How to create a simple savings plan
Here are some of the simple ways that can help you to create a beginner’s financial plan.
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Ask any youngsters about saving and investment, then they are likely to say that they are aware of the different products but don’t know where to start. And this inability to start leads to delayed financial planning. After all, it is always better if you start planning for your finances early.
Here are some of the easy ways to build a simple savings plan. It is easy as pie.
The first step to create a simple savings plan is to have a budget. In the early stages, creating a budget can be a huge task. The 50-30-20 rule of budgeting can be an easy first step in budgeting. The 50-20-30 Rule helps you to make a budget based on these three spending categories:
50% of your income should be earmarked for essentials such as rent, utilities, groceries and transportation.
30% of your income should be used for your wants such as movies, travel and dining out.
20% of your income should be saved for your financial goals, investments, and reducing debt payments.
You should remember that the percentage of allocation towards your needs and wants should not exceed 50% and 30% respectively. This will help you to save more money. However, it is always better to save more money.
But before you sit down to budget, it is essential to know how much money you bring home every month and what will be the respective allocation for the three categories. Next, is to track where your money is going. You can use various apps to keep a track of your spending. Calculate every penny. Then divide the spending into the three categories. This will help you to understand whether you are in lines with the 50-30-20 rule. If you are spending more on wants, you can cut it down so that you can make money for your savings.
This simple budgeting trick will keep your finances in place. You can pay the bills on time and still have money to spend on other things.
No one wants to be on a ship without its rudders. A proper objective is important in every aspect of life. It helps us to keep us focussed and ignore all the other things that do not add anything towards your goal. In case of finances, setting a goal is equally important. Instead of randomly investing in a product that your friends have invested, pause and think about the reason behind the investment.
Setting a goal, whether it is long term or short term financial goal, it can help you focus on what’s important. Financial goal does not have to be a big one. Big financial goals such as buying a house can have intimidating effect and you are most likely to lose interest in achieving these goals. You can start with a simple financial goal such as buying a smart phone. Achieving the small financial goals gives you the confidence boost to plan for the long term goals. The step-by-step process is an easy and simple way to achieve your goals. These goals will keep you motivated and stop you from undertaking unnecessary purchases.
Once you have set your financial goals, you can open a dedicated savings account solely for your goals. It is extremely easy to open a savings bank account and you open one without stepping out of your house. Many banks such as Kotak Mahindra Bank offers instant account opening through their app and website. With zero balance accounts such as Kotak 811, you don’t have to even think of keeping an average monthly balance. There are no penalties for not keeping a minimum balance.
Moreover, you can open a full-fledged savings account through video KYC from the comfort of your home.
Read: Video KYC: Open a Kotak 811 Full KYC account with no restrictions
Also, different banks give different interest rates on their savings account. You can choose a savings account that gives a higher interest rate such as Kotak 811. You can earn up to 4% on your savings account with Kotak Mahindra Bank. A higher interest rate will ensure that your savings is not lying in your savings account.
Once you reach your target amount, you can easily use to fulfil your financial goal.
Conclusion: The 50-30-20 rule, setting goals and having a dedicated savings account are just some of the ways that can nudge you towards proper financial planning. Once you master these techniques, you can easily move over to bigger goals and complicated investment options. But that is a story for another day.
Tags: savings account, savings plan