beginner's guide to saving money

After completing my Computer Engineering course at Nirma, I was fortunate enough to work with a fantastic IT company in Mumbai, Zeus Learning. Having worked there for three years, I was able to grow my savings to the amount of 5 lakhs which equals to the AVERAGE SALARY OF THOSE THREE YEARS

Here’s how I did it

Year 1

Preparing a rough budget is the most important of all things; having an allocation in your mind gives you clarity and might stop you from overspending. Budget for expenses can be divided into heads:

1. Significant expenses(food, house rent, and travel)
2. Miscellaneous expenses(outings and indulgences).

I used to divide the remaining amount into two subcategories, one part went into investment (recurring deposit with a bank), and the other remained in my bank account for emergency purposes.

Year 2

After a year I realized that TAX is, in fact, a significant burden. So everyone must do tax planning, I explored various options

1. Tax Saving Bank Fixed deposit with 5 year lock-in period
2. ELSS (Tax Saving Mutual Funds) with a lock-in period of 3 years
3. PPF Public Provident Fund with lock-in period 15 years
4. NPS (National Pension Scheme) with lock-in period till retirement

I chose ELSS because it had the highest return potential and minimum lock-in period. Every month I invested a part of my savings in those mutual funds systematically (buzzword is SIP). While researching options to invest, I got to know about a virus called inflation, which was eating away my savings slowly and I had to find an anti-virus.

Year 3

I wanted to move away from a low return recurring deposit because almost all of my returns were diminished by inflation. Stock Market became a hot topic for my research, and I opened an account with Zerodha (user-friendly mobile platform).

My only suggestion to beginners is don’t try to figure out how stock markets work, be patient and invest in some of the popular large-cap, mid-cap and small-cap stocks (a stock-picking post will follow soon! till then keep reading finance).

Like if you want to make money, share if you want to educate and comment your feedback. DM me if you want to know more! 

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Further reading and references

MoneyControl Personal Finance Youtube Channel, Detailed Investment and Trading guide by Zerodha, Basic Tax saving by cleartax