We all dream of saving up to make those big purchases like a house or a car. But many of us fall short on these dreams, not because of lack of earnings. But because of a lack of understanding on how to pump up our savings plan.
Read on for 5 simple yet extremely effective tips that will help you enhance your savings.
1) Budget, Budget & Budget!
Having a plan or a budget, whether it is weekly, fortnightly or monthly will passively work towards enhancing your savings. A budget may not directly contribute to adding those extra rupees to your savings account, but it will help to build self awareness and control over your expenditure. It is really no surprise why every department in every company has a budget. Why should your life be different?
2) Diversify your investment instruments
Whether your prefer savings or investment instrument is fixed deposits, mutual funds, bonds, shares or insurance plans, the key to enhance your savings is to maintain diversity in your investments. Your savings depend heavily on how your investments perform and it is best to add diversity to your investments to maximize your returns, divide your risks, which will eventually lead to a pump up in your savings.
3) Avoid keeping a large liquid balance
Unless you need to maintain a large balance of liquid or hard cash, it is best to be invested away. Simply speaking, there are two reasons. One, your cash is likely to earn more interest if it is put away in a deposit or a fund rather than lying in your savings account. Two, investing your cash in such instruments means that you cannot withdraw it straight away from your account through an ATM or a cheque. This may help put a stop to impulsive spending that may not be required in your current financial situation.
4) Contribute a fixed amount every period to your savings
Many banks offer facilities where a fixed amount will be automatically deducted from your account at the end of every period, which is generally monthly. This is known as a recurring deposit. Whether you decide to put your money in a recurring deposit of simply move it to another savings account that you don’t usually access, putting a fixed sum of money aside will go a long way in enhancing your savings. Time flies, and so will your savings account balance!
5) Restrict your line of credit
Warren Buffet has publicly stated his hatred for credit cards and loans. You really don’t need to be Warren Buffet to understand that spending on your credit card right now means you will have to repay it back – with interest if paid late. Impulsive purchases made by drawing credit can be a massive hit to your savings plan. Don’t let attractive credit offers get the better of you.