How to Save Money in India from ones salary?

Experts write billion words about investment. But it is surprising that how little is written about how to save money.

Saving  comes naturally to Indians.

But the global issue with savings is inconsistency.

How to save money consistently year after year?

Saving money is an art, and this is the reason why every one cannot master this art.

But what can be done is, to learn the basics of money management. This will greatly help even the non-savers.

Saving and investment of money is required for long term wealth creation.

Long term wealth creation for family is the ultimate goal of saving and investment.

But wealth creation will be a goal which is too broad.

Having a goal like this doesn’t motivate a person to save more.

Hence, finalizing a goal which is more specific, and with which a person can also relate-to is desirable.

To fix such a goal, one has to understand an alter point of wealth creation.

What destroys wealth building possibility?

The biggest devil is debt and overspending.

Let saving money be that tool using which you can fight these two devils.

So next time when you take a pledge to save 10% of your income, tell yourself why you are saving money.

Save consistently…

If one is able to save money consistently then 50% job is done.

We all are born as great spenders. Our focus is more on spending instead of saving money.

This is the reason why even if we save well today, but ultimately we end up spending all those savings.

The temptation to spend is so high that, the savings eventually gets eroded.

We always seem to have some valid excuse for spending money.

Our mindset does not allow us to save more.

We prefer to spend as we enjoy buying things.

Real example…

I bought a Macbook for myself by spending my savings meant for loan prepayment.

It would have been much wiser for me to use that money for its rightful purpose.

My calculation says that, if I would have made the loan prepayment (instead of buying the Mac) I would have saved more than Rs 250,000.

This is more than twice the price of my Macbook.

So, in real life, saving money becomes tough due to temptations.

If it is so tough then how to save money?

In India, people have different methods of saving money as compared to people from Europe and America.

In this blog post we will see the unique ways in which successful people save their money.

Start with baby steps…

Saving money is only the first step.

Preserving it from getting spent uselessly is the next important step.

The trick is to first save and then lock it.

How to lock savings? Now, this will be too quick for person learning to take baby steps

First digest this idea that saving alone is not sufficient. It is also important to lock it.

In this article we will see how to save money each month and also keep it intact.

Right Reasons to Save Money

If we do not first give ourselves strong reason to save money, the money will ultimately get spent unnecessarily.

Simply saving money will not help. One must also have good reasons to keep saving locked.

This is why, extremely self-disciplined and mature people save more money.

One must give themselves strong reasons to save money. Once we have a strong reason, we can then start to save money each month.

Save Money for Financial Independence…

Are you tired of your job? Do you hate your boss? Do dream leading a life which is more in your control?

If the answers are in YES’s, it means you want financial freedom.

Saving for financial independence is such a goal which is self-motivating.

There are people who save to buy car, buy vacation, etc…this is also not bad.

But it is also true that a true goal must also have a spiritual side of it. This spirituality encourages people to keep saving even in tough times.

The reason to save money should be simple, understandable, measurable and must also have a spirituality attached to it.

So my take about a RELIABLE GOAL to save money is consistently is to do it to attain financial independence.

But what is Financial Independence….?

Generate income, save money, buy assets, and this generate passive income. This is the process of wealth creation.

In simple words, wealth creation is a process of generating more and passive income.

The more one builds wealth, the closer one becomes to financial independence.

But wealth creation takes time. It is a slow but sure process of becoming self reliant and rich.

Wealth creation is like nurturing an Apple tree. It takes time to grow but when it grows it reaps fruits.

Why wealth creation is a slow process?

Suppose RAJESH has $2,000 in savings. If RAJESH invests it in bank deposit it will yield an annual passive income of $120 (say @ 6.0% p.a).

But $120 per annum is too less. It is nothing….

This is why people rely on their paycheck from job to manage day-to-day needs.

Potential income that can be generated from savings is too less. Why? Because we keep so less in our savings.

Suppose RAJESH needs $45,000/year to manage his day to day expenses.

In other words, RAJESH must increase his passive income from $120/year to $45,000/year to become.

