As you usher in the New Year, it is time to look at where you stand financially and take a relook at your financial portfolio for 2018. Just setting financial goals may not be enough, it is also important to make smart financial decisions that will help your money grow and multiply in the long run. Though it may feel overwhelming to figure things out, it is not difficult to build good financial health. Just go that extra mile and plan ahead to ring in the New Year on a happy and successful note. In this article, we tell you how you can save more money and increase your wealth in 7 easy ways.
1. Reinvest interest, go for compound interest: Compound interest is your best friend. You can grow your money by simply reinvesting the interest and dividends you earn. This means that the longer you invest, the more compound interest you will earn, and the more your money will multiply. For example, if you invest Rs.50 at an interest rate of 10%, you will earn an interest of Rs.5. So the total value of your investment will be Rs.55 at the end of 1 year. In the second year, you will earn interest on Rs.55, which will be Rs.5.50, adding up to Rs.60.50.
2. Use your credit card to save and earn more: If you do not already own one, we suggest that you apply for a credit card because it will help you save more money. Yes! Contrary to popular belief, if you use your credit card right, you can earn a lot of freebies. You can opt for cash back credit cards and earn cash rewards, use your signup bonus, get free hotel stays and complimentary flight tickets, and a host of other freebies. In fact, many credit cards have tie-ups with supermarket chains and you can actually get a discount on groceries. All this will help you save money in the long run.
3. Get health insurance and life insurance: Having an insurance policy will go a long way in protecting you against risk. Not just this! Having a good health insurance policy will help you save money on hefty medical bills and take care of all your medical treatment costs. A life insurance policy is also a good buy and will help you save tax.
4. Invest in an appreciating asset: Instead of investing in a depreciating asset, try to make investments in appreciating assets. For example, apply for a home loan if you have enough money saved for a down payment. Investing in a home will help you create an appreciating asset and also help you get tax benefits.
5. Keep a watch on your spending, save more than you spend: It is always wise to know exactly where your money is going. Make an effort to read your bank statements and your credit card bill statements to see where you have been overspending. See how you can avoid irresponsible spending and save more money. The trick to build wealth is to cut spending and save at least 10% more than you spend. For example, if you spend Rs.10,000 a month, you should ideally save Rs.11,000. This way, you can balance out your spending and saving.
6. Review all your investments: Before the end of the year, make sure you take a look at all the investments that you have made and see how they are performing. If some of your investments are not doing well due to market fluctuations, pull them out and reinvest in better-performing holdings. The trick is to have a balance between high-risk investments and safe investments.
7. Don't let your money sleep in your savings account: Last but not the least, make sure that you are not keeping a major portion of your money in a savings account. This is because the rate of interest on savings accounts is very less and inflation will only eat into your savings, reducing your purchasing power in the long run. The best way to beat inflation is to invest in a range of high-earning investments such as mutual funds, stocks, etc and also in safe investments such as fixed deposits and recurring deposits.
Managing your money is the key to becoming successful financially. How much you earn does not matter as much as how much you spend. Living paycheck to paycheck is a big no and it will only lead to financial stress. So be smart, stick to your budget, make meaningful investments and pay off debt.
The bottom line
Be wise and make your money work for you!