scorecardresearchWorld Savings Day: You can follow these five steps to resist the temptation to splurge

World Savings Day: You can follow these five steps to resist the temptation to splurge

Updated: 31 Oct 2022, 07:42 AM IST
TL;DR.
While it has become increasingly difficult to save money in the era of hyper consumerism, it is now increasingly important to inculcate this habit. We share some tips to do so
Theme for this year’s World Savings Day is ‘Savings Prepare You For a Better Future’

Theme for this year’s World Savings Day is ‘Savings Prepare You For a Better Future’

An age-old maxim says that for a better tomorrow, one should do something in present. The same logic applies to the world of investment where it’s integral to first save and then invest in the present to be able to accumulate sufficient wealth in the future.

As we commemorate World Savings Day this year, we emphasise on the significance of savings in creating a better future. But it is, undoubtedly, easier said than done. 

The companies around the world tend to push really hard to urge consumers to buy their products through advertising blitzkrieg on social media and elsewhere, and the young people with impressionable minds are easily tempted to buy products merely for their exclusivity and are even willing to spend far more than the real worth of those goods.

In this backdrop, saving money and investing the same not only appears difficult but courageous too, because one has to fight temptations to refrain from doing what their peers are doing on a regular basis such as buying an iPhone or purchasing the latest computing gadget or even a car.

Preeti Zende, a SEBI registered investment advisor and founder of Apna Dhan Financial Services, says, “Saving is the first stepping stone of Personal Finance. The wealth creation process starts only when we start saving. It leads us to financial freedom. One can follow three things to inculcate saving habits. First — set aside 20-30 percent of your income on the day of your pay cheque in a separate account every month. Second — you can follow the 50-30-20 rule. 50 percent of take-home can be allocated for basic mandatory expenses, 20 percent can be allocated for wants and aspirational expenses, and 30 percent towards savings. And third —Learn to be patient. Making saving a habit requires a lot of patience.”

Here, we list out a number of workable tips that can help investors save money today to help create a better future tomorrow:

First, investors can cut down on avoidable indulgences such as eating out too often, buying an expensive gadget for show-off only.

Second. Keeping track of expenses, particularly the ones that can be cut down is vital. Unless you track your expenses on a weekly or monthly basis – you will not be able to curb your avoidable cash outflow.

Third. Soon after the fear over pandemic died down, some people have resorted to revenge travel or revenge shopping to make up what they could not do during the two years of pandemic. These kinds of practices can, and should, be avoided to maximise the savings.

Four. Being true to your financial goals is key to keeping aside some money on a regular basis. Most financial goals have a tangible benefit attached. It is important to be mindful of them and never lose focus from these goals while you save for retirement.

These goals may include buying a house and paying for your children’s education, et al.

Five. Always remember the concept of opportunity cost of products and services you want to buy but can avoid. This means by buying a product ‘X’ for 500, you let go of everything else you could possibly do with the same 500 including investment.

For instance, if you splurged 25,000 on a new gadget you did not need, then not only you lost 25,000, but you also lost an opportunity to invest the sum in a fund where it could have grown to say 1 lakh. In other words, you did not only lose 25,000, you also lost a chance to earn one lakh in future.

It is normal to accept that altering the old habits is harder than it appears on the surface. However, whenever you are in a doubt, you can recall the great words of legendary investor Warren Buffet: “Do not save what is left after spending, but spend what is left after saving.”

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First Published: 31 Oct 2022, 07:42 AM IST