This year has been way different than what anyone of us could have imagined. Ray Dalio predicted that the market is overvalued and was bound to crash but he too couldn’t have known that the world would come to a halt. Due to the current unusual circumstance, many individuals continue to experience major changes like working from home or participating in online classes. Essentially, the recent COVID-19 outbreak has caused us to witness and experience a lot of things that haven’t happened before.
The busiest highways are now silent. Animals are roaming on roads that were once occupied by traffic. Job roles that were “office only” are now available for remote work. People are maintaining a distance from everyone, allowing for personal space.
Though things are tough, let me introduce a little positivity in your financial life this year. I’ve been able to use the exact steps outlined here to increase my savings significantly!
I can’t reveal the exact numbers, but with these exact steps, I was able to double (x2) my savings in only 2 months. Let’s get right into it!
1. Open A Spreadsheet & List All Your Expenses Before Lockdown
Before we begin, let’s find opportunities for improvement. First, open a spreadsheet (I <3 Google sheets) and list out all the expenses that you had when things were normal.
Include your travel expenses, phone bills, restaurant, and other expenses. Be specific but don’t spend too much time here either.
Once that’s taken care of, you can move to the next step.
2. Categorize Your Expenses Into ‘Old’ & ‘Current’
Once you have a list of all the expenses, use the column right next to the amounts to add a tag as ‘Old’ or ‘Current’.
The old expenses are the ones you had before the lockdown. The current ones are ongoing expenses even after working from home.
Get rid of the current expenses from the list so you have a clean list of only the old expenses.
3. Sum Up All Your Expenses
Great, now this is the easy part – Add up all the expenses that you have listed in step #2 and get the total amount. If you did the calculations right, you’ll come up with a significant disposable amount.
You might not even have thought of being able to save this earlier.
Now that you have the numbers, let’s automate everything so you are no longer part of the equation. The amount is for yours to save, not to spend after the lockdown is over.
My personal expenses from before the lockdown came up close to 30% of my monthly paycheck. Never expected it to be so significant but hey, here we are!
4. Recognize Your Investment Style: Conservative Or Aggressive?
What’s your investment style? If you don’t know the answer to this yet, ask yourself this:
Can I see half of my money vanish in front of my eyes, and remain calm?
If your answer to this question is “yeah, I’ll be fine”, then you’re an aggressive investor. But if you believe you cannot take the risk, there’s nothing wrong with you.
It’s all a matter of personal preference. After all, this article is all about boosting your savings and not your risk appetite.
Working from home, you need to find time to figure out what kind of investments you’re fine with, we can move on to the next step: deciding where to save and invest.
5. Understand Where You Should Save Or Invest?
Once you know what kind of an investor you are, find out where you need to save or invest your money. I’ve been a stock market investor for a very long time. So, the regular ups and downs are now part of life and don’t affect me much.
If your working from home and open to the option, I’d suggest you take a jump in the stock markets now. Shares of some of the biggest companies are available at very cheap prices. This is a good time to invest for sure.
Not interested in investing in the stock markets? That’s fine. Your mutual fund investment platform can allow you to invest in safer options. Go for an overnight debt fund if you don’t like seeing a loss whatsoever. Another option is your bank’s fixed deposit.
Remember, it doesn’t really matter where you invest. Our goal is to ensure that after the lockdown, you’re way richer than you were before it. So just get the money put in a place which you cannot easily access.
6. Automate Your Savings & Investments
Time to automate everything. Almost all banks allow automated transfers to investment accounts and other bank accounts. We’re going to leverage that facility to increase our savings here.
Here’s what you want to achieve:
The day your salary gets credited, you transfer it to the investment or savings account. We calculated the amount to transfer in Step #2.
For now, you can set up the number of installments to be equal to the number of months the lockdown was officially announced within your country. I’ve set it to 10 months tho I really hope the lockdown ends earlier.
7. Keep Track Of Your Process & Add Money Whenever Possible
The last step of the process is to track and keep adding more money as and when possible. But you’ve already cut out all the expenses, what more do you add?
A simple answer to this question is, don’t carry a single penny for spending from one month to the next. If at the end of the month before your next salary gets credited, you have some money left: invest it.
This is a very small step and insignificant too, but this alone has helped me add up a lot of money to my banks. When we accounted for all the expenses in step #1 and step #2, there are always some things that we cannot calculate. Some unexpected spendings like a car breakdown, flat tires, house maintenance, etc.
When working from home, these expenses are eliminated and, you’ll see a good enough amount even at the end of each month.
This small step will improve your bank balance every single month very significantly.
8. Bonus Tip/Advice
Okay, this was supposed to be a 7 step process, but here’s a bonus tip/advice for you. Don’t touch your savings unless absolutely necessary (if it’s an emergency, grab hold of the money and take it out. It’s yours after all).
Let the process continue and to take its course without hindering it. By the end of the lockdown, you’ll be well on your way to saving a lot more than you could have done before.
End result: A bigger bank balance by the time you join your office again.
That’s all it takes. Even if you are working from home, a little bit of effort and a lot of automation will make your bank account, and you very happy. I hope these easy to implement steps have been useful to you. Things are tough in the world but have also allowed people to spend more time with themselves. The more time you spend with yourself, the more you can find the different qualities that you have.
Take the time to explore what’s hidden within you and improve yourself bit by bit, every day!
Grow yourself and take charge of your life – when the lockdown is over, you will thank yourself.
Stay home and stay safe.