Saving is key

 Success is not about taking that bold step in the future, it is about taking the small steps now.

Saving is probably one of the most important habits in life. This is the first step towards your long term financial security and ultimately your financial independence. There is no substitute for saving. And hence the moot question. How much of what you earn gets saved?

I often hear people say that they cannot manage to save by the time the month ends. And this may be true in some cases. But in my experience, most of us can save a part of our earnings. While the size of our savings has a huge impact in the long term, the first step is to be aware of and having that intent to save.  Getting into the habit of saving and a mindset of saving is a very important first step. 

The early years need to be focused on building an initial corpus. One needs to build a sizable base as quickly as possible as this is important for the magic of compounding to kick in. Read about the importance of size in my previous post Size Matters. Hence developing a saving habit is very important. Just like your health, your financial health is dependent on the daily decisions that you make everyday. 

Here are a few ideas that will get you started on your journey towards financial security.

1. Set a budget: Setting up a budget is the most important start. Setting up a budget does not necessarily mean being stingy or depriving yourself. The process of budgeting makes you aware of the various things you spend your money on. It allows you to prioritize the important stuff and may be leave out the not so important stuff. How much do you plan to spend on rent? How much of your earning is allocated to groceries? And that most important question. How much of your earning do you intend to save at the end of the month?  Set up your goal for saving. Don't stretch yourself too much as setting unrealistic objectives will get you off the rails before you have even started. Setting up a fair and realistic goal is extremely important for a sustainable budget. Getting into a saving habit is much easier than you think and setting up a budget is a great way to get started.

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2. Spend less : Spending less does not need to be a negative thing. You need to decide which expenses are important and which are not. You can still go ahead and buy something that makes you feel good. But among the many things that you buy everyday, you will find opportunities to eliminate many items from your shopping list. You will be surprised about how many items you will be able to eliminate from your monthly list once you get into the mindset of saving. Shopping around is also a great way to cut down on your spending. While you may have set a reasonable budget for your groceries, check for prices and value across the supermarkets and brands. You will discover new stores and brands that provide a better value and cost significantly less. 

3. Separate your savings: Often we find that moving the targeted savings amount out of the current account is a great way to build the discipline. Right upfront, move your targeted savings amount to a new bank account. As soon as the salary gets credited to your account, transfer your planned savings to a separate account. Once it moves out of your salary account it is likely to remain safe and out of reach.

4. Avoid debt: We all fancy the luxuries of life. If you can't afford to buy them with cash, you can't afford them. Never ever take a loan for depreciating assets. Like a car or the new TV. A loan is a sure way to disrupt your savings process. Aside from this, debt have several others risks associated with it. It is prudent to avoid all debt in the early years.

5. Set up an SIP: An SIP ( systematic investment plan) is an automated process of investing your savings on a periodic basis. I personally love the concept of an SIP and have used it extensively. you can set up a process of automatically investing a fixed amount into any mutual fund of your choice.  Watch my video about the process of SIP here

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