Saving Money

Updated October 27, 2023

Introduction to Saving Money

This is an outline of Saving money. It is often the dream of most common people to become rich. The definition of “rich” for some people means having a big house, a big car, and a big bank balance. However, this definition is not true incomplete sense. To justify this, ask yourself one question: As of today, do you have more money than you had in the last month? If the answer to this question is yes, then you have taken one step towards becoming rich. If the answer is no, you must begin self-introspection regarding your habit of spending money.

When it comes to the habit of spending money, I’m reminded of famous quotes about saving money, such as:

“A penny saved is a penny earned” – Benjamin Franklin

Saving more money than you already have is more useful than earning more and spending more. I’m also reminded of another quote when it comes to money.

“Time is money” – Benjamin Franklin

Benjamin Franklin used this particular phrase as advice to a young tradesman. This means that you can generate a good amount of money by utilizing time efficiently. Now, I will be helping you to save money, which is the same as earning money. These saving money tips will help you eliminate your old habits of overspending and incorporate new habits that will help you inconsistently save money. It should be noted that your spending habits were not formed in one day and cannot be changed in a day! If you have consistency as well as dedication, then you can succeed in saving money.

How to Start Saving Money?

Let’s begin with simple guidelines to start saving money.

1. Avoid Plastic Money

Plastic money refers to financial transactions done using debit or credit cards. There are several advantages of using plastic money, such as eliminating the need to carry huge amounts of cash, being used anytime and anywhere, and using online payment. Also, there is a provision for credit facilities. On the other hand, there are disadvantages of using plastic money, such as using cards can be risky (hack, etc.) cannot be used at small retail outlets, transaction charges are levied, service charges are applied, and can lead to impulsive purchases.

Researchers say people spend more on debit/credit cards than cash. This is because making transactions using plastic money has little impact on you because you are not parting with real money, i.e. cash. Hence you spend more easily and without any worry. Using debit/credit cards also encourages you to buy unnecessary stuff and often takes you out of your shopping budget. Hence, it is recommended to use cash in most financial transactions.

2. Select a Good Savings Account

Instead of a regular bank deposit, consider a savings account offering additional benefits and an attractive interest rate. Kotak Mahindra Bank offers a 6% interest rate on your savings account, which is substantially better when you have a huge balance.

The chart below shows the interest rates on savings accounts offered by different banks:

Name of Bank	Account Type	Interest Rate
Yes Bank	Savings	7.00%
Kotak Mahindra Bank	Savings	6.00%
Ratnakar Bank	Savings	5.50%
Other Nationalised Banks	Savings	4.00%

Some banks offer free Demat facilities along with savings accounts. Some banks (such as SBI) allow a zero-balance facility, a great feature in an emergency (ICICI bank maintains a minimum balance of INR.10000 for a savings account). Some banks (such as Punjab National Bank, Corporation Bank, and State Bank of India) provide regular freebies, student savings accounts, and free demand drafts for paying examination fees or buying application forms.

Today, banks also provide life insurance coverage for privileged savings account holders. This saves you money from spending additional bucks on life insurance coverage.

3. Save Electricity to Save Money

This tip seems negligible change, and even you may wonder how saving electricity can save money. This can be better explained with the example that I learned with my neighbor. Our neighbor is getting a monthly electricity bill of INR.4000 with only two members in the family. He always complains about inflating electricity bills. During our discussion on the inflated electricity bill, I suggested he use electricity responsibly, i.e., turn off lights, television, fans, or any device that he consumes, saving money when unused. After diligently using this tip for one month, the electricity bill generated for the next cycle was INR 2100. He thanked me for the advice.

Now, let’s make a quick calculation of the amount that is saved in the above scenario.

Earlier bill amount: INR.4000
New bill amount: INR.2100
Monthly amount saved: INR.1900 (4000 – 2100)
Annually amount saved: INR.22800 (1900*12)

Based on the above calculation, you may wonder if using electricity diligently can save a huge amount.

