Unlocking saving potential: 4 tips to convert expenses into savings

One way to get out of financial worries is to create a sustainable budget with the help of technology, use investment tools, and make sure you and your family approach saving money with consistency.

Harsh Chhatrapati, MintGenie Team
Published4 Jul 2023, 01:16 PM IST
convert expenses into savings
convert expenses into savings

In recent times, the Indian economy has faced significant challenges, including widespread layoffs and salary reductions, along with a notable increase in inflation rates. As a consequence, savings among households in the country have witnessed a sharp decline.

According to a recent report by Nuvama Institutional Equities, Indian household Net Financial Savings (NFS) have reached a three-decade low. The report reveals that in the first half of FY23, HH net financial savings dropped to approximately 4.0% of GDP, significantly lower than the 7.3% of GDP in FY22 and the 12.0% of GDP observed during the COVID-19 pandemic in FY21.

This decline in savings, for several reasons, indicates the pressing need for individuals and families to reassess their financial strategies and take proactive steps towards improving their saving habits in order to safeguard their financial well-being. 

Build a safety net before budgeting expenses

Usually, as soon as the salary is credited, people tend to create a budget for the next month focusing on what expenses they are looking forward to. Try the other way around. As soon as your salary is credited, dedicate a certain amount to your savings and then take a look at the expenses. It is a great way to save for the rainy season first, as life is unpredictable and you never know when you will be needing that saving. 

Simplify expense tracking and management with technology

Make sure you are taking advantage of technology by using applications or services that automatically round up your purchases to the nearest Rs and deposit the difference into a savings account. This makes saving effortless and allows you to accumulate funds over time. 

Break free from the buy now, pay later cycle

Due to the ambitious goals and limited income of many young adults in India, they are increasingly relying on credit to fulfil their lifestyle needs. This change in consumer behaviour, combined with factors such as easy access to credit through services like Buy-Now-Pay-Later, Credit Card EMI options, and app-based loans, has resulted in a rapid increase in consumer debt in India. 

Based on data from the Reserve Bank of India (RBI), household debt has reached 36% of the country's Gross Domestic Product (GDP). As of March 2021, the total debt held by households was approximately Rs 43.5 trillion. This loop of buy now, pay later is injurious to your savings. Hence, as much as you can, try and gradually come out of this loop. You’ll eventually start seeing a change in your saving patterns. Rich Dad Poor Dad’s author Robert Kiyosaki also promotes the idea of never using credit cards. 

Investing is saving 

As Indians, we have seen our family using traditional forms of saving, including buying gold or setting aside money in fixed deposits, among other saving modes. This is a traditional form of saving and growing money. However, at this point in time, SIPs have become one of the greatest investing options.

Consider this scenario: If you are able to find an extra Rs 2,000 each month and decide to invest it in an equity SIP, assuming a conservative average return of 12%, you could potentially accumulate a corpus of around Rs 20 lakh over a 20-year period. This example serves as a reminder of the true value of small savings and encourages you not to underestimate their potential impact on your financial goals.

Align your family's financial approach for consistent success

Well, it’s time to sell this idea to your family as well! Make sure you all together smartly convert your expenses into savings. Explain to your children the need to start saving small amounts of money and how you can convert Rs 2000 into Rs 20 lakhs savings in the long term. 

Harsh Chhatrapati, CEO of Galgal

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First Published:4 Jul 2023, 01:16 PM IST
HomeMoneyPersonal FinanceUnlocking saving potential: 4 tips to convert expenses into savings

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