But how to do it?

This will be possible if RAJESH can increase his savings in bank deposit from $2,000 to something bigger.

At the rate of 6% per annum interest, the required deposit should be $750,000.

A bank deposit of $750,000 will then generate a passive income of $45,000/year.

For sure, accumulating $750,000 is going to be neither easy nor fast. Wealth creation takes time.

If objective is to get rich and attain financial independence, one must be patient.

Become a big saver of money…

Why it is so difficult to change our status from an owner of $2,000 to an owner of $750,000?

Accumulating $2,000 is lot easier. It is easy not because the value is small, but because we cannot do much with an amount less than $2,000.

But by the time we accumulate $2,000 or more as savings, we start getting new ideas of spending it.

We start getting ideas of why the new iphone-10 is the best phone ever. How that new LED TV will change our lives….

The point I am trying to make is this, starting to save is easy, but hurdle comes later. The main challenge is to keep those savings intact.

This is the reason why experts give so much emphasis on investment.

By investing money we can locks our savings.

Investment keeps our money away from us. This way, it does not get spent on trivial things.

Investment also yields returns (like interest of 6% p.a. from Bank Deposits).

These returns on investments can earn us potential monthly income that we need to attain financial independence.

So now we know that, a combination of saving and investment is essential.

Knowing easy ways of how to save money from salary will help in the wealth creation process.

Ideas on how to save money in India each month

Frankly speaking, there are no limitations of ideas when it comes to saving money.

People use their own unique ways to save money in their day to day lives.

I will list down here few ways of saving money that I have gathered by reading books, talking to people and personal application.

So lets start with idea #1 which is also my personal favourite…

1. Pay Yourself First

First step is to open two bank accounts. One will be a salary account where the paycheck gets deposited. The other will be savings a/c.

In savings account, money only comes in, and if it goes out, it goes only for investment.

Second Step is to budget all expenses. Try remembering all expense that you made in last one year.

It should cover all expenses starting from utility bills, cooking gas, groceries, vegetables, vehicle fuel, house rent, EMI etc.

Expense that we often fail to budget are vehicle insurance premiums, emergency funds, unplanned purchases, property tax, miscellaneous expenses, vehicle maintenance, gym, dining out, prepaid mobile recharge, etc.

The point I am trying to emphasize is, our list of expenses shall be very exhaustive.

Once we have identified all expenses, start putting values against each.

Third Step will be to identify how much we can pay to ourselves.

Suppose monthly income is $100. Total expenses comes out as $85. It means $15 is the money we can save from salary.

This $15 should be that money that no matter what we do, will never be needed to manage our day-to-day needs.

Pay yourself first this amount ($15). How?

Fourth Step will be how to pay oneself.

Remember, you have two bank accounts, ‘salary’ and ‘savings’. Online transfer this $15 from your salary account to your savings account.

This transfer of money should be done on the first day your paycheck gets credited into your salary account.

Before you pay any bills, pay yourself first. Do not allow yourself to even get a feel of those $15.

Make it as if this money ever existed in your salary account.

Making yourself feel poorer is better. If we have less in your hand, we will spend less.

But remember that feeling poorer is not the real goal. Feel poorer for long term wealth creation is the objective.

If we have excess money visible, our mind start playing pranks with us. It will generate ideas of spending on needless things.

This is the reason why the world richest man Warren Buffett leads a humble life. His focus is wealth creation and not on lavish spending.

2. Open a Piggy Bank at Home

Now we know that when our mind sees free cash (unlocked money) it start playing game with us.

Free cash in your wallet? Your mind will gives innovative ideas of spending it on trivial things.

The ideas can be like going on cruise for vacation, buying a nice car etc.

It is only natural. Spending on entertainment and luxury cannot be avoided. It is only human nature to ask for it.

But there must be control. Family must understand the going on unplanned vacation and buying car impulsively is too expensive.

So it is better to plan for it. How to plan?

Planning means, giving oneself a distant date (for vacation or car) and start saving for it from today.

