New Year Resolution 2023: Understand 10 Money Saving Tips to Achieve your Goals
New Year’s Eve will be here soon. Have you decided on your 2023 new year resolution yet? While your personal goals are important, this year let’s pledge to consider your financial resolutions too.
One of the most important resolutions has to be around budgeting. This will help you plan your short and long-term goals properly, keep you safeguarded during emergencies, and also put you in the habit of saving and investing.
We understand that a lot of us struggle to keep our finances in order; be it due to rising inflation, increasing needs, and the urge to spend more and save less. But that’s not something you need to worry about. We have curated a list of easy and must-follow ways to save money so that you can be stress-free and also enjoy that extra money in your bank.
Let’s get started with 10 crucial money-saving tips:
Tip 1: Set Savings Goals
Everyone has varied financial goals, whether it’s becoming wealthy, paying off credit card debts, buying a car, or investing in that dream house. To achieve your short and long-term goals, it’s crucial to set your savings’ goals in advance. Each of your goals will require a different approach.
So, how can you plan your savings goals? Firstly, create a designated savings account; ensure to transfer funds on a monthly or weekly basis depending on the goal you want to achieve. Stay consistent with the practice of transferring regular funds. Learn to live frugally, buy only what is necessary, and stick to your money-saving habits.
You can also consider “micro” saving goals. For instance, each time you hit the gym, reward yourself by depositing an extra 500 or 1,000 into your bank account. Or when you spend on something unnecessary, such as a luxury watch or shoes, transfer the amount, similar to your purchase, into your bank account.
Tip 2: Eliminate your Debt
Accumulating loans and debt that you won’t be able to pay off easily is always a bad idea. It’ll not only hamper your financial goals but also keep you mentally stressed. Every month you’ll have to spend a huge chunk on paying loans, debts, and EMIs.
Remember, you must take loans or pay a big amount from your credit card, only when it’s necessary. You don’t want to be stuck in a situation where more than half of your income is getting spent on paying off loans.
Firstly, pay off the higher interest rates loans to improve your credit score and also enhance your financial situation. Start by paying off any unpaid credit card balances, vehicle loans, or even personal loans before moving on to bigger debts like home loans. Set clear goals to lessen your debt load. By lowering your debt, you’ll be able to save more and spend it wisely on lucrative investment opportunities for wealth creation.
Tip 3: Create an Interest-Bearing Savings Account
If you have extra cash or income in your hand that you don’t want to utilize right away but need in the near future, then you can consider creating an interest-bearing account, in any bank. Your funds will lose value over time due to inflation if you are not earning interest on them.
High-yielding savings accounts are offered by several banks, like RBL Bank which provides a higher interest rate. It’s crucial to spend time and research which bank offers a favourable interest rate and which account will be easily accessible for you.
Sure, you can also invest your money into higher-risk assets like stocks and mutual funds. But with an interest-bearing savings account, your risk to lose money or face drastic market and economic changes is quite minimal. You’ll see your savings grow slowly yet steadily.
Tip 4: Invest Wisely
In case you have set aside some money to invest in the market, assets, or mutual funds, then you must do that wisely and carefully. If you’re a beginner in investment, learn and research the top investment options. Determine your risk tolerance and decide how much you want to invest.
To start with, consider investing in low-risk stocks and stable investment options, such as bonds. Always plan how much you want to invest in a month or a year. What are your reasons for investing? Is it tax saving or purely to see your money grow? Choose your investment option accordingly.
Nowadays, there is a ton of information available online including videos of personal finance influencers who will guide you in every step to make the right investment choice. Educate yourself before investing.
Tip 5: Review Subscriptions
We sometimes fall into a trap of spending more than required. Or spending on something which is not necessary. Every quarter, you must look back at your regular payment areas, such as subscriptions. It’s easy to subscribe to a particular channel or service where monthly fees are as low as Rs.199.
These subscription amounts are auto-deducted from your account, and you often tend to overlook this small monthly payment. It’s even possible that your account is being charged for a service you used once, and are no longer interested to use, or you’re too busy to use. In the long term, these monthly subscriptions can have a huge dent in your money-saving goals.
