How to Save Money for Future Life Goals

Why is saving important?

As an individual, you might have several goals in your life. For instance, if you’re a young working professional, your life goals might include purchasing a car or a home. Or if you’re married and have children, your life goals might include providing your children with the best education. Irrespective of the life stage that you’re currently in and the kind of life goal that you have, to be able to successfully satisfy them, you would need a large enough corpus.

And how do you build a large corpus that’s enough to satisfy your life goals? By the magic of saving, of course. There’s even an old English saying that goes ‘A penny saved is a penny earned.’ Saving your hard-earned money in a manner that’s systematic and well-thought-out can do wonders to your financial position. With that, let’s move on to the tips to help you save more.

Tips to help you save more towards your life goals

1. Draft a budget

   Budgeting is a neat little trick that can help you maximise your savings. Listing down the various sources of income and expenditure on a piece of paper will allow you to visualise the inflow and outflow of money. This can help put your finances in a better position by enabling you to plan your expenses accordingly.

   
   

2. Cut down on expenditure

   Many individuals unknowingly spend more than what’s necessary, leading to their savings taking a hit in the process. The budgeting process above can help you outline your expenditures, which you can then use to filter out unnecessary expenses. So, the next time you feel the urge to splurge, think about how your life goals are important to you.

   
   

3. Set SMART goals

   Identify and set specific, measurable, achievable, relevant, and time-bound (SMART) goals. Know how much corpus you would need for your goals and their expected timelines so that you can choose suitable investment avenues for them.

   
   

4. Secure your finances

   While you learn how to save money for the future and plan your goals, you need to be prepared for unexpected emergencies too, which can hamper your finances. This is where a term life insurance plan comes into the picture. It can help secure your family’s financial future and enable them to satisfy their life goals when you’re not around. Term insurance plans are cost-effective and allow you to choose an adequate sum assured that would help your family meet their lifestyle needs and financial goals.

   
   

5. Have separate accounts

   It is a good idea to have multiple banking accounts by your side instead of having your entire earnings under just one roof. You could have an account for servicing all your debt and loan obligations, an account for your general household expenses, and a third account for savings and investments. As soon as you receive your monthly income, allocate it among these three accounts. This way, you can ensure that you save your income as soon as it sees the light.

   
   

6. Start early

   This is one of the most underrated tips there is. Starting your savings journey at an early age, preferably as soon as you get your first job, can give you a huge head start. Even if starting early means that you can save only a few thousand, it would be a good idea to do it since it will all add up in the long run. The concept of compounding is extremely powerful and can help you build a large corpus with much less effort.

   
   

7. Make savings a must-do activity

   Savings are essential to plan for your goals and create a corpus needed for their fulfilment. So, every month when you get your income or salary, set aside a part of it towards savings and then use the rest for your expenses. You can also follow the 50:30:20 rule of budgeting, which allocates 50% of your income to needs, 30% to wants and 20% to savings.

   
   

8. Invest your income

   One of the preferred ways to save is to invest. The financial markets give you an opportunity to create market-linked wealth in the long run. And investing in a ULIP policy is one of the preferred ways to participate in this process. Not to mention, it also provides you with life cover. Alternatively, if you don’t prefer to invest in the stock markets, there are also many other types of life insurance policies, like endowment policies, that you can consider.

   
   

9. Automate payments and investments

   You can set up auto-debit mandates on your bank account for recurring payments and investments like utility bills, loan EMIs, subscriptions, monthly investments, etc. Automating can prevent the chances of missing out on important bills and also help you save in a disciplined manner.

   
   

10. Look for passive income sources

    Passive income is the income that you earn without actively working for it. For instance, if you have a house property and you rent it out, the rental income would be a passive income. Similarly, interest or returns generated from your investments qualify as passive income.

    
    

    Try to create a source of passive income which can increase your savings and help you invest more towards your goals.

    
    

11. Manage your debts

    One of the most useful tips to save money is effective debt management. This includes paying your debts on time to avoid late payment charges and prioritising repayment of high-interest debts. Both of these factors can add to your savings and also work wonders for your credit score.

    
    

12. Track your spending

    It is important to keep a tab on your spending habits so that you can identify and trim down on unnecessary spending. Moreover, tracking your expenses also helps you get an overall picture of your finances. There are various expense tracking apps available, which can break down and give a complete view of every penny spent.