The whole family should get an idea that they can save anything from small coins to big notes to fund the cause.

The objective should be to save heavily so that the piggy bank gets full in quick time.

This type of exercise does two things for us. First, the family realizes that if they want to buy a big thing it takes time to realize a dream.

Secondly, the family will learn that it takes effort and patience to buy things. Kids will learn how to fight the temptation of immediate gratification.

Make it a habit of your family. In case one wants to buy any big thing, first discuss. Then start a piggy bank and start saving for the cause.

Everywhere Daddy’s credit card will not fund the requirements.

This will cultivates the habit of savings which the family can cherish all the life.

Piggy bank is only symbolic, what it actually does is to cultivate one of the best habits necessary in all human beings – wise spending and more saving.

How to Save Money in India - 1

3. Your Pay rise should also reflect on “Pay You Self First” rule

At the end of the year when we get a pay rise it is always very satisfying. But what we do with this pay rise?

Generally we end up spending all of our our pay rise by inflating only our expenses column.

For sure, when we get a pay rise we can expect a proportional rise in standard of living.

But a proportional rise should also reflect in ‘pay yourself column.

Till last month your salary was $100 and your were paying your self $15. If your salary grew to $120 then you pay-yourself should also rise proportionately to $18.

The advantage of increasing the Pay Yourself Column is that, it adds to your savings.

The more you are contributing to your Pay yourself column, the more free cash is available for investing.

It creates a cyclic process. High Income > High Savings > More Investment.

4. Take bank loan, but self contribution should be more than 50%

This piggy bank is slightly different from your home piggy bank. Leave that piggy bank for your children.

This new piggy bank should be used for bigger expenses like new home purchase, new car, higher education for child etc.

Suppose you decide that you want to buy a car, it is very easy to buy it using car loan. If you decide to buy car today, tomorrow you will get a car loan and within days the car will be at your door steps.

But what is suggest is to learn to delay this gratification.

As a rule of thumb instead of paying just 20% as down payment for the car, try paying 50% as down payment.

Suppose your want to buy a car whose price is $13,350. Ideally a bank will pay you loan for 80% of the cars value $10,700. But do not fall prey to this temptation.

Instead, wait till you have 50% funds ready for down payment.

Create a piggy bank for buying this car. This piggy bank can be like a mutual fund SIP or a money market fund.

Rule is, you are not allowed to but the car till you have 50% funds ready for down payment in your piggy bank.

You can also do similar exercise while buying a house. Set aside each month a sum of money that on a later date you can use for buying your house or your car.

5. Pay a Hypothetical EMI for your New Home

Even though you are not planning to buy a home today, imagine that what if you have a home for which you are required to pay EMI.

But how much EMI you shall pay for this imaginary home? A person can pay EMI equivalent to 30% of their take home salary.

Suppose your net income per month is Rs 10,000, in this case you can pay Rs 3,000 as your imaginary EMI.

Continue paying 30% as EMI to yourself.

This EMI you will continue to pay till to really buy a home. By the time you really start paying the EMI, your are already used to paying that amount.

But more than that, paying this hypothetical EMI is building a corpus for the down payment for home.

Supposing that you are a 24 years old graduate, just out of college. Your are in your first job.

If you start this virtual home buying EMI payment scheme now, by the time you are 30 you will have a nice savings.

You will also exactly know how much EMI you can actually afford. Paying hypothetical given this tremendous realization about our affordability.

I have personally used this trick of money saving and it works the best.

6. Accumulate Precious Metals Like Gold or Silver

I will suggest to add one column in your expense budget. Name it ‘investing expense on gold/silver’. Keep a target of buying at least 5 gm of gold (or equivalent of silver) every year.

Presently 1gm gold will cost approximately $41. This is nothing compared to what we end up spending on weekends.

Every month save $20, it will be sufficient to buy a 5 gm gold coin at the end of the year.

The idea of highlighting gold purchase here is because of its ability to lock funds.

Once we buy gold it is not easy to spent it (like cash). Moreover gold also shows reasonable price appreciation in long term.

