Buzz! “Your salary has been credited!” — An SMS, and probably the best thing that makes you happy instantly.

And the next day you get some more SMSs — A gentle reminder for your Home Loan EMI; Your mobile bill has been generated; Your electricity bill is due – pay on time to avoid disconnection; blah blah blah. Well, your family requirements are always there – ever increasing. As a consequent, before the month ends, money disappears from your wallet, isn’t it?

It’s a common story of most of the salaried people and they are out of idea how to handle their budget. Savings? Investment? Those are the worst joke of their life.

The tragedy is they don’t know how to save money and invest it right way to become rich.

I also have gone through same course of life during my early earning-years. I always blamed my low salary.

But, when I started analysing the record of my past months and years expenses, it was an overwhelming report. I couldn’t just believe what amount I could have saved without compromising with my lifestyle!

Might be you have some better plan that you already implement in your life. But, I know there are millions like me who are still struggling just to manage their monthly budget. So, here are some money management ideas for them. You can definitely share your plans as well with us – I love to hear from my readers.

Where to Start?

The first thing that you must need to do, is to be determined. Dreaming a good savings and happy future isn’t going to help anyhow. You have to act. I can just guide you through the steps. And believe me, it works.

Look Back into Past Records

Make a draft of your income and expenses for the past months. The more the better. It doesn’t need to be accurate by every penny – just an overall calculation is enough.

Start with the major expense categories like house rent/home loan EMI, children’s education (school fees, tuition, dress, books etc.), groceries & food, medical, utility bills (electricity, mobile etc.), car/bike’s fuel & cooking gas, restaurant/movie/amusement expenses and others (office expenses, social activities, home maintenance, clothes, decorative items and so on).

Once you get the clear picture of your expense list, you can definitely be able to find the extra expenses. Mark every part where you take steps and can save on your own.

Are you still confused? Didn’t find any option to reduce your expenses? Don’t worry! I have some tips for you.

Tips to Cut Down Expenses

It’s all about discipline. You don’t need to make huge change in your lifestyle and still you can save some, if not a lot.

The golden rule is to make it a habit to ‘think before you spend’. We all have endless needs and limited fund. So, we must need to segregate expenses that as urgent, important and extra.

We can live a happy life even after deducting the ‘extras’. It’s the ads that keep trying to make them ‘important’ in our life. Think if it would make great trouble if you don’t spend on that.

No, I’m not going to preach like a monk. Here are some solid tips to cut down your expenses from your tight budget. Remember, every penny you save will become a lump sum amount altogether.

• Instead of buying small amount of grocery items every day, go to wholesale market and buy in bulk. In a shopping bag of Rs.2000 you can easily save almost Rs.100 to Rs.200.
• Uninstall garment selling apps from your smartphone; if your location is within their delivery zone, there must be some physical stores where you can find better quality dress at a cheaper price.
• Drop every third plan to take a lunch/dinner in a restaurant – it makes you fat and your wallet slim. Can’t control eating those? Check for deals online before you step out.
• Switch your mobile connection from post-paid to prepaid; it’s a trap for the middle-class salaried people. Do you use prepaid connection? Use online portals to recharge and every time check for the deals/coupons to save some.
• Pay utility bills on or before time and save from penalties.
• Instead of buying fancy foreign fruits, eat locally grown ones – they are more beneficial for health and cheaper as well.
• Try home-made quick recipe for snacks instead of buying those fast foods. It saves both your health and money. You can pack it into your kid’s lunch-box as well.
• If you buy items online often, add them in cart or wishlist and leave them for some days. May be you change your mind and drop the plan. Also, there is a good chance, they will send you mail with a discount to compel you to check out.
• Opt for pick-by-channel instead of standard package for your D2H. Why pay for what you don’t watch?
• Switch to LED lamp and save on electricity bill. If possible, install solar panel.

Looks very monotonous and cheap? Probably! But, a person whose monthly income is 15 thousand or so can save at least Rs.1000 following these ‘cheap’ methods. The amount can increase dramatically, if your salary is a bit higher and you try some added methods.

