How to Save Money?

6 min read

In today’s world of buying the next cool thing and showing it off on Instagram, saving is one of the most important parts of managing money and many find it difficult to save a portion of what they earn. We all know that someone’s income makes them rich but the hidden monster is preserving that income. If you can’t save a portion of your income then you will never accumulate enough money to be rich. Spending should never be equal to earning.

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To get out of the trap of spending more myself, I studied a lot of millionaires, mainly their habits on how they save so much of their income. And finally came up with 4 simple steps to save more money every single month. And it doesn’t matter if you are a 20-year-old college student, a full-time employee or a 75-year old retiree; these 4 steps are very practical, simple and applies to all.

Personally I work full-time in one of the largest consultancy firms in the world with a very average salary and still have managed to accumulate a significant net worth just by following these 4 simple steps:

Step 1: Track

First and foremost you need to track every single penny you spend. Everything from a ₹1 chocolate to a ₹20,000 phone. EVERYTHING should be tracked & noted. Now that might sound like a lot of work, but I will show you how simple it actually is:

1. Download the app Monefy (It’s free.) You can also use other apps like SpendLess but I personally use Monefy.

2. You will see something like this

3. You’ll have two options Expense (-) and Income (+).

Monefy will allow you to manually enter every penny coming in (income) and every penny going out (expense) every single month.

4. Hit the expense/income button, then “Choose Category” to enter the type of income or expense.

Bought an ice cream of ₹50? Hit the Expense (-) button and enter 50, give it a category like “Food”.
Got this month’s salary? Hit the Income (+) button and enter 20000, give it a category like “Salary”.
Bought a movie ticket for ₹300? Hit the Expense (-) button and enter 300, give it a category like “Entertainment”.

Every day enter each of your transactions in it. It might feel like a lot but do it for 14 days, yes, just 14 days and it will be a part of your life. Just like you unlock your phone every other minute to check WhatsApp or Instagram, and it doesn’t even feel like you have literally unlocked your phone 100s of times in a day. Similarly, after 14 days, you will automatically start entering your every expense in the app. In the beginning, you will forget to enter few stuffs but don’t get discouraged, enter as much as possible and slowly you will see that you won’t have to force it. It will be your habit.

It might not be easy but its very simple and absolutely worth it when you will reach the end of the month with every single expense noted. I am doing this for the last 6 months and it’s now a habit. Yes, in the beginning, I had to force my mind to remember about entering the transaction in the app but now I don’t even feel like I entered anything, but end up with a lot of my income & expense data at the end of the month. Roughly I have saved ₹10,000+ in the last 6 months by just noting down what I have spent my money on. That might feel like less but this ₹10,000 invested in a market index fund would be worth approximately:

  • ₹11,300 after 1 year.
  • ₹18,424 after 5 years
  • ₹33,945 after 10 years
  • ₹1,15,230 after 20 years

And NO, you are not that busy that you can’t find 3.5 seconds to enter the transaction (earning or spending) in the app. When the wealthiest American of all time and the richest person in modern history John D. Rockefeller could do it, why not you? And he didn’t even have an app, he physically noted it in a notebook (He called it Ledger A).

John D. Rockefeller’s Ledger A

Step 2: Analyse

Now as you’ve successfully noted down all your expenses, it’s time for step 2. First let me tell you that the 3 major devils which eat up income are Housing, Food, and Transportation. So first, make a list of the minimum money you can spend to have an average livable room (housing), have healthy food (Food) and travel the least for work, college, etc. (Transportation). Personally I call it Freedom list. Freedom from the fear of not having enough money, freedom from the devils. About 6 months ago, my Freedom list looked something like this:

  1. Housing: ₹8000 per month (Sharing flat with another roommate)
  2. Food: Maximum ₹150 per day i.e 150*30= ₹4500 per month
  3. Transportation: ₹120 per day i.e 120*30= ₹3600 per month

So the 3 main devils eat away 16,100 of my monthly income.

Now if you have also made your own Freedom list, go through it once again. Go through it carefully, you can easily cut out that extra cup of coffee (₹10 saved), or that expensive room you are living in (₹1000 saved). Move to a flat/room which is closer to your office or college and is available in the minimum monthly rent possible. Maybe share it with 2-3 flatmates/roommates. It might not be luxurious but it’s worth it. This will not only lower your monthly rent (Housing) but it will also bring down your transportation cost (Transportation) and time as well. Go through your list once or twice, and reduce each of your 3 expense (devils) by at least 5-10% every single time.

Currently, my Freedom list looks something like this:

  1. Housing: ₹8000 per month (Sharing flat with another roommate)
  2. Food: Maximum ₹140 per day i.e 140*30= ₹4200 per month
  3. Transportation: ₹0 (Living 15 mins away from my office)

Now the 3 devils eat up 12,200 (down by 3900) of my monthly income.

So it’s time to re-open Monefy app. With every income and expense noted throughout the month, you have the exact data of how much you spend on these 3 devils. Now compare and analyze your freedom list with the Monefy data. Monefy already provides a very good pie-chart representation of how much you have earned, how much you have saved, how much you have spent, and exactly where you have spent it. You will have a clear picture of how much these 3 devils are eating up. And repeat this comparison (analyzation) on the last day of every single month.

Step 3: Act

It’s finally time to act on what you tracked and analyzed. Cut out the extra cup of coffee you are consuming daily or that burger you are having. It isn’t worth it. Completely stop or replace it with a much healthier option. Your net worth doesn’t support your garbage craze to eat or do all this. Cut out the beers and cigarettes, you have at weekends or the club you’re visiting.

For example in evening snack time, I stopped having milk coffee (₹10) and replaced it with black coffee (₹8). I also stopped having veg burger (₹20) and replaced it with 2 boiled eggs (₹7 each). Though I did lot more small small changes but these two simple changes helped me reduce my food costs (2nd devil – Food) by about ₹2880 every year.

Considering 30 days a month:
₹10 X 30= ₹300 and 2030=600
Total = ₹900

₹8 X 30= ₹240 and ₹14 X 30= ₹420
Total = ₹660

Saving 900-600= ₹240 every month and ₹2880 every year.

Step 4: Repeat

Now the final step is to repeat it every day. As I said in the 1st step, and I will say it again – Just repeat for 14 days and you’ll see a huge difference in your habit, wealth and even your health. This is the most important step out of the 4 steps.

Self-discipline is the No.1 delineating factor between the rich, the middle class, and the poor.

Robert Kiyosaki

To summarise “How to Save” within 60 words:
Download Monefy app. Create a Freedom list. Insert every single expense and income you made in the app. On the last day of each month compare it with your Freedom List. Watch where you are spending more. Aggressively act on it and cut that extra out. Repeat it every day, every month.

To make things clear, I am in no way getting paid by Monefy to write this; I personally use it and sharing this with you so that you can start your saving journey today. And as always, thanks for going through this. Never forget our life mantra: Save Invest Repeat. Do let me know how and how much you’re saving. Talk to you on Twitter – @InvestRepeat. Cheers guys.

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