A person who is earning a lot of money seems to save the same as a person who is earning lesser. The reason for this is that when one earns more money, they start having a lifestyle that is very different from the lifestyle that were used to and so they start spending more that leads to less savings.
There are various methods that can be used to make sure that you do not have unnecessary expenditure when you have money in your hands.
1. Spend less and be on a budget:
Making a budget for the family or even the individual is the primary method of keeping tabs on the money that is in the hand. This will also help you to spend less because you would not like to overspend money. Budget should be made adequately taking into consideration, the various expenditure that you may have in that particular month. This is the main method of making sure that you have money in hand at all times.
2. Diversify savings:
Almost all people would have heard of this, but their savings is skewed. Some save much more in riskier instruments and many other people save in instruments that have very less returns, but are very safe. The best method of investing is to make sure that there is adequate allocation in both the risky as well as the safe methods of saving. A financial consultant would help you to plan your finances better, but the thumb rule is that any person can invest 100 minus their age in the equity and the rest in their safe investments.
3. Do not think of short term investments:
Unless you have something specific in mind or unless you have to have cash on hand for a expenditure, you should not think of short term investments. Almost all savings methods yield more returns on long term investments only. This has to be understood by you and so the investment should be planned accordingly.
4. Do not sell equity when markets crash:
This is not a thumb rule, but only a general rule. There are some equities that may freefall and never regain their pre fall status, but almost all the other equities regain their pre fall levels and this should be remembered by the investor and so you should never sell in a market that is falling. Those who try to time the market and catch the lowest part to rebuy the stocks are never successful and this only causes the person to get a huge loss.
5. Try to avoid loans:
As a person who wants to have a secure future, you should try to avoid loans unless you have some benefits of taking a loan like the tax saving benefits that people who have housing loans have. Other than this, any loans that you buy will cause you to pay a lot of money extra.
All these are the most important methods of making sure that you have the money saved and it does not go waste.
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