Below are a few money tips to save electricity:

• Replace ordinary light bulbs with LEDs.
• Keep computer/laptop in sleep mode when not in use.
• Turn off lights when it is not in use.
• Switch off the main power button when you are out on vacation.
• Inform government officials if the street light is on during the daytime.

4. Use Free ATMs

If you withdraw the amount from another bank ATM after a certain number of limits, additional charges are levied for the transaction. This number of transaction limits varies from bank-to-bank such as SBI offers three transactions, whereas ICICI offers four transactions. If you exceed the number of transaction limits, the bank imposes additional charges of INR 20 per withdrawal. If you are a regular withdrawal from ATMs outside your bank’s network, it can be expensive! You can avoid this by properly planning your withdrawals.

5. Fix a Budget and Stick to it

Having a budget for your monthly expenses may sound funny, but it is a must. It helps a lot to curb and control the outflow of money. While preparing the budget, make sure there are savings, and then, from the balance, chalk out a monthly budget. You should keep 20% of your salary as savings and the remaining 80% as a monthly budget.

6. Save Money by Planning Taxes

You can save a significant amount of money by planning taxes properly. You can do this only if you know the exemption offered by the Income Tax department. Let’s check various exemptions that the Income Tax department offers to Indian citizens:

• Investment Specified under Section 80C

This is the most popular income tax deduction that comes under Section 80C. It allows you to make investments in certain specified instruments. Some of the instruments are mentioned below :

1. PPF account
2. Tax-saving mutual fund
3. Tax saving fixed deposit
4. Repayment of principal on your housing loan
5. The premium of a life insurance policy (LIC)
6. National Savings Certificate (NSC)
7. Contribution towards Employee Provident Fund (EPF)

• Investment Specified under Section 80CCC & Section 80CCD

Deduction under Section 80CCC allows for payment of any amount done towards the annuity plan of any insurance company for receiving the pension, i.e. contribution towards Pension Funds. Deduction under Section 80CCD allows the individual who has made a contribution towards the pension scheme of the Central Government, i.e. National Pension Scheme (NPS).

The maximum amount that is allowed to be claimed for deduction under Section 80C, as well as 80CCC, is INR.1,50,000 for every financial year. It has been announced that from the financial year 2015-16 onwards, an additional deduction of INR.50,000 is allowed for investment done in NPS.

Overall, the cumulative total under this deduction should not exceed INR.2,00,000.

• Investment Specified under Section 80TTA

A deduction of INR.10,000 under Section 80TTA can be claimed from interest earned from the Savings Account. This interest income is first added under the category “Income from other sources”, and later on, deduction from this income is allowed under Section 80TTA with the constraint of INR.10,000 per annum.

• Investment Specified under Section 80CCG

The investment under Section 80CCG is also known as the Rajiv Gandhi Equity Savings Scheme. This deduction applies to an individual who has invested in shares or mutual funds listed for a given financial year. The deduction allowed is INR 25,000, with a maximum limit of 50% of the amount invested.

• Investment Specified under Section 80D

Individuals or HUF (Hindu Undivided Family) who have paid for medical insurance premiums for themselves or any family numbers can then claim the amount as an income tax deduction.

• Investment has been made under Section 80DD and Section 80U

If the individual is disabled themselves, they are allowed a deduction under Section 80DD. In contrast, if any dependent family member of the individual is disabled, Section 80U allows them to claim a deduction. Most commonly, people claim these deductions. For a detailed study of deductions under the Income Tax Act, visit www.incometaxindiaefiling.gov.in.

7. Use Free Facilities

There are a few facilities that are available for free, such as:

• Newspaper/Books are available at the library of the clubhouse.
• Internet in the form of free Wi-Fi.
• Dance classes.
• You can do gymnasium exercises at the office or social clubhouse.
• Yoga classes by the Patanjali group.
• You can access training for courses for free on YouTube.
• You can utilize these facilities to save money.

8. Invest Money in Mutual Funds or Equity Markets

Investing money in mutual funds, equity markets, or the real markets is a wise decision to earn money from savings. People tend to avoid investing in these schemes due to a lack of knowledge. However, several links will help you learn about equity markets and mutual funds (such as money control Jago investor). You can even subscribe to channels on YouTube that give training on share markets.

