We all go through this inertia of saving at a salary which barely manages our living expenses. Nowadays, the situation is going through a tough grind for many who have no or marginal salary hikes in the last couple of years. Plus the inflation seems to be in no mood to sober up. Last year, I did not add a single savings or investment product to my portfolio and moreover I discontinued paying premiums for one of my insurance policies. Mounting expenses at the same income levels just leave us with little choices.
So what does one do when the regular monthly salary doesn’t leave any scope for savings? Well see if my approach can be of any use to you.
First – Make a list of all your savings, insurance, investments, gold and other assets. Below is a list of some broad categories to give you a start.
| Assets and deposits | Total |
| Fixed deposits | Rs.200,000 |
| Savings bank account balance | Rs.35,000 |
| Gold deposits or ETFs | Rs.25,000 |
| Stocks and Shares | Rs.18,000 |
| PPF / Recurring deposits | Rs.100,000 |
| Total Asset holding till date | Rs.378,000 |
| Investments (made every year) | Amount |
| Mutual funds or SIPs | Rs.34,000 |
| Life insurance – money back plans / unit-linked plans | Rs.50,000 |
| Total Yearly Savings & Investments | Rs.84,000 |
| Total Monthly Savings & Investments | Rs.7,000 |
Second and the most annoying task is to jot down all those monthly expenses on a sheet of paper (or in an excel sheet if you can) which are incurred after paying for the basic needs of grocery, clothing and accommodation. For example –
| Items | Spends /per month |
| Mobile bill | Rs.1,500 |
| Fuel bills / Travel exp | Rs.3,000 |
| Coffee and Dining | Rs.2,500 |
| Movie and entertainment | Rs.2,000 |
| Shopping (easier way is to divide total yearly spend by 12) | Rs.4,000 |
| Cigarette / Alcohol * | Rs.2,500 |
| Miscellaneous ** | Rs.3,000 |
# refers to expenses incurred on eating outside and not to be confused with grocery bills
* may not apply to all
** internet charges, membership fees and other expenses that are not included in the other categories
Once you have done Step 1 and Step 2, you will be able to see the aim of this entire exercise – that is – Increase the contribution to your first table of savings by decreasing some of the expenses in your second table. That shall help us to achieve our objective of increasing our savings within the same disposable salary amount.
I do not want to get into the nitty-gritty of how you will reduce your secondary expenses. But I will give you an example of how I did it. Here goes –
Movie ticket expenses – I started watching one of the movie shows in morning/noon when the tickets are really cheap. It surely saves me some money and excitingly I am less frustrated after watching a bad movie as compared to my friends.
Restrict frequenting the coffee shops – From visiting a coffee shop once a week, I pushed it to once a fortnight. I not only have lesser caffeine going in my head but I also escape from those tempting brownies and cookies.
Minus 2 Cigarettes a day – I took up this challenge of skipping two cigarettes every day. I am not sure of the monetary savings I am gaining but it surely is doing some good to my will power. Of course this can only work for people who do smoke or consume alcohol frequently.
Just by following these 3 steps I manage to save Rs 2,000 per month which adds up to Rs 24,000 per annum. Without any delay, I opened a SIP mutual fund plan and started transferring this savings amount into it. Small steps everyday leads us to a bigger destination and hence it should start immediately.
It surely is difficult to change or cut down something which is a habit or a source of entertainment but that’s where the challenge lies. And the best part is that the results do not take too much time to show up. When the magical moment comes and you see a growth in your savings with the very same salary, then it indeed is a great feeling – Zen like!
