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How much money do you save each month? 5 tips to answer this

  • Highlights

  • Account for your fixed and variable expenditure

  • Follow the 30% rule of channelling your income to savings

  • Automate your savings to make it easier and more disciplined

  • Invest smartly for high returns and liquidity in your time of need

With accumulating expenses, it can become difficult to keep track of where your income is going. However, saving is no longer an option, but a necessity. Whether to achieve your goals such as buying a car or to come to your aid when emergency strikes, saving is a must. In order to stay financially healthy, it is essential to have a sound saving strategy in place and follow it religiously. Here’s how you can calculate how much to save each month and how to go about it.

1. View and analyse your outgoing expenses to control your spending

Setting a budget will help you prepare for fixed and variable expenditure. While you cannot do much about reducing fixed needs, take a look at all those bills you are paying but services that you aren’t really using. These include cable or TV channel subscriptions, a gym membership or a loyalty card for a hotel that charges you annual fees. Putting an end to unnecessary expenditure will lead to a steady rise in your savings—and you will sleep better knowing you aren’t wasting your gym membership by snacking on that muffin earlier in the day! Replace constant trips to an expensive coffee shop with homemade coffee. If your taste buds don't thank you, your wallet surely will.

2. Save for emergencies and unplanned costs by following the 30% rule

Saving for medical emergencies can be tricky as you never know how much and how quickly you may require funds. However, this is all the more reason for you to abandon living hand-to-mouth. By setting aside 30% of your income, you can ensure that you always have the money in times of need. If 30% is too much to begin with, start with marking 20% of your income as untouchable savings and 10% as regular savings. This will also serve in lowering the amount you have at your disposal for unnecessary expenses.

How to Grow Your EPF Savings

3. Make savings automatic to bring more discipline and reduce the temptation to spend

The easier it is to access your funds, the higher the chances of you spending it. So, ask your bank to automate a percentage of your income from your salary account to your savings account. This way you will not feel the loss of something you never had as the funds out of sight will be out of mind and less tempting to spend.

4. Invest the surplus in FDs and mutual funds for greater earnings

Now that you have savings, investing by prioritising your financial goals can be a great asset. Choose to put a part of your savings into a high-earning fixed deposit or a mutual fund via easy SIPs to gain returns and build your wealth. Calculate your investments by sitting down with a financial planner and outline your goals. Divide them into short and long-term goals and save with the view to achieve them. This will encourage you to be more disciplined about money and help you achieve your goals too.

5. Choose your social circles wisely and save more

Peer pressure is something your parents have told you about and what you may be telling your kids about too! However, pay attention to your social group right now. It’s easy to overspend when out with friends, be it at a trendy new restaurant or while on vacation. It’s also easy to indulge in shopping sprees or those visits to spas that you don’t really need. While you don’t have to avoid social gatherings on a whole, be smarter about where you spend your money and why. If it is simply to match someone else’s lifestyle, stop and think. When you surround yourself with friends who match your mindset, it’s easier to save and still have all the fun you want.

With these tips, you can save smartly and never have to worry about not having a financial umbrella on a rainy day!

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