Suppose you buy 5gm of gold each year for next 20 years. At the end of 20th year you will have 100gm of gold.

If gold price appreciates even at a decent rate of 6% per annum, after 20th year its rate will be close to $132/gm. It means, 100 gm of gold will be worth close to $13,000 (Rs 8,50,000).

I personally consider gold/silver as an excellent way to save money from salary. It is a great tool of locking money from getting spent on trivial things.

7. Prepay Your Loans

These days almost all of us carry some form of loan or the other. Majority of us carry personal loan or home loan.

Prepayment of loans helps in saving heavily on interest.

I have written one article purely on home loan prepayment. If any one wants to know more about loan prepayment they can read this article.

This is one practice that I have personally followed and had experienced its benefits. Prepayment has not only allowed me to save on interest but it also allowed me to close my loan in half the tenure.

There was a stage in my life when I was diverting all of my ‘pay yourself funds’ towards my loan prepayment.

Home loan prepayment is a very realistic way of saving money. Every time I make a prepayment I know that I have saved huge interests.

I will suggest my readers to at least once read this article on loan prepaymentand decide for yourself whether this is worth trying or not.

8. Open Savings A/c in Bank offering highest interest rate

Why to only think complicated when it comes to savings money.

You will agree that the easiest way to save money from salary is by opening a savings account.

We do not consider savings account as best option because it offers low interest on savings account.

But let me ask you this question, do we have an option?

If we are not opening a savings account can we manage with something else? No we do not.

One has no alternative to savings accounts.

What saving account to do for us? It helps us to receive salary, pay bills, get debit card/credit cards, avail home loan etc.

So why to needlessly ponder about low yields from savings account.

Better option is to choose the best from the worst.

Yes, these days not all banks offer same interest on savings accounts.

A good idea will be to have our savings account in a bank that is offering highest interest rates.

Interest Rates on Savings Account

Deposit TypeName of BankOffered Interest Rate on deposit below Rs.1L
SavingRBL Bank5.1%
SavingYes Bank5.0%
SavingKotak Bank5.0%
SavingBandhan Bank4.25%
SavingIndusInd Bank4.0%

9. Planning Taxes  saves money

Our target is to save every bit possible from our salary.

By planning our taxes we save a good deal of money from salary.

Let me give you an example to explain how much we can save by planning our taxes.

Small savings like these can make hell of a difference in long term.

In India, rules allow us to save money from salary as listed below:

U/s 80C – Over all exemption is Rs 100,000/year
(Investment in ELSS, PPF, NSC, LIC, Home Loan Principal etc)

U/s 80D – Over all exemption is Rs 15,000 (Rs 20,000 for Senior Citizen)
(Health insurance for Self, family, dependent parents)

U/s 80E – 100% interest on education Loan is exempted from Income Tax
(Education loan taken for higher studies of self, spouse, children)

ExamplesIncome per YearTax SavingTax PayableSavings/ year compared to Ex. 1

10. Develop Small-Saving-Habits

When it comes to long term savings, even small savings make a big difference.

Small saving over a period of time can prove to be very beneficial.

Big benefits are not visible while practicing small saving habits.

Small saving habits is more like a discipline.

When we practice small-small savings, we also inculcate these good habits in children.

Small saving habits works on the principle of ‘delaying gratification”.

Lets see some small savings habits that we can implement in our day to day life:

  • Driving a car which runs on cheaper fuel (Diesel, CNG, Electric).
  • Buy groceries in bulk from places like D-Mart.
  • Do not buy new books frequently. Listen to free audio-books or read online.
  • Switch-off electrical appliances which are not in use.
  • Buy clothes in bulk offered on SALE.
  • Try to jog early morning in open air instead of spending on gym subscriptions.
  • Try to make all payments by cash. Cards subconsciously trigger people to overspend.
  • Plan your annual vacations in advance. Do all bookings in advance.

11. Prepare a Personal Cash Flow Report

Here the idea is to buy things we can afford. Generally we get tempted to buy things we cannot afford. This creates overspending.

