior items are asking good amount of money for maintenance. So while choosing the items this should also be considered. Choosing low maintenance item can save decent money.
Food/ grocery – Most of us knows budget per month for grocery. Now a days many chain of supermarket are offering best discount on grocery items. We need to find out which supermarket chain is offering best discount on products. This will save good amount of money per month. As this is regular expenditure every month in all years hence even small saving can contribute good amount of corpus in 20-25 years. Few supermarkets are offering best discount on grocery items brand like D Mart……etc. Also buying vegetables from local bulk market can save lot of money.
Generally our budget for grocery & vegetable per month is around 10-15k. If we can save 3-4k every month for 25 years this can add 30-40 lakhs in 25 years.
We are losing money in wastage of food. Controlling wastage of food can also save lot of money.
Healthy food is very much essential for good health so try to use healthy food so our family health will be good which will help us to reduce medical expenses.
Clothing – Clothing is one of the essential need and regularly we are spending money to buy clothing. Clothing is one of the things which gives us confidence and we can create good impression in society. Generally many people are buying clothing stuff during festival season. Also through online shopping many are buying clothing very regularly. Now a day many online websites are offering very good discounts on fashion clothing which can save lot of money. Those day has gone when people are buying only branded clothing but now we can get better designer clothing even in non-branded items which have reasonably good quality.
Try to buy the items when discount sale is going on, as now a days clothing manufacture do not want to keep stock of clothing and regularly putting offers/ sale. Sometime we can save even 50% on clothing expenses which help to reduce major expenditure.
Spouse & Kids – We need to spend some money for our spouse & Kids for buying stuff or for their pocket money. Here we do not have any control so we should treat as expenditure. If our spouse is enough smart then he/she will invest part amount of pocket money to buy valuable assets like gold etc. which will have good value in future.
Kid’s Education – Kid’s education is very important element, we can treat this as investment as this will give us peace in future. If our kid will get good education and will get settled in right age then our financial liability will drastically reduce and we will be stress free in later age. We should try to give good schooling to our kids as this will help them to become independent and you can enjoy your financial freedom peacefully. Don’t waste money in highly branded school where for normal education our pay-out are very high. If we are into higher income bracket or having only one kid then may go for it if it is good and affordable.
Utility bills – This expenditure looks very small but if we total for our all utility bills it will be decent amount. Since this expenses are for every month and will continue for whole life, saving small amount can also add decent contribution to corpus. Try to avoid paying late fees. Also like mobile or phone connection we should check latest offers / plan and convert connection with latest plan where we can save some amount of money. Even some of the govt/ Non govt. organization is offering discount on timely payments.
Installment of Loans – Paying EMIs on time will save penalties. Don’t keep so many loans as this will shell out our pocket. Try to close loan in full tenure so we will get best benefit of interest rate. Pre-mature closer will attract more penalty and higher interest rate. Better to invest excess money in other investment options where returns are at higher side which will help to increase corpus amount.
Premium pay-outs for Insurance – Many people are investing money in life Insurance policies thinking that will get good amount of money after tenure but insurance policies are offering very less interest rate, only best benefit is the family protection after demise. Always recommended to invest that much money which should protect our family. Insurance policy should be name of earning member of the family, in case of any interruption in earning due to demise, the family protection cover will help them. Many of us are taking policies name of spouse & children but investing in these policies has no use as this will give us less returns, better to invest in other investment options where interest rates are at higher side.
Plan your travel in advance – Most of us are not making any yearly traveling plan and booking travel ticket at near to travel date which costing us premium pricing. If we plan our travel in advance we can save lot of money. Also hotel booking at peak season will attract high pricing. Plan your travel during non-peak season can save big chunk of money.
Few of the tips will help us to save money.
- Plan your travel in advance
- Pay your utility bills on time to avoid late fee
- Try to avoid making payment by credit card where transaction fee applicable.
- Pay your EMIs on time to avoid penalty.
- Plan your parties at place where discounts are available.
- Try to reduce your utility bills like electricity, water, phone etc.
- Buy 2 or 4 wheeler with extended warranty to minimize maintenance cost.
- Try to use less intake of outside food which shell you pocket and health too.
- Explore the food chain and buy on the days on which offers available.
Just for example if we can able to save Rs 10k per month form all above heads we can create good amount of corpus. Saving and investing Rs 10k per month average interest rate of 8.5% will give us 1Cr in 25 years. This Rs 1 Cr will be addition to our other savings for corpus.
Every single rupee saving will give returns in future as compounding of interest on money will gives unbelievable returns. Taking little pain in this age will help us to lead life stress-free & relaxed.