How to Start Saving Money | A Guide for Beginners

Hello! My Dear Friends

This Blog is for all those who have not yet started saving money. It may be a 20 year teen to 40-year man/woman. We all know how important it is to save money, but the problem with us is no one taught us how to do that in real life. So take out some time from your life and go through this blog and promise yourself to start saving from today or now only.

What is Saving?

In simple words, you can say the income which is not spent is Saving. Explaining it with a few examples, if you are a salaried class employee and earn Rs.40000/month and your expenditure is Rs.30000/month so Rs.10000 you are saving. If you are a businessman you invested Rs.50000 got a profit of Rs.30000 but you reinvested the amount in your business, so this Rs.30000 is no more your saving because you have invested that amount for your growth.

So savings is that liquid amount or the invested amount which is available to you when you immediately need it. So all investment property cannot be termed as savings.

Why Saving?

First and foremost, saving money is important because it helps you when you will be in the event of a financial emergency, it may be a scenario of you or your family medical emergency or it may be job layoff. Additionally, saving money has many other benefits. I will list a few of them -

Freedom to pursue a dream career
Long term financial security
Financial emergencies
Stress Reduction
Marriage
Education
Big Purchases like Owning Home, Owning Car and other life events
Retirement

How to Start?

So I will pick an example of a teen (Rahul) who just finished college and starting with a normal job and earning a good paycheck of Rs 30000. So how he can start saving? So there is no hard and fast rule that everyone needs to save any X amount only, but in the financial term, I must say adopting a habit of saving 30% (approximate) at least of your salary every month will make you more disciplined and strong financially.

So there will be saying to start investment also, but I would recommend to first save money and make yourself financially secure in case you lose your job or in case of any medical emergency, then you can start with your investment.

So, coming back to Rahul again, the first thing he should do is to go and open a new bank account which he will use for saving purposes. Now Rahul's monthly income is Rs 30000, so on his paycheck day he should first transfer Rs.9000 (30% of Rahul's salary) from his salary to his savings account, and then with Rs.21000 he can pay his rent, any student loan, enjoy parties and use it for his other needs and wants. Now just imagine after 1 year Rahul has saved around (Rs. 108000 + 4% interest from savings bank). With a small disciplined habit of saving how Rahul is now having a net worth of lakhs of amount but his friends are still not able to save money.

Types of Savings -

Now I will try explaining how much amount everyone should have in there saving account -

1. Emergency Fund -

This is the fund that helps you when you are financially insecure, like losing your job, etc. So you should at least have 5 months expenditure amount saved as an emergency fund. So if you have a question why only 5 months? Then for calculation purposes, we assume that if you lose a job due to any mishappening or you want to take a break from your niche and start something new it will take a minimum of 5 months to start earning again. Taking an example of Rahul so as he has an allowed expenditure of Rs.21000 after saving so he should at least have Rs.105000 as his emergency fund.

2. Medical Fund -

You should at least have Rs.100000 in your account as a medical emergency assuming you have health insurance from your company, in case it is not there please take a one from private/government portals.

3. Short Term Plan Fund -

If you are thinking of having a PS4 or a new expensive phone or any vehicle, or any expensive camera, etc. This is considered to be short term plans. So set it as a goal and start saving now.

So now ending this blog here I just want to convey one message that keeps saving and enjoying both. Both are the necessity of life and should be followed.

Bonus Tip -

You all may have a question that sometime in our life comes when we will not able to save what we are expected to save for that month. So what to do in that situation? To answer this as I said there is no hard and fast rule. If you missed saving few amounts this month add up in the next month and make it equal. Always remember saving just makes your bank balance grow but disciplined saving makes you financially strong for your whole life.

Financial Advisor

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