Since you are here, I assume that you are looking for ideas on how can you save more money in 2020 and further, right? Before you start, take a deep breath and exhale all the fear and anxiety. Keep doing, few more times. But remember, don’t inhale as you might catch something. Hehehehe, Kidding guys !
Table of Content
- Why should you save more money
- 10 ways to save more money in 2020
Why should you save more money
Everyone wants to have more money to live a comfortable life, but not many knows what to do to save more money. There can be two ways to have more money in life, either you earn more or you start saving more.
“A penny saved is a penny earned”.
I have always been told by my parents to have a rainy day fund which is at least 3 months of your salary. Although, I ask myself if that’s enough to secure my future? There are folks who do not have enough savings or savings at all. Don’t worry if you are that person, I won’t judge you. In fact I will share with you some life changing tips on how to save more money.
10 Ways to save more money in 2020
Saving more money is simple only if you know how to do it right. Below is the list of ways to save more money and grow more money in 2020.
1. Set your Goal
Goal gives you an idea of a desired result that you want to achieve. For example, if your goal is to buy a car, you will be happy to save more money for that. By pasting a picture of the car, you can visualise the outcome of your actions to stay motivated. When you know what exactly you are saving for, it is more easy to stay focused.
#Rule : Set 1 Big goal like down payment for a house, start own business etc., 1 medium sized goal like buying a car, holiday/ vacation, renovating the house etc. and 2 small goals like buying a playstation, watch, phone, furniture, electronics etc. per year.
2. Create a Budget
Successful people always maintain a budget to audit their finances and be in control. Budget gives you clarity on how much money you are making in total and where is that money going. You can make budget by calculating your total earning (after taxes) and subtracting your monthly expenses (rent, utilities, grocery, fuel, EMIs, bills etc.). This way you can see if you are among those people who are making less than their expenses and so are getting into debt.
#Rule : Make two separate lists for Basic necessities and Non essentials. Try to minimize non essential spendings to maximize your savings further. You will know how, in point no.3.
3. Modify the 50/30/20 Rule
50-30-20 is a standard rule for budgeting. As per this rule, you must spend 50% on basic necessities, 30% on non essentials and keep 20% for savings. Whereas, I propose to reverse it with 30% savings and 20% lifestyle expenses because saving more should be your main objective. There are many people who are saving 50% or more as well, as they are on a path to financial independence.
Differentiate between Necessities & Non-Essentials
Necessities are the ones you can’t function a basic life without (house, grocery, utilities etc.) but Non-essential expenses can be cut down. These are the things you spend money on, that makes you happy like fancy salon, games, movies, clubs, dine out, shopping etc.
#Rule : Try saving at least 30% of your income and be ahead in the game. And trust me spending 20% on Non-essentials won’t make a difference in your lifestyle. More details in point no. 7
4. Bye-bye ‘high interest’ debts
I understand most of you have taken student loan, personal loan or auto loan. But before you think about long term financial security, you need to get rid of your high interest debts. Your priority must be to focus on settling down these debts as early as possible so that you can save more in long run. You should cut down a major part from your non essentials every month and take a big part from your savings to prepay these loans. My friend Ross have used his annual bonus and some savings for past 2 years to prepay and then successfully closed his Student loan.
#Rule: Make sure you have your rainy day fund (3 months of your salary) if no, then build emergency fund first and then pay off your debts.
5. Change your Savings Game
My friend Rachel pays her rent and other basic necessities after receiving her paycheck (absolutely right). And then she spends on luxury, lifestyle or non essentials items/services (absolutely wrong). After all the expenditure, whatever is left she claims it as her savings (not acceptable).
I would encourage you to put the savings money aside after you recieve your paycheck. Set an auto transfer in your mobile banking app to transfer 30% of your income to your savings account as soon as you get your salary. Now you have a limited amount of money to spend on non essentials so you can’t go all out.
Reverse the psychology
Regular People : Income – (Basic Necessities + Non Essentials) = Savings
Successful people : Income- Basic Necessities- Savings = Non Essentials
6. Hold on to your shopping temptation
Best way to deal with shopping urges is to delay the process. I know every now and then you feel like checking your online shopping app to see what’s new right. And let me tell you that ‘what’s new’ section has been designed for people like you. While you can’t resist a cute dress or a pair of shoes, you can add it to your cart but do not buy them right away. Before you click that buy button give it 24 hours to take the decision. Chances are you won’t be willing to buy it the next day in most of the cases.
#Rule: Put a cap on number of items you can buy in a month because there is no limit of non essential things in the world.
1 piece of clothing, 1 item of accessories and 1 make-up or cosmetic product.
7. Pay smartly on Non-essentials
As mentioned earlier, you should put less money in your Non essentials fund than your savings. You can still dine out, go to movies/concerts/shows/games and enjoy drinks at your favourite resto-bar. But from now on use coupon codes, discount vouchers, cashback deals, apps, websites (Groupon, Viator etc.) and credit cards to enjoy more while spending less. But be cautious not to over do it though.
There are certain Credit cards that can give you 5-15% cashback on almost every transactions. Also, the reward points earned throughout the year using that credit card, can be redeemed for your new purchase instead of paying from your balance.
#Rule : Get a credit card with maximum benefits like cashback on grocery, fuel, utilities bills, shopping and gives discounted/free movie tickets, games, flight tickets, discounts on transactions etc. Compare pros and cons before applying for a credit card to match your requirements.
8. Put that extra money in your Savings Fund
Most of us get salary hike or increment every year along with annual bonus. And some people also get cash from their relatives, parents or grandparents on special occasions like birthdays, christmas, etc. as a blessing. We should try to put all that extra money (whatever be the source) to our Savings account. Before spending it think that it wasn’t even there in your budget or plan. Remember, this money has come to you to increase your savings.
9. Tax Savings Investment Plan
Once you have started the habit of saving money then as a smart investor, you should look for tax saving investments, which not only provides the benefit of tax exemption but also helps to earn tax-free income. These plans are created to get benefit from the Income Tax Act (of your country). As per the act, all investments made by investors are eligible for tax exemption up to a given maximum limit.
Such investments can include ELSS (Equity Linked Saving Scheme), Fixed Deposits, Life Insurance plan, Public Provident Fund, National Savings Scheme and Bonds ( better to consult a tax advisor).
10. Invest More
“If you don’t find a way to make money while you sleep, you will work until you die.” – WARREN BUFFET
Investing money is super essential to make more money from your money. If you don’t invest your money then your money is not growing, In fact it is losing its value due to inflation rate. The early you start investing the more money you can make. And it is the best time for investment as the market is down, even bluechip and great shares and stocks prices are lowest just like it was in 2008-09. Now is the time to put a big lump-sum amount into Equity market and make most use of compounding. Opportunities like this rarely comes when market is down to this level. You should read this blog post about investment to start making more money.
#Rule :You should take professional help for planning your investments to reap maximum benefits.
I hope this post has motivated you to inculcate a good habit of saving and get your personal finances in order. Please share your thoughts if you are doing any of these things already. See you in my next post.