Money savings tips starting with your first paycheck

How much we should save is directly related to our income and expenses. Yes, soaring prices are not helping us in any way. But considering the volatile nature of the market and the unforeseen nature of life, it is essential to keep aside some money and start saving with your first paycheck.

How to evaluate income

It is possible that during our initial days of income it might be difficult to save a large amount. The 80-20 rule may not work, where you give 80% of your income to expenses and save the rest 20%. So, we have to split the monthly income in parts and see how we can allocate funds for savings.

The first cut should be assigned to monthly expenses. What are monthly expenses? These are mandatory spends which we can’t avoid; room rent or home loan EMIs, electric bill, telephone bill, monthly internet charges, food and grocery expenses, travelling costs and miscellaneous expenses.

We could save some money in this section, if we act a tad bit smartly. If it is possible, you may share a rented flat with a co-worker or a friend. This move will immediately slash the amount that you would spend on rent, electricity, and internet charges.

There is also an opportunity to save money if you choose a public commute over a private one. Carpooling is again a good option to save money.

Once we have the monthly expense budget in front of us, the next important step is to immediately decide how and where to put the remaining money. To save before you spend is always a noble approach towards savings. Set up an Electronic Clearing Service (ECS) in your bank account. So that the monthly salary credited to your account will immediately get transferred to a savings account or any other mode of savings you have opted for.

Example: Amit has recently started his career in the field of IT. His monthly take home salary is Rs25,000. After adding up his monthly expenses. Rs7000 is left with him. This is the money with which he should start his savings journey.

Where to put your money?

Like calculating monthly expenses, it is equally important to know where we should put our income. There are a few important funds we should look at:

Savings account – The most secure and convenient product available from a bank is a savings account. Yes, the interest rate might be low as compared to an investment in the stock market, but the risk factor is much less. There are other added benefits to opening a savings account; you can carry out day-to day banking and financial activities from that account.

You could opt for a zero balance savings account digitally, where the bank will not charge you or ask you to maintain a monthly average balance in the account. On top of that, you will earn interest on the saved amount. Such an account also helps you to invest in FD or RD and get a better interest rate. Check out the ActivMoney or Flexi Fixed Deposit schemes offered by Kotak Mahindra Bank.

Mediclaim policy – Considering today’s medical expenses, it is vital to invest in a Mediclaim policy. It will ensure reimbursement of any medical expenses that you may have incurred by the insurer. There are multiple policies, both pocket friendly and covering major diseases to choose from.

Points to be noted: Before selecting the one suited for you, check the claim process, network of hospitals, and yearly premium.  

Pension plan - Saving for your older self is not only a good idea but a wise one. A pension plan helps you to put aside small units of cash in a pool in order to fund you post retirement. Saving money in a pension plan will also help you save tax.

Points to be noted: Consider your age, current income, tentative retirement age, and money you wish to avail as pension post retirement.

Emergency savings fund - Unforeseen situations are difficult to deal with, and it is equally important to save aside a certain corpus to fight such a time. Emergency savings is a safety net, where you put aside some money from your income in a separate account for emergency situations.

Points to be noted: An emergency account must cover a minimum of three to six months of regular expenses.

In the nutshell

Though the amount that you can save on a monthly basis is related to your income, it is essential to start saving as soon as you can. This will provide a financial backbone, and with time as your income moves up your savings will also find better grounds to bloom.

Popular Searches

Zero Balance Account Open Online | Instant Savings Account Opening App | Online Savings Account | Life Time Free Credit Card | Apply Credit Card Online | Kotak811