How to make the transition from splurging to saving ?

What is the first thought that comes to your mind when you receive your salary? Save it or spend it? For most people it’s the latter, and if you belong to that group, you know exactly how it goes. You want to treat yourself, so you go on a shopping spree or meet with friends for an extravagant weekend. But there is a very fine line between spending and splurging.

Conscious spending may not necessarily burn a hole in your pocket. Certain expenses, like utility bills, grocery shopping and rent are essential. But buying a brand-new watch you don’t need or upgrading a phone that is only a few months old are unnecessary expenses and are quite indulgent if you cannot comfortably afford them. So how can you stop splurging and start saving without feeling the pinch?

1. Time-tested expenses

Invest in something that can be a proud possession, say gold jewellery, gold bonds or an apartment. Since gold never grows old and its price keeps increasing, its benefits are long term. Similarly, a studio apartment might be a house party destination for your friends now, but it can also be a very wise investment that you can profit from when you sell it a decade or two later.

2. Snowballing your savings

The good thing about saving is that you don’t have to do it all your life. If you start saving early, you can reap its benefits when you are older. For example, let’s assume you invest a handsome amount every year in government saving certificates that mature after five years. In the sixth year you can reinvest the amount that matured from your first year’s savings, which is now loaded with interest income as well. Similarly, invest the second year’s maturity amount in the seventh year, and so on. So, if you invest well in the first few years of your life, you can take it easy in your later years. 

3. The 50:30:20 rule 

You should ideally earmark 50% of your income on necessities, 30% on your wants, and save the remaining 20%. These figures are not set in stone and you may change them to an extent. The idea is to keep aside an amount for the purpose of savings and also have a clear sight of your expenditures – whether mostly necessities or wants. This rule can bring financial discipline into your spending habits. 

4. The 30-day rule

You want it, and you know you don’t need it. But the question is: would you want it after a few days? Next time you feel compelled to buy something, why not wait for 30 days? If the urge to buy remains you can go ahead, but if it doesn’t you have saved the money! There are great benefits in following the 30-day rule. You are not being miserly but just postponing the expense. During this period, you can research the product and decide if you really want it. It will save you a lot of money and make you a more mature shopper.

5. Decisions to help you save

There are several decisions you take in your life that decide how much you spend and how much you save. While buying a car we should try to pay at least 20% and take a loan for not more than four years. This maximises savings. Even in the case of home ownership, a 20% down payment is considered prudent. And the home loan EMI should not exceed 35-40% of your total income. Besides, saving 10% of your income for retirement is a popular benchmark; targeting to save 20 times your annual income for retirement is another.

While these mantras and benchmarks can motivate you to reach a particular savings target within a specific time, cultivating the savings habit is very important. The ideal way to get started with your savings, is having a Savings Account. Not only will it help you save towards your financial goal, it will also help you earn an interest on the amount you invest.

Know more about the different HDFC Bank Savings Account.

With HDFC Bank InstaAccount open a Savings Account instantly in a few simple steps. It comes pre-enabled with HDFC Bank NetBanking & MobileBanking and you can enjoy Cardless Cash withdrawals. And you can get started in just a few minutes!

*The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action.