As a millennial who starts earning, you must be aware that saving money is easier said than done. After paying the rent, utility bills, and all other expenses, your grand paycheck turns into a fraction of its former self. This is definitely not a great feeling.
Most millennials believe in a myth that saving is completely dependent on the salary one draws. But the fact is that no matter how much you earn, there are simple ways that can help you start saving.
For instance, if you’re spending Rs 500 per day on coffee or eating out often, you may be ignorant of how much this spending is adding up to. If you calculate spending Rs 500 per day could cumulatively sum up to Rs 15000 per month. Imagine saving this much amount every month consistently!
As a millennial, you may face great challenges financing your independent life and planning for a future savings plan. Below is a list of a few steps that can help you achieve your financial goals:
- Create a Budget
This is a thumb rule! You should always have a budget in place. This will help you prioritize your expenditures. If you have liabilities like loan, credit card bills and so on, consider mentioning them on top of your priority list followed by your household expenses like utility bills, rent. Once you have accounted for the above two, your next action should be saving for your short term and long term goals and then finally you can spend on your wants like weekend trips, vacations and so on.
- Systematic Investment
A systematic investment plan can help you save in a disciplined and a consistent manner. You can start investing in Recurring Deposits, Systematic Investment Plans and Unit Linked Insurance Plans (ULIPs). ULIPs provide an option where you can invest monthly and also save on tax under section 80C and 10(10D). ULIPs are becoming a new trend and most youngsters prefer to add them to their investment portfolio. This is because they provide the benefit of insurance plus investment. As a millennial, you must be under the assumption that you will need a large sum amount to start investing in ULIPs. But you will be surprised to know that you can start with just Rs 5000 per month and get returns exceeding Rs 75 lakh* after 20 years. Does this seem impossible? This is the magic of the power of compounding which creates a ripple effect in the future.
- Avoid using your credit card for every purchase
In order to avoid buying unnecessary stuff, a good trick would be limiting the use of your credit card. Approximately, 68% of millennials have at least one credit card. Credit cards are not bad; however, it does inculcate a relaxed approach towards money management which in turn can result in overspending. Another approach would be waiting for a reasonable amount of time which could be between one or two months to determine whether something is really necessary or no.
- Save for your retirement
You aren’t too young to think about retirement. The rising rate of inflation, increasing medical expenses and a higher standard of living will require you to start saving from this moment itself. If you start investing money when you’re 35, rather than 25, you’ll be losing 10 years of time. This means, if you plan to retire at the age of 45 and start investing Rs 5000 every month at 25, you will be building a retirement corpus of more than Rs 75 lakh*. Now, if you were to invest the same amount at the age of 35, you would accumulate a wealth of only Rs 17 lakh*. Saving just Rs 5000 every month from a younger age will not only instil a good financial habit but also give you better returns in the long run.
Have you been planning to start saving ever since your first salary? How about starting it today on World Savings Day?
*considering an interest rate of 15% p.a. along with additional allocations