Key takeaways:

• Understand the power of compound interest and how it helps in increasing your wealth.
• Saving money from salary every month is easy using the 50/30/20 rule.
• Consider investing 20% of your salary in mutual funds, ULIP plans, saving plans, gold, etc.

Financial freedom is not just a dream, but an easily achievable reality. Constant investment and savings habits can help you materialise this dream in no time. The question ‘How to save money for achieving all life’s milestones?’ is common and finding answers to it will help you instill a sense of financial fulfilment.

Understanding how to invest money starts with realising that compound interest can work wonders to boost your wealth over the years. When you start saving early, you can easily reap the benefit of compound interest by placing your funds diversely across various assets, giving high investment returns. You can conveniently build a sizable money nest by practising this for 20-30 years. 

When you think of ‘How can I save money?’, you must remember your unexpected expenses and recurring purchases. Tracking your spending is a good habit that helps create a realistic monthly budget plan. Besides, it lets you list your expenditures and help identify areas where you overspend. Furthermore, it will also give a fair idea of the amount you need to invest or save. The goal is to start small – you can simply create an auto-deposit for 5% of your paycheck and increase the amount in the subsequent months.  

How to save money from salary per month?

Saving money each month is entirely dependent on your financial goals. Some of you may have short-term goals like going on a family vacation, while others may have long-term goals like buying a house or a daughter’s marriage. Your goals may also depend on various factors like monthly income, debts or liabilities, age, life insurance premium payments, etc. Nevertheless, it is never too late to start saving. Here are some ways you can save money easily:

• Envelope system: Before deciding your monthly budget, allot different categories with an envelope for each of them. Split your money in different envelopes, and you will know when you have run of cash. Moreover, cash left in any envelope at the end of the month can be used for savings. In case of digital transactions multiple applications available online will help in assigning categories with a monthly budget for each. 
• 50/30/20 rule: This rule, widely used for savings, states that you should spend 50% of your monthly income on essential utilities such as rent, food, medical bills, college/school fees, etc. 30% of your salary should go on discretionary spending, while the remaining 20% should go into your savings.
• Saving plans: You can also select an investment or saving plan to build your financial wealth over time. Multiple saving plans offer customers guaranteed income benefits that can help achieve life’s major milestones.  

How much money should you invest in a month?

Are you thinking of investing some money each month? If yes, you must consider your monthly income, fixed expenses, and investment goals. It is advisable to invest 20% of your salary each month across different investment/saving options available in the market. This will help you build a significant corpus over time, which will further assure a financially secure future.

Different ways to save & invest your money

You can invest your money in different investment and saving vehicles. Some of them are listed down below.

• Mutual Funds:

  A mutual fund combines funds from different investors, which are then allocated to various sectors for security reasons. Mutual funds help you diversify your assets, significantly reducing your risk portfolio. Unlike purchasing stocks and bonds, buying a mutual fund is relatively simpler. You can start with a SIP (Systematic Investment Plan) for as low as Rs. 1000 per month. Based on market performance, mutual funds offer higher returns on investments compared to other investment channels.



• Fixed Deposit:

  You can create a Fixed Deposit (FD) through various financial institutions or banks. Starting a fixed deposit is convenient and can begin with an amount as low as Rs. 1000. You can deposit money based on your financial capability, and upon maturity, your principal amount is returned along with interest.



• Gold:

  Investing in gold is a time-tested strategy that remains popular. Gold jewelry is a widely preferred investment option with low-risk management. The gold market fluctuates with the financial market, offering opportunities for appreciation. Additionally, gold can serve dual purposes—as an investment and for personal use, such as wearing it on family occasions.



• Tax Saving Plans:

  Investing in tax-saving plans can provide financial security and help reduce taxable income. These plans are ideal for individuals with sizable incomes seeking to minimize their tax burden. Key factors to consider before investing include ease of investment, returns, liquidity, and flexibility. Popular options include the National Pension Scheme (NPS), Equity-Linked Savings Scheme (ELSS), Public Provident Fund (PPF), Sukanya Samriddhi Yojana, and Life Insurance.



• ULIP Plans:

  ULIP (Unit Linked Insurance Plan) combines investment and insurance. These plans allow you to invest in equity, debt, or a mix of both, while also providing life insurance coverage. They offer tax benefits under specific sections of the Income Tax Act and are suitable for long-term financial goals.

These plans combine insurance and investment components to give you high investment returns. With a ULIP plan, you can place your funds in debt, equity, or both, depending on your risk appetite. Like any other insurance plan, you will must pay a premium for ULIP. The basic difference compared to a life insurance plan is that ULIPs give you market-linked returns.  

Conclusion:

Successful savings and investments can only happen if you allocate funds for them at the beginning of each month, not towards the end. Create a budget and stick to it rigorously. Never use your savings money for unwanted expenses; otherwise, it will defy the purpose. You should save money to invest it, so it grows over time. Always remember that it is never too late to invest, so begin today and watch your financial portfolio grow over time.

Disclaimer: This article/blog is issued in public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article/blog as conclusive in nature. Readers should research further or consult an expert in this regard.
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Reference: https://www.prudential.com/financial-education/saving-investing-strategies-basics