Simple steps that can help you avoid splurging money

While saving money has become increasingly difficult in the age of hyper-consumerism, it is now more important than ever to instil this habit

Abeer Ray
23 Nov 2022
Simple steps that can help you avoid splurging money

New Delhi: According to an old adage, in order to have a better tomorrow, one must act now. The same logic applies in the world of investing, where it is critical to first save and then invest in order to accumulate sufficient wealth in the future.

Companies all over the world use advertising blitzkriegs on social media and elsewhere to entice consumers to buy their products, and impressionable young people are easily tempted to buy products merely for their exclusivity and are even willing to spend far more than the true value of those goods.

In this context, saving money and investing it appears not only difficult but also courageous, because one must resist temptations to refrain from doing what their peers do on a regular basis, such as purchasing an iPhone, the latest computing gadget, or even a car.

The first rung on the personal finance ladder is saving. Only when we begin to save do we begin the process of creating wealth. It eventually leads to financial independence. Saving habits can be instilled through three steps. First, on the day of your paycheck, set aside 20-30 per cent of your monthly income in a separate account. Second, you can follow the 50-30-20 rule. 50 per cent of take-home pay can be allocated to basic mandatory expenses, 20 per cent to desires and aspirations, and 30 per cent to savings. Finally, practise patience. It takes time and effort to develop the habit of saving.

Here are a few practical suggestions to help investors save money today in order to create a better future tomorrow:

First, investors can reduce unnecessary indulgences such as eating out too frequently or purchasing an expensive gadget solely for show.

Second, it is critical to keep track of expenses, particularly those that can be reduced. You will not be able to reduce your avoidable cash outflow unless you track your expenses on a weekly or monthly basis.

Third, soon after the pandemic fear subsided, some people turned to revenge travel or revenge shopping to make up for what they couldn't do during the two years of the pandemic. These types of practices can and should be avoided in order to maximise savings.

Four, sticking to your financial goals is essential for setting aside money on a regular basis. Most financial objectives have measurable benefits. It is critical to remember them and never lose sight of them as you save for retirement.

These goals may include, among other things, purchasing a home and funding your children's education.

Five, keep the concept of opportunity cost in mind when purchasing goods and services that you want but can avoid. This means that by purchasing a product 'X' for 500, you forego everything else, including investment, that you could do with the same 500.

For example, if you spent Rs 25,000 on a new gadget that you didn't need, you not only lost Rs 25,000, but you also missed out on the opportunity to invest the money in a fund where it could have grown to, say, Rs 1 lakh. In other words, you lost not only Rs 25,000 but also the chance to earn one lakh in the future.

It is natural to recognise that breaking old habits is more difficult than it appears. When in doubt, remember Warren Buffet's wise words: "Do not save what is left after spending, but spend what is left after saving."

Recommended Articles