Being financially independent means you can give yourself the freedom to be free financially. Although it requires a healthy balance of saving as well as investing money. How to Save Money? The answer to such a question can be financial independence. Financial independence not only means that you have a stable source of income or you have a lot of savings. However, financial independence means that along with savings and investments. You do not have any ongoing loans or debts and you do not need to worry about your expenses. It is always a good idea to plan for your future expenses and to be prepared for any unforeseen expenses.
Different people may have different motivations for saving money, such as saving money for any unforeseen medical emergency. Saving for retirement, on the other hand, can be a requirement for another. Similarly, someone may be saving money aside to purchase their dream home or buy a new car. Saving gives you freedom from a lot of financial problems. Financial problems that might occur over time. Apart from financial independence, saving money provides you with financial stability. However, if you’re wondering how to save money? You should not just save money but should concentrate on creating wealth. As a result, you’ll acquire good financial habits and build up your cash reserves. It also assists you in investing, which is the only method to create true long-term wealth.
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Tips to Save Money in India
When you have made up your mind that you want to be financially independent, you can achieve that. You can achieve that by starting to save money from the very beginning. You have the whole year to save money. However, you just need to plan your expenses for the whole year as the year begins. Therefore, you can easily plan your financial expenses by planning for every month. The first step to save money is to make a budget for your daily expenses and stick to it. However, planning for your yearly expenses can be a task so you can plan to save money every month.
Moreover, if you do not plan your expenses, it might be difficult to save money by the end of every month. You can decide an amount to spend on every category of expenses that you make throughout the month in order to save money every month, accordingly.
Prioritizing Your Expenses
Now that you know what are the categories that you need to spend upon, you can plan accordingly in order to save money. Prioritizing your expenses would require you to avoid unnecessary spendings and therefore, it means that you should always spend on things that lie under the category of the required expenses. Your monthly expenses must be according to your priority list in order to save some money at the end of every month. Your expenses should also carry some weightage according to their importance. This helps in determining the amount of money that you should be spending on each category.
When you avoid paying tax it also counts as saving money. There are various tax saving mutual funds through which you can save money by not paying extra tax amounts. Tax saving mutual funds are also known as ELSS (Equity Linked Saving Scheme) mutual funds. You can claim tax deductions of up to INR.1,50,000 under Section 80 C of the Income Tax Act, 1961. ELSS is termed as the best investment option in this section. You can gain the benefit of tax reductions as well as long-term wealth creation by investing in these ELSS mutual funds. However mutual funds are subject to market fluctuations, so you should invest accordingly.
Another way of saving money by avoiding taxes is through bank fixed deposits. You can invest in a tax-saving FD to save money on your taxes under section 80C of the Income Tax Act. A fixed deposit under the Tax Saving Scheme must be held for at least 5 years. However, a maximum tax exemption is limited to INR 1,50,000.
How to Invest Money?
When you have surplus funds available to you that you have been saving, there is a risk that you might spend it. Before you start investing your money make sure that you have explored all the investment options available. Your saved money would either earn a very low amount of interest by just sitting in your bank account for the whole year or you can invest it at some places with higher chances of getting a better return. These options are however more risky than any bank fixed deposits. However, a few investment options through which you can earn some return on your investments are as follows:
This is one of the most common places that people invest their money in. The stock market is common among investors due to its high returns. Stock markets however involve a lot of complications therefore, you need to have deep knowledge before you start investing in the stock market. There is no minimum limit and you can choose according to your savings that how much amount you are willing to invest in the market.
Apart from the stock market, the crypto currency market has overturned the game by giving massive returns to the customers. Similarly, like the stock market you need to have some basic knowledge about the crypto market before you start investing in it.
The safest way to earn returns on your investments. Unlike the stock market and the crypto market the return on your investment might not be high but it is the safest way of investing your money. You can visit the bank in which you already have an account and invest your money in a bank fixed deposit.
“Beware of little expenses, a small leak will sink a great ship.” – Benjamin Franklin.
As the quote above suggests, you should be careful about your expenses from the very beginning to make sure that your ship does not sink by the end of 2022. Moreover, a budget will keep you on track throughout the month and year. Just like the financial budget 2021, the budget for the year 2022, is also around the corner so you should plan your investments accordingly. However, if you make a financial plan for yourself at the beginning of the year and are determined to follow it throughout the year, then there should not be any problem in being financially independent in 2022.