Save First and Spend Later

“I have so many expenses. I can’t save money with the salary I get currently.” – one of my colleagues told me this.

Believe me, if you are having such a mentality you won’t be able to save even after your next raise. Human psychology is such that you will do what you want to do. Your will is what matters. 

Here is a simple hack that you can follow.

• Have an expense diary.
• Each and every expense should be entered in that diary.
• At the end of the month, review the entries and find out “Rs. 500” which you can get rid of.
• Start a SIP of Rs. 500 right away.

Garnering wealth is not something that can be done by earning more through hard work.

Wealth is garnered by saving more and investing more.

I was speaking with a colleague recently and we were discussing financial management.

I asked him why are you not able to save?

His answer was in expected lines. “Too many expenses so I don’t have excess cash to save or invest.”

This is where most people make mistakes. Paycheque to paycheque is how most people run their lives. What a big mistake!

I asked him how much was his traveling expenses per month (home to office travels) before March 2020!

He took a while and then told me it was about Rs. 2000.

I asked him next: “Did you get any appraisal in the last 12 months?”

He said, “yes”.

I asked, “how much?”

His answer, “Rs. 5000”

I told him it means in the last 12 months your extra savings should have been Rs. 7000 per month. Then why can’t you save a part of that?

He didn’t answer. This is the mistake most people make. We do the expenses first and think of savings later. That’s a cardinal mistake.

My simple idea on this matter is given below.

• Save and invest first.
• Whatever is left – learn to live within that.

It’s a pain to start initially but soon you will be habituated. Good habits are the first step towards success. Start with Rs. 500 and then keep increasing that amount. 

Ordinary Habits: Extraordinary Results 

Last year towards the end of the year as the lockdown was eased and things were getting back to normal, I saw people who have been advocating that we should normalise work from home since going to the office was risky – making a beeline to vacation spots. Some went to Darjeeling. Some went to Sikkim. Some went to Goa. Some went to various other places across India. Good on them and I am happy for them because that’s their inner calling. But did they think how much of their decision was related to the extra savings that they made due to work from home? Actually, most of the people saved a lot, in time and money during the lockdown (Especially in the IT industry). But in place of thinking about investing part of these additional savings, they decided to increase their expenses. These are lifestyle expenses. Finally, after one year if you ask them what’s the net worth after adding all savings and investment accounts- the answer is “no difference”. 

So saying that I will invest after earning more, is a fad. You will only save and invest more when you believe you want to be wealthy – desire is the first step towards success – you will get wealthier only when you change your mindset. And tweaking your lifestyle habits and giving more importance to “save first and spend later “ is the very first step towards financial freedom.

How are you doing it?