    
    

Factors to Consider for Saving Money Effectively

To save effectively, here are some factors that need to be considered -

• Inflation
  Inflation tends to reduce the purchasing power of money, increasing the corpus required for your goals. So, factor in inflation when you estimate the corpus needed for your goals.
• Risk appetite
  Choose investment avenues that match your risk profile so that you know what you can expect from your savings.
• Diversification
  Allocate your savings to different types of assets like equity, debt, gold, etc. to diversify your risks and enhance the return potential of your portfolio.
• Tax planning
  Choose tax-saving options, like savings-oriented life insurance plans, so that you can save taxes while creating the corpus. Moreover, such options can also help you create a tax-efficient corpus for your needs.
• Avoid withdrawals
  Do not make unnecessary withdrawals from your savings as it would deplete the corpus.
• Give your savings time
  Compounding returns can help in growing your corpus steadily over time. If you give your savings time to grow, compounding can build a good corpus. So, invest with a long-term approach.
• Regular reviews
  Saving and investment are not a one-time affair. It is recommended to keep track of your savings and see how they are performing. If some avenue is not generating the expected returns, you can switch to high-interest options to save and earn more.
   

Types of Investments for Your Future Savings

If you want to generate returns on your savings, you need to invest. Investments can yield attractive returns and grow your savings into a decent corpus.

When it comes to investments, there are various options that you can consider. Some of these options are as follows -

• Life insurance savings plans like endowment and money-back policies
• Life insurance plans like ULIPs
• Life insurance annuity plans for retirement planning
• Fixed deposits
• Public Provident Fund
• Mutual funds
• National Pension System

You can choose one or more of these savings options to build a diversified portfolio and save for your future goals.

Key Takeaways

• Saving money means setting aside a part of your income for the future.
• Saving is important so that you can create a corpus for your financial goals and be secured against emergencies.
• Some ways can help you save money for the future. You can use these tips to enhance your savings and build a secure future.
• Some of these tips include identifying your goals, setting a budget, cutting down on unnecessary expenses, planning for emergencies, looking for passive income, etc.
• When saving, factor in inflation, emergencies, risk appetite, taxes, and other things to allow your corpus to grow.
• Some investment options that you can consider include life insurance savings plans, ULIPs, FDs, PPF, NPS, etc.
   

Conclusion

Implement these tips consistently and diligently, and watch your savings corpus grow over time. That said, before you go ahead and purchase any one of the many types of life insurance policies, always ensure to use an insurance calculator. It can give you a better perspective of how life insurance can help you and your finances.

FAQs

1. How do I start saving money?

   Begin building your savings by prioritizing yourself first.. When you receive your salary or income from business, set aside a part of it before using it to meet your expenses.

   
   

2. What are effective strategies to save money quickly?

   Some of the effective strategies to save money quickly include budgeting, reducing unnecessary expenses, tracking your spending, utilising deals and discounts to save, automating payments, etc.

   
   

3. How can I save my money on a low income?

   Even if you have a low income, try to set aside 5% to 10% of your income every month before you spend. Invest these savings in a suitable avenue, like life insurance savings plans, ULIPs, mutual funds, etc., to allow your savings to grow.

   
   

4. What is the 30-day rule for saving money?

   The 30-day rule is aimed at controlling impulse spending. This rule states that you should wait out 30 days before purchasing what you want.

   
   

5. What is the golden rule of saving money?

   There are many golden rules of saving money. One rule is the 50:30:20 rule, which divides your income into needs, wants, and savings, respectively. Other rules include starting early, saving first and spending later, disciplined savings, etc.

   
   

6. What are the 4 key rules of managing money?

   The 4 key rules can be -

   1. Creating a budget and sticking to it
   2. Building an emergency fund
   3. Saving first and spending later
   4. Investing in diversified asset classes to minimise risks
   
   

7. What are the best ways to build an emergency fund?

   You can buy life insurance plans for emergencies. Plus, setting aside 3-6 months’ worth of your income is also a suitable choice to build an emergency fund.

   
   

8. How can I save more and become financially independent?

   To save more you may consider reducing unnecessary expenses and look for passive income sources. You can also explore investment avenues offering attractive returns and invest with a long-term horizon to grow your savings.

   
   

9. Does a savings plan help achieve financial goals?

   Yes, life insurance savings plans can help you create a stable corpus for your financial goals. Moreover, there are goal-oriented savings plans, like child plans and annuity plans, that can help you save for specific goals.

   
   

10. Is having a budget important when saving money?

    Yes, having a budget is very important as it helps you identify your income and expenses. Moreover, you can allocate your income to your expenses and restrict unnecessary spending when you have a well-defined budget and you stick to it.