Want to save Rs 10 lakh without feeling broke? Here’s how

A lot of people think that saving a huge amount of money means having to give up all things they like — eating out for dinner, going on weekend vacations, shopping for things, or their daily coffee that wakes them up in the morning. People often assume that there are no other options than to cut back, follow a super tight budget and have an overall “no fun” approach to their lives.

The good news is this does not have to be true. There are ways you can continue to live your life as you normally would while simultaneously growing your wealth. Building a large amount of wealth is not about giving up the things you enjoy in life. Financial stability is achieved when you design systems that allow your money to grow with little to no effort on your part and with little to no feelings of guilt.

This article will show you how to create a ₹10 lakh savings cushion by continuing to enjoy the same lifestyle you currently enjoy. No matter how much money you make (whether it is ₹40,000 per month or ₹1 lakh) the focus here is not on spending less, but rather spending smart, automating your savings and letting compound interest work for you over time.

Step 1: The true nature of a “safety” fund

A “safety” fund is an amount of money you save in order to help you deal with unforeseen situations (such as the loss of employment, or illness, or an urgent expense). A safety fund will provide you with financial stability when an unplanned event occurs.

Keeping approximately ₹10 lakh as a safety fund provides peace of mind, because you will be able to cover your expenses for a couple of months, allow you sufficient time to recover from the emergency, and make calm decisions regarding your finances without having to rely on loans or credit cards.

In short, a safety fund will protect your lifestyle, and not limit your enjoyment of things. In fact, it will enable you to continue enjoying your life as you normally would.

Step 2: Breaking down Rs 10 Lakh into smaller monthly targets

While ₹10 lakh may seem like a large amount, breaking this down into smaller monthly investment amounts will make reaching this goal easier if you are consistent with your investments and allow for compounding to take place over time.

You could achieve a target of ₹10 lakhs by investing approximately ₹13,000 per month at a yearly rate of 10%. It is also possible to reach the same target through a lower monthly investment, i.e., a little over ₹8,000/month for a period of seven years.

For short-term goals (under 3 years), stick to safer options like recurring deposits or short-term debt funds. For longer goals, start a mutual fund SIP in a balanced or index fund — they generally have the potential to generate 9 –12% returns and help your money grow without constant tracking.

Step 3: Automate and forget – The savings process should be easy

The biggest challenge in saving is not generating the funds; it’s making sure you save consistently. Automation can help with this. Set-up automatic transfers or systematic investments plans (SIPs) so that a set amount is transferred from your salary account to your investment each month on the same date.

This is a simple mental trick. By automating the transfer of money from your checking account to your investment account you would not notice when the money leaves your account. Over time, the money will be quietly building your savings, but you will not feel the effects of reduced spendable dollars.

You do not have to start large, even starting at a monthly contribution of ₹5,000 and increasing the monthly contribution 10-15% each year, based on your annual increase in income, your savings will add up quickly over a few years without significant adjustments in your lifestyle.

Step 4: Add income & invest more – worry less!

Instead of focusing on how much less you can spend each month, think about how you can add even just a little more money coming in. Having a small side job will your goal much easier.

You do not need to get too fancy to have some kind of side hustle. Some simple ideas include freelance work, weekend tutoring, selling used things online, or offering your services through Fiverr or Upwork. If you invest an additional ₹5,000 – ₹10,000 per month properly, you could cut years from your target date for saving enough money.

The most important thing is to put all the money you earn on top of your regular income into your SIP or other investment accounts. This allows every single rupee you make to be working to build your long-term financial future – in a quiet, consistent and non-disruptive manner.

Step 5: Regularly re-evaluate your plan every 6 months

Creating ₹10 lakh is a long-term process and will require occasional check-ins to confirm your success. Therefore, every 6 months, assess your progress to date in terms of total savings, investment performance, and changes to either your income or expenses.

If you receive a raise or bonus, increase the amount you are investing through a systematic investment plan (SIP) by a small margin. Even a 10% additional investment per year will result in a significant difference over time. If you find your expenses increasing, do not feel guilty about adjusting your plan accordingly – as consistency with your plan is more important than perfection.

Regular review of your plan will allow for flexibility in your plan and keep your savings consistent with changing expenses and other factors.

Step 6: Safeguard your savings

After saving money for a while, it is equally important to safeguard those funds that you are accumulating. A single illness or losing your job can potentially wipe out years of savings with one stroke, unless you have some form of protection.

In this regard, create a 12 to 24 month “emergency fund” which should be kept in a savings account or a safe liquid account. This fund will act as your safety net, ensuring that the ₹10 lakh you aim to save remains untouched even during a financial crisis.

Similarly, protect yourself against medical emergencies and unforeseen events through basic health insurance and term insurance. The cost of these types of insurances are relatively low, but they can help you avoid unexpected and large expenses when life presents you with an unforeseen event. As such, your savings plan will remain on track regardless of what may occur.

Step 7: Allow time and discipline to build wealth

When you have set up an automatic savings plan for yourself, made the right investment choices, and created a safety net then the most important thing to do is to allow time to build wealth.

Wealth building is not a function of daily tracking but rather the length of time your money spends in the market. There’s no need to stop investing or take your SIP contributions out because there is some downturn in the market.

Therefore, continue to invest consistently and with discipline, as a result your goal of reaching ₹10 lakhs will not be a dream – but rather a fact of life.

Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only. 

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