Why we overspend? We overspend in ignorance.

If we are not aware of our affordability, we will fall prey to overspending.

How to prevent oneself from overspending? We will see a solution to these problems emanating from real life experiences.

Check and correcting bad habit of overspending has resulted in development of this wonderful solution.

Generally when it comes  saving money, nothing seems to work.

But the concept of cash flow report preparation really works.

Example: One day my family decided to replace our old dilapidated refrigerator with a new one. The cost of that refrigerator was Rs 49,000.

Before we commit to buy that refrigerator, I ask to my self “Can we afford it“?

To answer such questions I dig deep into my cash flow report.

In ‘miscellaneous shopping’ row I checked how much saving we have accumulated.

I found that we can easily buy one. In the same time, I was suppose to pay school fee of my child. The fees was close to Rs 35,000.

When I checked my cash flow report I found that I was running out of funds. As this was uncompromisable expense.

Hence I decided to borrow some money from ‘miscellaneous shopping’ fund.

As a consequence we were not able to buy refrigerator that month.

But we knew that in next couple of months we can buy it.

So such cash flow reports not only helps us to check affordability but it also helps to manage emergencies.

How to Save Money in India - 2

12. Always Save Money for Birthday’s & Anniversaries

It is my personal experience that, not saving for birthday’s and anniversaries can lead overspending.

Birthday’s and Anniversaries are such events that happen on a fixed date each year.

Depending on ones requirement, it is advisable to save 12 months prior to the real expense date.

Suppose you are 3 people in your family.

It is only inevitable to arrange some gathering and buy gifts during this day.

If the expense is inevitable why not save for it from start of the year?

If we will save, at the end of the year we will exactly know how much we can afford.

If we do not save, this expense will happen anyway.

Probably we will dig into our other savings to fund this  requirement. This leads to overspending.

So better is to fix a budget, save for it, and spend what is planned.

13. Skip Grocery Purchase once every two months

This may sound like a foolish suggestion. But it is really effective.

All household maintains a huge unnecessary inventory.

Funny thing is that, we are not even aware that we maintain it.

Sometimes it happens that this inventory gets stale and we have no option but to dispose it off.

In an typical Indian household, following are few items that often remain idle. But we still keep refilling them more out of habit.

  • Kabuli chana (white gram),
  • Rajama (kidney beans),
  • Maida (wheat flour),
  • Tooth paste etc.
  • Rice & Wheat.
  • Onion and Tomato.
  • Ketchup etc

This list can be very long.

Sit with your spouse and try to this kind of fact check for your house as well.

Every household maintain this inventors.

Idea is to push yourself to “consume this inventory” before it gets spoilt.

How to do it?

Do not buy grocery as scheduled.

If you buy groceries, every week, skip one week every two.

Once you do not have the refill available, automatically you will look for your hidden inventories.

Believe me, it may be sounding impossible now, but it is only a matter of pushing yourself.

It is really an interesting habit.

I will suggest everybody to try it once in 2 months.

14. Increase Home Loan EMI by 5% each year

This is a very safe and most effective way to save money.

Not only it will make you debt free, but it will also save huge money (interest savings).

We all do prepayment of home loan, right?

How we do it?

We accumulate money & then make prepayment.

The other alternative is, do not wait for the money accumulation.

Straight away approach your bank and ask them to increase the EMI.

Let the EMI increase be only Rs.300 per month. Let the compounding of savings begin from the day zero itself.

Try to increase your loan EMI by 2-5% each year.

It has been observed that, this way people tend to pay back their home loan in less than half the total tenure.

[Read more on whether to reduce EMI or tenure of home loan upon prepayment]

15. Use your savings to generate monthly income…

Use your savings to buy Monthly Income Plans (MIPs).

MIPs are debt linked investment. Hence they are absolutely safe.

No need to worry about possibility of loss.

Investing in a MIP plan will serve two purpose:

  1. It helps you to save money (no risk involved).
  2. It motivates you to save more as it generates monthly income.

Higher will be the fixed income more enthusiastic the saver becomes.

