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A penny saved is a penny earned —Unknown

I have personally faced testing times, and that has helped me a lot in realizing the value of money. Over a period of time, I have learned that saving money is a necessary and useful skill to have.

It’s not particularly hard to do so if you have a system in place. I will try to list a few ways that have helped me in taking the right steps in saving money.

1. Differentiate between necessity and luxury

Save money and money will save you — Unknown

The first thing you should teach yourself is understanding the difference between necessity and luxury.

Having a car may be a necessity but having a BMW or Audi or other high-end cars is a luxury. When you go to buy anything new, ask yourself: is it really a necessity or luxury.

Credits and loans have got us all in a never-ending trap. The standard of living has gone up, but stress has increased as well. Is it really worth it?

2. Saving then spending

Do not save what is left after spending, but spend what is left after saving — Warren Buffett

This simple step could save you from spending on unrequired things.

Calculate your budget and identify what is the minimum sum required to run your household. For the remaining funds, set up a direct debit to move part of the salary to say super contributions, another part to buying stocks, a part to buying gold, another to say your vacation trips.

Having this system in place will ensure you are directing your funds to the things that matter to you.

3. Managing Kids’ expectations

Enough is better than too much — Unknown

For families with kids, it is important to set kids’ expectations at the right level. You should make them understand the value of money early.

It's Ok to say “no” when the demands are unreasonable.

Parents often get too emotional about what they need to do for kids. It’s Ok if your kid doesn’t have the latest toy.

Also, developing healthy food habits for kids will save you a lot of money.

4. Brands vs Return on investment

Don’t buy that $300 bag to have nothing in it. Buy that $10 bag to have $290 in it — Unknown

After you have understood the difference between necessity and luxury, buy your necessities carefully.

Once a product brand is established, companies start charging just for the brand name. Don’t fall just for the brands, always try to check if the value provided by the product is worth the money you are putting in.

However, note that I am not against buying branded products. But just be careful about blindly buying products just because of its brand name.

At the same time, it is also important to remember that cheaper items can turn out to be more expensive.

5. Research before you buy

Research is to see what everybody else has seen, and to think what nobody else has thought. — Albert Szent-Gyorgyi

Never pay a dime more than what something is worth. When you are buying big-ticket items, always research to bargain for the best price.

These days it has become quite easy to compare prices across a variety of retailers.

6. Getting away from a herd mentality

If everyone is thinking alike, then somebody isn’t thinking — Unknown

You have your own goals and your own priorities. You need to understand that you need to lead your life in your own way and so, your necessities will be different from others.

Do you really need to buy that wearable device or switch to the latest smartphone model just because you see a few people around you having them?

7. Managing Credits

Credit cards are the worst investment that you can make — Mark Cuban

The worst thing that has happened to humanity after wars and global warming is the invention of credit cards and loans.

It’s easy to buy on credit. But often, it is forgotten that buying on credit means that you are buying something based on an assumption that you will have the money to “afford it in the future.

Never have credit card limits higher than your monthly income.

While all the above ideas will save you money, the very fact that you have the means to “earn” and “save” makes you luckier than many unfortunate fellow human beings. So, most importantly, don’t forget to be grateful!

Hope you enjoyed reading! Happy Saving 🙂

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7 practical ways to save money was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

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