It is the innate desire of every individual to have a significant pool of savings. And, while you plan to save to meet your various goals in the future, you may struggle to get started. A lot of people, especially the youngsters who have just started earning facing this problem; they have no definite savings plan.
If you can resonate with the same issue, here are a few vital tips to help you create a savings plan.
- Make a budget
One of the fundamental aspects of savings and financial planning is to prepare a budget. Experts suggest following the rule of thumb, i.e., 30:70 allocation of your income towards savings and spending. A well-planned budget will give you a clear picture of your spending so that you can identify the unnecessary spending and avoid the same.
- Start with saving
As easy as it may sound, saving for the future can be incredibly challenging. Several things can go wrong on your saving journey that can put off your plan. For example, a sudden medical emergency in the family may eat your spending on hospital bills. But, if you plan well, you can save a significant amount.
For example, even before you start paying off the important expenses like rent, bills or EMIs, you can allocate a specific amount each month towards savings plan. You can set-up automated savings, where the bank automatically debits the amount for SIP payment or recurring deposit as soon as your account is credit with salary. This way your savings goal will be met compulsorily.
- Link your investments to specific goals
One of the most amateur mistakes that most people commit while saving for the future is that they save and invest in various schemes without any specific objective in mind. But, you must know that just as it is important to choose the best savings plan to put your hard-earned money, it is critical to link your investments to specific goals.
This not only help you stay focused with your savings but also allows you to know precisely what you are saving for, how much you must save every month to accomplish the goal. This in turn will help you make more informed choices and decisions.
Also, for each goal, you will be able to choose the right investment scheme. For example, if your goal is to build a corpus for retirement, you can invest in schemes such as NPS, PPF, or equity funds. But, if you have short-term goals like buying a new car in next three years, you can invest in liquid funds or debt funds.
- Get an insurance cover
Experts suggest that a savings plan is incomplete with a robust insurance plan. While you may invest in various investment schemes that provides you valuable returns, you must no underestimate the importance of investing a health insurance and life insurance policies. This will ensure that your investments are protected and you don’t have to liquidate them in the event of any unforeseen event like medical emergency, loss of job, etc.
Make sure that you compare the different insurance plans and choose the one that best suits your needs, offers you maximum protection and has an affordable premium. Also, insurance is vital from tax benefits perspective; your investments in insurance can help maximise your annual tax savings.
Now that you are aware of the steps to develop a savings plan, be diligent with your savings. Only a planned and dedicated approach will help you save a significant amount for the future.