This kind of monthly income generation ultimately renders financial independence for the person.

16. Lock Your Savings Forever…

One day I asked one of my friend, how much is your saving?

He replied, “30% of his my home salary”.

I enquired further, how much of it your never spend?

He didn’t knew the answer.

What happens is, though we save money today, but we eventually end-up spending them.

This is not real saving.

Real saving is that that money that you will never spend (or say you will do it after 30 years)

How to do it?

Generally, what we keep in savings is very liquid form. Liquid money gets spent very easily.

Savings account, recurring deposit, fixed deposits are good saving options but it does not “lock” our money.

When we do not lock money it gets spent.

How to lock the money forever?

Suppose one has home loan, use the savings to make prepayment of loan.

Once the prepayment is made, that money can never be spent elsewhere.

One can also use savings to buy tax-savings options (like NSC, PPF, FD, Mutual Fund etc).

People do not tend to liquidate those investment that helps them to save income tax every year.

Find your your own unique way to “lock” your saving “forever”, and just do it.

17. Budget higher than necessary

This is another very effective way to save more money.

It is like a trick, but is very effective.

The trick is simple. It helps one to save money unknowingly.

It works on a very simple “psychological rule”.

Our mind adapts very quickly to deal the set rules.

Set a rule which will not allow your mind to do needless spendings.

How to do it?

Set an expense budget and give more funds to items like:

  • Bills payments,
  • Subscriptions,
  • Grocery,
  • Fees,
  • Loan EMIs,
  • Premium payments etc.

Have your notices what is common in all of the above?

All of them are such expenses, which are almost fixed in nature.

Suppose your home loan EMI is Rs.30K/month. Will it increase the next month?

So what you generally do? You allot a Rs.30K budget to your loan account.

But do it differently this time. Allot it a higher budget, like Rs.31K/month.

The additional Rs.1K will never be spent. It it remain idle in your back account forever.

18. Trick Yourself & Save Money

We are all natural spenders of money.

We can spend money more easily than we earn them.

Hence it requires special tricks to continue saving money for long time.

We can actually trick our mind and influence it to save more money.

How? Lets have a look:

#18.1 Buy a Day of Financial Independence:

Suppose ones annual expense is $25,000. Divide this by 365.

The value that we have now is is $68 (24,000/365). This is our daily cost.

This value ($68) can be used to trick our mind, and motivate it to save more.

How to do it?

  • Feed into your mind an absolute value (your per day cost). In this case it is $68.
  • Try to save $68 in bits and pieces.
  • When you have accumulated $68, lock it in a bank deposit.
  • Reward yourself by saying this, “thank you for buying a day of financial independence”

Every $68 in savings means, the person has build a day worth of savings.

Give yourself to build a savings for 180 days.

This will be one sure step towards financial independence.

[Read more on how to trick your mind to save more money]

#19. Give money to parents and ask them to save it for you.

This idea may sound childish, but its effectiveness is almost guaranteed.

Where our money can remain most safe?

  • Savings account.
  • With parents.

Parents are those people that we have, with whom our money will be safest.

They will do everything to keep our money as safe as possible.

Who is the biggest enemy of money? Spending urge.

Parents will never spend the money of their child by the way of wrong spending.

Hence, I personally feel that the money parked with your parents will remains their as savings forever.

One of the better ways to save money with parents is the form of gold coins and silver.

So if the question is how to save money, give it to your parents. They will preserve it like your mandate.


Saving money each month is difficult.

But setting up rules as discussed above will certainly help.

These clever saving tips does the following for us:

  • It helps to manage our near term expenses.
  • It also helps to plan big expenses going to come in future.
  • Helps to get closer to financial independence.


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  2. I liked your policy btw! Just made notes on it 😀 I am a PhD student here ! Thank you so much for keeping me enlightened !

  3. So how do you form your own flow report ? Isn’t it just like “Pay yourself” and expenses section but in a more elaborate extent ?

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