Verify any automatic payments you may have scheduled. Examine all short-term payments, and cut or eliminate any unnecessary ones. Keep only those accounts or subscriptions that you’re using daily or 3-4 times a week. Get rid of the ones that you only check once in a month.
Tip 6: Create a 50/30/20 budget
The 50/30/20 budget rule has been created to assist you in managing your finances while making you prepared for retirement and unexpected expenses. According to this popular budgeting principle, you must dedicate up to 50% of your income after-tax to necessities and commitments that are the most essential to you. This includes rent, bills, groceries, transportation, and important instalments.
Once that’s done, you must allocate 30% of your income on wants – such as clothes, gym, dining, etc. Remember that if you want to save for the long term, you must primarily focus on your needs rather than wants; unless absolutely necessary. The remaining 20% of your income should go towards savings.
You can create a better and more sustainable savings plan by consistently setting aside 20% of your monthly income. The 50/30/20 rule will provide you with a clear understanding of your monthly budget so that you don’t go overboard with your expenses, and gradually increase your savings.
Tip 7: Closely Monitor Spending
The first step to successful budgeting is keeping track of monthly income and expenses. Making a budget must not be a chore. The main objective is to be aware of how much money you spend rather than worrying about every penny you spend. Having said that, try tracking all your expenses for a week or month.
Analyze the costs of your travel, meals, and entertainment. See if you can reduce any expenses, large or small, in these areas. Use the budgeting method that works best for you, whether it’s on paper or a budgeting app of your choice.
Be prepared to make adjustments as you track. Your budget will be greatly altered if you can reduce the unnecessary costs in your life, such as a new car, a bigger house, or extra entertainment. You’ll be astonished to see how much money you can save by tracking your spending regularly and exercising financial restraint, even for a brief time.
Tip 8: Practice Spending Freeze
This might sound a bit difficult for someone who makes impulse purchases or spends on items that is not needed. We advise you to practice a ‘Spending Freeze Challenge.’ It is essentially a period during which you refrain from making any unnecessary purchases.
Although there are various variants of the classic spending freeze, even one week of no spending could help you get closer to your financial objectives. The first thing you need to decide is how long you wish to go for a spending freeze. It can be a week, two weeks, or even more.
Depending on your basic needs, you must plan your spending freeze. Start small, only commit to a few days at first, and then gauge how you feel after that. Account for necessary bills and groceries before you go for a spending freeze. You may face some challenges initially, but making this a regular habit will help you control your spending.
Tip 9: Refinance your Mortgage
Your home is a financial commitment. One method by which you can leverage that investment is by refinancing. Paying off an existing debt and replacing it with a new one is defined as refinancing a mortgage.
You can refinance for several reasons; such as to receive cash from your house, to lower your payment, and to shorten the duration of your loan. Lowering the interest rate on your current loan is among the top grounds for refinancing.
When you refinance your home mortgage, you essentially exchange your old loan for a new one with a new principal. You are then left with just one loan and one monthly payment once your lender pays off the older mortgage. According to a general guideline, refinancing is advantageous if the new rate is between 1% and 2% lower than the one you currently have.
Tip 10: Use Reward Spending
Making purchases using a credit card is a common affair. Sometimes, it can be a good thing if your credit card company is giving you rewards for all the purchases you make. Then it becomes a sound strategy to use your credit card regularly. Some credit cards also offer a dual benefit of discount and rewards on shopping.
By giving you reward points for every purchase or money spent, credit card issuers push you to spend more. Spending simply to accumulate points is tempting, but avoid doing so for unnecessary purchases. Because you’ll then be burdened with repaying the loan. And in case you don’t repay on time, you’ll have to bear an extra cost for it.
As far as the reward points on your spending are considered, redeem your points every one to two years. If your credit card company allows, adjust the points against your bill payments. Use spending as a reward on your credit cards, only when you have the confidence to clear your dues on time.
Conclusion and Way Forward
It goes without saying that we need to enjoy our lives and spend money on both necessities and desires. Yet, the benefits of budgeting and adopting overall expenditure discipline go a long way. It helps to secure your financial future and keeps you stress-free. Which money-saving tip will you follow for the upcoming year? Pause, think, and plan in advance.