This is the era of inflation where the salary never gets raised but inflation will be implicated and the person who suffers is middle man.
31% of India population portion of the population falls under the middle-class category, and managing finances can be a challenge as the average salary in India is around ₹3,87,500 per year or ₹32,840 per month.
Living comfortably for a middle-class individual has become a difficult task. Despite this, they must manage and think about their future, which necessitates saving.
As we constantly face layoffs and market downturns and have already experienced situations like the COVID-19 pandemic, it’s important to prepare for uncertainties.
To address this challenge and assist you how to save money from salary, we will discuss a plan in this blog.
Let’s dive in!
Building Your Savings Foundation
The first step is to create a budget; think of it as a road plan for your money. Many financial gurus recommend adopting the 50/30/20 guideline, which is a good starting point but may not be possible for everyone. According to this theory, you should spend 50% of your income on necessities (like rent and groceries), 30% on wants (like entertainment and dining out), and 20% on savings and debt reduction. However, this may not always be ideal for your scenario, so customize your budget to your specific requirements. If you find yourself spending all of your income, it’s time to reconsider your expenses. Try to track your spending.
Knowing where your money goes is important for identifying areas to cut back. Free budgeting apps or a simple notebook work wonders.
For example, if you’re overpaying on wants like entertainment and dining out, consider reducing back to save money.
If you’re still struggling to save, consider taking on a part-time job in the evenings or on weekends to supplement your income. There are many online platforms where you can offer freelancing services to earn extra money, which you can then save and invest for the future.
Here are some freelancing platforms available in India:
- Upwork: Upwork is one of the best freelancing platforms, offering a wide range of job categories, including writing, graphic design, programming, and virtual support.
- Freelancer: Freelancer allows you to bid on tasks listed by clients in a variety of industries, including writing, design, IT, marketing, and more.
- Fiverr: Fiverr is well-known for its gig-based system, which allows freelancers to offer specialized services or “gigs” starting at $5. It provides a wide range of services, including graphic design, digital marketing, writing, and programming.
- Toptal: Toptal connects top-tier freelancing talent with high-quality clients in industries such as software development, finance, project management, and design.
- Guru: Guru provides a variety of freelancing options, such as writing, programming, design, marketing, and administrative support.
However, having money is not enough; you also need to try to manage it, otherwise, you will end up burning all your money and have nothing to save.
Here are some tips to manage your money:
- Meal Planning and Cooking at Home
Nowadays, people love to go out for dinner and party, which is good, but if your budget is not allowing you to save, then it’s time to cut back. You need to plan your meals for the week and prepare your food instead of dining out or ordering takeout. Although, you can add a cheat day on which you can go out. This will help keep your body healthy and save money. Moreover, trying to buy groceries in bulk and preparing meals in advance can help you save money on food expenses.
- Cancel Subscriptions and Memberships
Are you paying for things you don’t use anymore? Cancel them to save money! You need to review your subscriptions and memberships for services like streaming platforms, gym memberships, or magazine subscriptions. Consider canceling those you rarely use or finding cheaper alternatives.
3. Reduce Energy Consumption
- Turn off lights! Seems obvious, but it helps save money on your electricity bill.
- Switch to energy-saving light bulbs. They last longer and use less energy.
- Adjust the thermostat: A little warmer in summer, and a little cooler in winter can save money.
- Limit Impulse Purchases
Before making a purchase, wait at least 24 hours to see if it’s something you truly need or if it’s just an impulse buy. Avoid shopping when you’re feeling stressed or emotional, as it can lead to unnecessary spending.
- Use Cashback and Rewards Programs
- Use credit cards with cashback: Get a little money back on everything you buy!
- Use shopping apps with rewards: Earn points for buying things you need anyway, then get discounts or free stuff!
Once you have money in hand then you have many options to spend. Let’s discuss it.
Smart Saving Strategies For Salary Person
They are types of saving strategies, but everyone has different preferences, so we’re going to divide these strategies into two parts: one with low risk and the other with higher risk. Let’s divide the strategies into two categories: low-risk and high-risk.
Low-Risk Strategies
1. Post Office Savings Account and Schemes
Post office schemes are a great way to begin investing, especially if you’re starting small. They often have lower minimum deposit requirements compared to some banks or investment products. This makes them suitable for anyone in India looking to grow their money gradually.
Variety of Options: You’re not limited to just one type of account. The post office offers a range of schemes to fit your needs and goals. Here are some popular ones:
- Savings Account: Similar to a bank savings account, you can deposit and withdraw money easily. It’s good for everyday saving or emergency funds.
