How to Start Saving: A Penny Saved is a Penny Earned

It is true that rich people like to invest more whereas poor people like to save. There is a simple truth behind this. Rich people can take a risk because they can afford to lose money, whereas poor people cannot take a risk because they cannot afford to lose money. That's the reason why rich people get richer and poor people to get poorer.

Correlation Between Saving Money and Investing Money

Buying a house is an investment. When you have your own house, you do not have to spend money on rent, which means you will be saving a lot of money. Secondly, you can rent out your rooms or flats to make money. Thirdly, you can sell back and earn profits on investment.

When I had a job, I was saving 10-20 percent of my salary every month, and whenever I found lucrative investment opportunities (launch of IPO for example) I used my saving to make an investment. However, when I invested, I only used 50 percent of my savings because I also had to be careful about having emergency funds.

If you have the responsibility of running your family, paying for your kid's tuition fees, paying a mortgage, etc. you may never be able to save even if you want. If you are earning less than or just about what you need to run your life, saving is impossible. In order to save when you have limited income, you need to cut your expenses.

Investment is not Always Profitable

Investment does not always give a good return on investment. When your investment fails you will be in financial trouble unless you already have a saving. Here lies the importance of saving. You need to invest, but you also need to save. If both worked for you that's great but if you are doing both and if only one of them work, it is still good

How to Spend Less, Save More

In order to save money, you need to earn more than you spend. In other words, your income should be bigger than your expenses. If you have a good income, you need to deduct some percentage and save the money in your emergency funds or saving accounts. You can use the remaining money to manage your expenses.

One of the mistakes surrounding saving is people try to save whatever they have at their hands after paying their bills and spending on other expenses. Saving does not happen this way because a lot of times, you will not have anything in your hands that you can save. You should start saving by deducting a certain percentage after you receive your salary.

In my home country, middle-aged and old people prefer to save money in the bank, whereas young people prefer to make investments in various areas like the share market, real estate, business, etc. Saving in banks, especially in interest-bearing saving accounts or fixed accounts give you a good return

Saving Money Through Insurance Policy

Have you heard about life insurance-saving policies? You might know even not know if a policy like this exists. However, you surely know if you buy an insurance policy, mainly a life insurance policy, you will be able to make a saving, without knowing you are actually saving money. For example, if you have bought a term life insurance policy, it can be considered some sort of saving scheme (even though they do not use that word) because you pay a premium every year and get big returns after maturity.

Insurance policy not only provides coverage gains loss and damages but also provides benefits if nothing happens during the insured period. You can use an insurance policy as a saving scheme because you pay premiums every year, which is some sort of saving.

First published on Trendri, in author's name