There is a misconception among people that it is better to have a fixed deposit (FD) account rather than invest in the market. According to financial advisors, it is better to invest in the market rather than going for FDs with your bank since FD gives you a 7% to 9% interest rate per annum. However, they have kept in the dark that FD interest is taxable; hence, the interest you earn is negligible compared to inflation at the end of the day.

Diversifying your investments is better than investing all in one scheme since markets are sometimes risky. Diversifying your investments means investing money in various areas, such as the equity market, mutual funds, or share markets. To explain with an example, my dad invested in UTI mutual fund MasterGain 92 (which is UTI equity now) with 100 units worth INR.1000 rupees. Every year, the dividend was paid based on market value. After a few years, I completely redeemed the units, and the amount after redemption was INR 79,000.

People who are looking for a tax saving scheme can use the Rajiv Gandhi Equity Savings Scheme (RGESS), Equity Linked Savings Schemes (ELSS), United Linked Insurance Plans (ULIPs), etc.

9. Party at Home

If you throw a party at a restaurant, then it will cost you thousands of bucks. A lot can be saved if you do this at your home or in the backyard! You can even ask for your friend’s farmhouse to organize a party. The only expense you need to pay is the food you order. If you order food in bulk, you can ask for additional discounts, which most restaurants generally give. Order food from a restaurant you are already familiar with to get loyalty discounts.

10. Tap your Mobile Phone Usage

The use of mobile phones is essential in day-to-day life. You may constantly require data packs, unlimited calls, night calling packs, and other schemes. In such a scheme, you forget to tap your mobile phone usage. If you are a post-paid user, you must keep track of usage. If you don’t track usage, you may incur bills out of budget. I was a post-paid user until last year I received a monthly bill of INR.2300. Thereafter, I decided to switch to prepaid, which was a wise decision to save money. As a prepaid user, you can top up as needed and are completely aware of mobile usage. Choosing the prepaid option resulted in a significant change, reducing my monthly bill to INR 750.

Let’s quickly calculate the money saved after switching to a prepaid mobile.

Post-paid bill (monthly): INR.2300
Pre-paid bill (monthly): INR.750
Amount saved (monthly): INR.1550 (2300-750)
Amount saved (annually): INR.18600 (1550*12)

You may wonder after looking at statistics. The amount saved annually is sufficient to buy a health insurance policy for your family. Some bill payment service providers (like Paytm, Mobikwik, and Freecharge) offer cashback when you pay the bill using their service. This, too, adds to the amount saved on the mobile bill.

11. Check with Part-time Positions

If you are already working professionally with fixed weekends off, you can get a part-time job to supplement your income. Even students and housewives can opt for a part-time position to increase income. Several profiles exist, such as online trainers, content writers, brand executives, transcriptionists, recruitment agents, tour guides, etc. You can do online jobs from the comfort of your home, such as being a marketing executive or doing data entry work.

However, you must be extra cautious before applying to such jobs since most are scams. There are job search engines such as first naurki.com, internshala.com, letsintern.com, and searchmycampus.com, which are designed particularly for college students for part-time jobs. You can even seek help for a part-time job from your contacts, such as family and friends.

12. Compare and Bargain

You should bargain as if you have a birthright, as everyone has margins when they sell goods. In today’s scenario, where the economy is slow, traders generally go with the maximum margins. You can compare prices of stuff online on various e-commerce sites such as Flipkart, Snapdeal, Amazon, eBay, etc. While visiting a store, keep the price handy, and using that, you can bargain. Such bargains may not result in much but will bring down the price by at least 5-10%.

Conclusion

If you practice the above-saving money tips and tricks, you will have a sufficient bank balance at the end of the financial year.

Recommended Articles

This is a guide to Saving Money. Here, we discuss the introduction and a few tips on saving money. You may also look at our other articles to learn more –

1. Plastic Money – Technical And Monetary
2.  Job Hopping 
3. Mutual Funds for Beginners
4. Job Searching Strategies