Sometimes the hardest thing about saving money is just getting started with it. The amount of wealth you build now will help you to live more comfortably in the future. It can also put you in place to help your children when they are grown. The COVID-19 crisis has taught the critical importance of building a savings pool that can be used in times of emergency. Here are 5 tips on where to invest money and develop a simple and realistic strategy for your finances, so you can save for all your short- and long-term savings goals.
- Set An Emergency Fund goal
The first thing to do when planning on increasing your savings is to set a financial goal. If you just try to set a general goal to save more money, you will likely fall short in the end. Setting achievable and realistic goals makes the savings process much more successful. How much needs to be saved depends on your recurring expenses and the likelihood of running into a costly financial emergency.
For most households, you need to save at least three to six months of expenses in a cash emergency fund. In crucial situations like job losses and layoffs, car accidents or home repairs where you require funds, you can start saving and grow your emergency fund until you hit the three to six-month target. If you are self-employed you can increase that savings goal to at least 6 to 12 months of expenses.
- Lower Your Monthly Costs
Simple changes such as opting for a cheaper broadband connection, cancelling monthly entertainment services that you never use, or calling up your mobile telephone company and asking them for better package options that are in line with your usage patterns, could cut your monthly fixed expenses. Once you’ve calculated your net monthly savings from these endeavors, opt for a long term investment like a ULIP plan. You can fulfill your financial goals along with a life cover where a good portion of your investment will be put towards life insurance and rest into a fund that is based on equity or debt or both and matches your long-term financial goals.
- Make Savings Automatic
One of the hardest parts of saving is disciplining yourself to save a sum amount from your income. Some people find it hard to remember saving and end up spending all of the money either on their bills or as their personal expenses. Lucky for us, there are tons of ways to make your savings automatic with modern online banking and mobile banking tools that make saving a lot easier.
You likely already have an automatic saving built into your bank account, you just have to log in and turn on this facility specifically for your account. Log into your existing online banking account and navigate to the transfers section. There, you should see an option to transfer money from one account to another. Almost all banks offer automated transfer option between the checking and savings accounts. You can choose when and how much and where to transfer your money or even split your direct deposit so a portion of the monthly paycheck goes directly into your savings account.
- Save Cash Windfalls
Cash windfalls like a work bonus, tax refunds, and cash gifts are all money sources side excluding your monthly budget. When you get a big cash infusion all at once, use that cash exclusively to invest in good tax saving options like a term insurance plan. A term policy helps you prepare for life’s uncertainties. The term insurance policy will provide your loved ones with the financial security they deserve in case of any unfortunate event.
- Set Specific Goals
Having a specific purpose for funds that you are saving is the ideal way to manage your money. You may want to take baby steps by setting small goals like saving ten per cent of your income and slowly increase how much you save each month. Careful planning and maintain discipline in terms of your finances can help you to reach your goals much more quickly.