Every August 15, we celebrate our Independence Day as the day the country became free from British rule. But, are we really free? Today, you have freedom of expression, freedom of speech, freedom to follow whichever religion you want, etc. But, do we have financial freedom? Almost everyone has some loan or the other to repay. The family’s breadwinners have home loans, auto loans, personal loans, credit cards, etc. Our children are burdened with education loans even before starting their careers. Yes, we can say that we do not have financial freedom. Let us look at some ways to save money for the future and attain financial freedom.
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Prepare your budget to track your expenses and income.
Generally, you find people tracking their income correctly because they have to file their income tax returns each year. But have we ever tracked our expenses? Unfortunately, not many people do that because they usually have money on hand to spend. So, we advise you to sit down and track your income and expenses every month.
Prepare a list of fixed expenses like house rent, income tax, provisions, utility bills, fuel expenses, repairs, maintenance, dining out, traveling, etc. You have various apps available on Google PlayStore that allow you to track your expenses. These apps analyze your spending patterns and provide graphical info to help you reduce unnecessary spending.
Reduce the wants and concentrate on the needs.
As you analyze the spending patterns, you will realize the extent of money you spend on futile expenses that could easily be avoided. Remember that every rupee spent less is a rupee saved for the future. You never know when a calamity can strike your family. It could be a bereavement, a loss of a job, unexpected medical bills, etc. So, we advise you to keep track of your spending and reduce the non-essentials. Cutting down on your non-essential expenditure is the best way to save money for the future.
Get your saving priorities right in the short and the long term.
We are not telling you to cut down on all your wants and save for the future. You can have your goals like going on a vacation once in two years, purchasing a house or a car, etc. However, getting your savings priorities right is also crucial. So, we advise categorizing your wants into short-term and long-term. It helps you save money accordingly. In investment parlance, short-term refers to the goals you wish to achieve within the next three years. Anything more than that is long-term. So, we advise you to save money accordingly and choose the ideal savings and investment instruments to cater to short- and long-term goals.
Start early to achieve your goals.
Deciding on your goals and setting them is one aspect. Achieving them is critical. So, you need to place these goals at the forefront to help you achieve them. The right strategy is to begin saving money early in life. It helps develop the saving habit. Start with the short-term goals, but never lose track of the long-term goals, including clearing debts, planning retirement, creating a contingency fund, etc. Starting your plans early gives you more time to learn from your mistakes and not repeat them.
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Select the ideal mix of investments.
We advise you not to pool all your money in similar investment instruments. You can have regular savings accounts to cater to your immediate needs in the short term. A few bank FDs with maturity periods of less than three years can help you get better returns.
Take out insurance policies for yourself and all the family members, including your parents and parents-in-law. It can prove handy during a medical emergency. Otherwise, you could find your savings dwindling within no time. Similarly, the breadwinner of the house should have a life insurance policy (term or endowment) with a maturity amount equal to their loan liabilities. It ensures that the family members do not have to bear the brunt of repaying the loan installments.
You can also invest money in mutual funds that allow you to get better returns than bank FDs. You can tap into the share market to earn good returns if you know the stock market well. The objective is to plan your investments to have the necessary financial freedom.
Today, very few people can say they are debt-free. Each family has some loan liability to repay. This repayment curtails our plans to save money for the future. We have discussed five simple principles to follow that help save for the future.