Set Up Your Goal

So now, when you have got some surplus money out of your income, plan what are your future aims; why you want to save. Decide, whether you are planning to save for short term or long term needs. Without a clear vision, you can’t plan it perfectly. Here is a segregation for a better idea.

Short Term Saving Purposes

• Need a savings for your kid’s birthday, naming ceremony or school admission?
• Want to save for buying a smartphone, home theatre, DSLR or LED TV?
• Want to save for your emergency medical expenses?
• Need a fund for buying jewellery for in-law’s marriage?
• Want to create a fund for your upcoming trip plan?

Long Term Saving Purposes

• Want to save for your daughter’s marriage?
• Want to create a fund for your kid’s higher education?
• Have any bigger plan like building a home or buying a car?
• Want to create a savings to start your business?
• Want to create a financial support for the critical illnesses like cancer?
• Worrying about your retirement and want to secure your old age?

Well, the list is too long and every ‘need’ has a different plan. If you don’t have that much time to read all, you can simply jump to the section that you want.

The interesting thing here is, short term plans need bigger amount of investment and the long term needs smaller investment. But, before we proceed to the best investment schemes to become rich, I suggest to plan for a part time job to get some extra savings space.

Create an Extra Source of Income

Side income? Yes, there are plenty of opportunities! You just need to find out your talent and comfort zone and have to monetise it properly. Invest just a couple of hours daily or as per your preference and you can earn up to 25% of your monthly income.

What Type of Job Should I Do?

I have some plans for you – if you are ready. I have already published content on how to earn money online. Just follow those ideas and make a good source of income.

If you have any special skill like preparing handcrafts, cooking delicious food, teaching or anything else, you can even plan for a startup and sell it online.

Just make partnership with an established website or launch your own. I can guide you step by step on how to setup a startup with least investment and make it successful.

If you can work dedicatedly on that, it can give you more income than your full-time job – even when you aren’t actually working. But, you need to know the right method to achieve success and need the passion to work without much expectation during the early months.

I am working on this and will publish a detailed guideline soon. Just subscribe to my free newsletter so that you don’t miss it. It can be life changing for you.

Invest in The Right Scheme

Now, assuming that you have mastered the skill of how to save money and have started a side-income, let’s proceed to the discussion on how to become rich through right investment.

Well, the definition of ‘rich’ differs from person to person and while a thousand dollar is just nothing for a successful entrepreneur, it can be dream for a local business person, isn’t it? So, considering your current status customise the guidance to suit your needs.

Short Term Investment Plans

First of all you need to understand it clearly that you can’t make a huge savings in short term. And the even painful part is, short term plans demand higher premiums or instalments to make a handsome amount on maturity.

So, What Tenure is ‘Short Term’ Actually?

Yes, the tenure of a short term investment scheme can differ widely and it can be from 1 week to 3 years. Generally, an investment between 3 years to 6 years is treated as mid-term plans. I won’t focus on those in this post.

What Amount Do I Need to Invest?

It depends on what amount you want on maturity. The higher your aim, the higher amount you have to invest, as you can’t expect a huge interest rate in a short term scheme. It would be anything between 5% and 10% of the total amount you invested.

How Often Do I Need to Invest?

You can invest monthly, quarterly, half-yearly, yearly or even one-time. The higher the gap would be, the higher amount of premium you have to pay. So, for the beginners, I always suggest to choose monthly premium so that you don’t miss any instalment.

Which Scheme is Best to Invest?

First and foremost word that I must say is, short term investments don’t give you bigger return. You need to act wisely. And a BIG NO to chit funds. Avoid all those schemes that claim to pay ‘unbelievable return’ – there isn’t any such scheme.

Here are some proven schemes that you can try. Choose according to your budget and tenure. Better you keep your premium not higher than 15-20% of your total monthly income.

Recurring Deposit (RD)

Suitable Plan for: kid’s admission, buying home appliances, jewellery, motorbike, trip expense etc.
Most of the banks and post offices provide option to open Recurring Deposit account with different interest rate. They pay a compound interest of around 6-8% which is not a bad deal at all, especially when you can start investing with an amount as low as Rs.500 per month.

Downside: It isn’t an inflation-beating scheme. Also, as per the scheme your amount would be locked for 1-3 years and you can’t withdraw the money within that lock-in period.