- Fixed Deposit (Time Deposit): Lock in your money for a fixed period (like 1, 2, or 5 years) and earn a guaranteed interest rate. This is a good option for saving towards a specific goal.
- Public Provident Fund (PPF): This is a long-term investment scheme with tax benefits. You can invest for 15 years and earn attractive interest rates. Ideal for retirement planning or long-term goals.
- Senior Citizens Savings Scheme (SCSS): This scheme offers higher interest rates specifically for senior citizens (above 60 years old). It’s a good way for them to secure their income.
2. Recurring Deposit
RDs are similar to Fixed Deposits (FDs) but allow you to deposit a fixed amount regularly (monthly) for a predetermined period. Many banks in India offer RDs with low minimum deposit requirements, making them accessible to individuals with small amounts to invest. RDs provide guaranteed returns and can be a suitable option for short-to-medium-term savings goals.
3. Sovereign Gold Bonds
Sovereign Gold Bonds issued by the Reserve Bank of India (RBI) offer an alternative way to invest in gold. SGBs allow investors to invest in gold without the need for physical storage and provide additional interest income. SGBs are issued in denominations as low as one gram of gold, making them accessible to small investors. They offer safety, liquidity, and potential capital appreciation linked to the price of gold.
4. National Savings Certificate (NSC
It is offered by the government, NSCs come with a fixed lock-in period (typically 5 years) and offer guaranteed returns. Minimum investment can be as low as ₹100.
5. Fixed Deposits (FD)
Lats not not least you can invest in FD. FDs are considered low-risk investments as they offer guaranteed returns and capital protection. They provide a predetermined interest rate over a fixed period, making them suitable for conservative investors who prioritize capital preservation.
High-Risk Strategies
1. SIP (Systematic Investment Plan) in Mutual Funds
SIPs are one best ways to save from your salary. It allows you to invest a fixed amount regularly (monthly or quarterly) in mutual funds. Many mutual fund houses and private and public banks in India offer SIPs with low minimum investment requirements, sometimes as low as ₹500. SIPs provide the benefit of rupee cost averaging and are an excellent way to start investing in small amounts. And the best part about this is it has very low risk.
2. Gold ETFs (Exchange-Traded Funds)
Gold ETFs are open-ended mutual fund schemes that invest in physical gold. Investing in Gold ETFs allows you to invest in gold without the need for physical storage. Gold ETFs can be purchased in small quantities, making them accessible to investors with limited funds. They provide liquidity and are an efficient way to include gold in your investment portfolio for diversification.
3. Direct Equity Investment
Investing directly in stocks carries higher risk due to market volatility and individual stock performance. It offers the potential for higher returns but requires thorough research and understanding of the stock market.
4. Micro-Investing Apps
Micro-investing apps allow you to invest small amounts in stocks or ETFs, often through round-up mechanisms or fractional share investing. While they offer accessibility and convenience, investing in individual stocks or ETFs carries market risk and potential loss of capital.
5. Direct Investment in Real Estate
Investing directly in real estate involves significant capital investment and carries risks such as market volatility, liquidity constraints, and property-specific factors. While real estate can offer long-term capital appreciation and rental income, it requires thorough research and understanding of the real estate market.
Things You Need to Ignore While Saving
- Avoid Debt and Pay Off Existing Debts
Debt can be a major obstacle to saving and financial stability. Prioritize paying off high-interest debts, such as credit card balances or personal loans, as quickly as possible. Avoid accumulating new debt whenever possible and use credit cards responsibly by paying off the full balance each month. By reducing debt and interest payments, you’ll free up more money to put towards savings.
- Monitor and Adjust Your Financial Plan
Financial planning is an ongoing process that requires regular monitoring and adjustments. Review your budget and savings goals monthly or quarterly to track your progress. Be flexible and willing to make changes as needed based on changes in income or expenses. Celebrate milestones and progress towards your financial goals to stay motivated and inspired on your journey to financial freedom.
- Make Your Savings Grow
Set clear goals for your savings. Aim for a small emergency fund first (3-6 months of living expenses) and gradually increase your savings target.
High-yield savings accounts offer a slightly better interest rate than traditional accounts. If your employer offers a retirement plan, contribute as much as you can to leverage employer matching (free money!).
For long-term investing, consider low-cost index funds, but remember, it’s wise to seek professional guidance before diving into investments.
Conclusion
Saving money from your salary is a skill that everyone can learn with discipline, patience, and determination. You can take charge of your finances and establish a secure future for yourself and your loved ones by reviewing your financial status, setting specific goals, developing a budget, automating your saves, and making wise spending decisions. Remember that the route to financial freedom is a marathon, not a sprint, so keep focused on your objectives and reap the benefits of your hard work and devotion.
