The biggest challenge for young investors is to control their desire to splurge. Following are 5 simple tricks that can help you with your transition from being a spender to a saver:
- Keep a tab of your expenses
The foremost step to start saving money is to figure out how much you usually spend. It’s important to keep a tab of all your expenses—that means every coffee that you buy, or any household item you purchase, cash tip, etc.Once you have your data, organise the numbers by categories, such as necessities like groceries, gas, electricity and mortgage, splurges like shopping, dining out, etc. and total each amount. Use your bank statements and credit or debit cards to make sure you’re accurate and don’t forget any expense.
- Save before you spend
Several individuals are unable to save enough as they are hardly left with anything after all the expenses. Often people have a financial equation of Income – Expenses = Savings. Whereas it should be Income – Savings = Expenses, i.e. instead of saving what’s left after your expenditures, you should spend after deducting your savings for each month. Sure, controlling expenses is easier said than done. What’s the solution you ask? – automate your savings. Start an SIP (systematic investment plan) where a fixed amount gets automatically deducted from your accounted and is further invested in your preferred investment options at regular intervals.
- Consider long-term investment options
Putting your wealth away in long-term securities such as equity mutual funds will help you accumulate greater wealth thanks to the power of compounding. What’s more, investments in equity markets for a long period helps to beat the volatilities. You can also consider investing in ELSS tax saving
- Avoid falling into a debt trap
Sure, debit and credit cards are very handy and useful when it comes to paying online transactions. With the easy availability of personal loans, people are taking loans for anything – be it buying a mobile phone or taking an exotic trip. These personal loans provide easy access to cash to individuals. But what people usually fail to see is that these loans can easily make them a victim of the debt trap. It’s important to avoid debt traps at any cost as it’s difficult to get out of one.
- Use tax-saving investments
Section 80C of the Income Tax Act, 1961 offers various tax-saving investments to individuals. One of the most common investment options being ELSS tax saving funds. ELSS (equity-linked savings scheme) scheme offer the dual benefit of tax saving and capital appreciation.ELSS tax exemption offer tax benefits of upto Rs1.5 lakh per annum. An investor can save up to Rs46,800 by investing in ELSS tax saving mutual funds.
Self-regulation and discipline are the cornerstones of any successful investment plan.A good financial plan acts as a map to achieve your financial goals. Happy investing!