Mutual Funds – Debt & Equity

Suitable Plan for: kid’s admission, buying home appliances, jewellery, motorbike, trip expense etc
Even today people avoid investing in mutual funds while they can earn a good amount of return in shorter period. The only reason is the word – ‘risk’. Well, there are some risk factors always; still a reputed scheme is enough reliable. On an average you can earn 10-15% return, if not even higher.

Mutual funds invest your money on two major areas – debt and equity and they are named accordingly. In simple words, debt funds are a bit low earning and safer option; while equity mutual funds are high return and higher risk options. I suggest to stick to debt mutual funds until you gain some knowledge on this.

The best part is you can invest for as short duration as a week to several years. There are plans that allow you to withdraw your money at any moment if there is a need of money. However, they can levy you a nominal exit charge to you.

If you are sure that you won’t require the money within 2years, you can opt for Fixed Maturity Plans (FMP) which are less risky and can give even higher return.

Mutual Funds – Liquid Funds

Suitable Plan for: Emergency medical budget, trip expense, buying gadgets etc.
These are very short term mutual funds where you can invest the money for 4 days to 91 days. Your money is invested in government securities and certificate of deposits and you get a return of 4-10%.

The best part is the return is mostly higher than FD and RD and there is no such lock-in period. So, if you can invest a lump sum amount, you can get a quick and almost safe return without blocking your money.

Downside: The interest rate is lower than debt and equity based mutual funds and there is no option for longer tenure than 91 days.

Equity Linked Savings Scheme (ELSS)

Suitable Plan for: Kid’s education, motorbike, jewellery, and other mid-range financial requirements
Again it’s a mutual fund that locks in your money for 3 years. As the name suggests, it invests your money in equity market and so you get a decent return. And the best part is the capital gain that you make is totally tax free.

Downside: You can’t withdraw the money within the lock-in period. Also being equity based scheme it has higher risk; but in general it gives very high return. Before you invest, go through the track record of that particular scheme.

Long Term Investment Plans

Short term plans can’t secure you a good future. They are designed for smaller needs. You need to plan for long term investment to make sure you don’t ever suffer from lack of fund at an age when you won’t be able to earn money like now.

The good thing is you can create a good amount of wealth by investing very little amount of money regularly for a longer tenure. So, be disciplined and stop postponing your plans.

I have earlier posted article on best long term investment schemes – you will learn about most of the top schemes from that post. Here are a few more that I haven’t mentioned on that post.

Critical Illness Scheme

Deadly disease can destroy your family – financially, mentally and socially. Keep yourself prepared to fight with critical diseases boldly. There are attractive health insurances that cover several types of critical illnesses like cancer, heart disease, kidney issues and several more.

Go to any reputed online portal, compare different plans and apply. There are cancer protection plans that can cover up to 10lac up to 10 years just at a monthly premium of Rs.60, isn’t it great?

Retirement Scheme

It is also known as pension scheme. Plan your retirement age and the amount of pension you want accordingly. The best rule of applying for a pension plan is to start as early as possible; you can get higher benefit with lower premium.

I Want Both. How to Manage?

Yes, everyone should invest in both short and long term plans to handle all types of financial needs smoothly.

However, it may seem too heavy for a person to continue multiple premiums simultaneously. But, you can easily overcome it by following the trick that I applied on my life.

Simply, divide your surplus money in three major portion in a ratio of 50:30:20 and invest them in short term, long term and health insurance schemes accordingly.

Didn’t get me? Let me give an example. Suppose, you have planned to invest a total amount of Rs.5000 every month. So, invest Rs.2500 (50% of total) on short term schemes, Rs.1500 (30% of total) on long term schemes and Rs.1000 (20% of total) on health insurances.

Well, it’s totally my personal opinion developed from experience. You have to consider your situation and have to plan accordingly.

The Final Word

I have seen worst days in life when I did not have a job and at that time my savings provided me the best support to live a respectable life.

It was all about right planning and discipline. I shared my hard earned knowledge and experience with you. If you follow, I can confirm, you also can create a good wealth and become rich without having a high-paid job.