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The more money you have, the more you spend it. And saving, then, becomes a hassle. Here’s a way to save and invest money while spending what you want!
One of the major differences between the rich and the poor is the mindset. The rich aren’t rich by luck or by fluke. They have worked their way toward it.
There is no substitute for work, (and here I will not argue on hard work and smart work) – what really matters is that you work and grab all opportunities that come your way. But what after you have done so? Now you have worked hard and earned well. But you still aren’t a millionaire.
You know the power of compounding, and you know the early you start the better it will be. But most of your earnings are spent by the end of the month. And you can barely save a good amount to give you enough principle to compound.
You expected a raise this year and you got it too, but by then you realised your expenses rose too. Maybe your vehicle needs replacing. Or the house you are living in seems small and there isn’t enough space to keep your stuff in. So you need to but an extra cupboard.
Now let me tell you about an interesting character from a certain fantasy world. PotterWorld Fans, you will definitely love this. I recently watched this movie, ‘Fantastic Beasts And Where To Find Them.’
And in the movie, I came across a very interesting beast- the Occamies. The speciality of the Occamies is that they can change their size to fit in any available space. So, if you give them a large room, they will expand in size and fill the whole room. But they can be fit in a small teapot too.
And that is exactly how expenses also work. If you have one lakh at your disposal, you will, somehow, have your expenses really close to this figure. You’d feel like you are just making the ends meet and that all the expenses are just the necessary ones. And you will promise yourself that as soon as you get a raise, you will put the entire raise into your savings and invest it.
Then you get the raise. And as soon as you get it, you find that you have a few upcoming unforeseen expenses. Thus, you end up the extra money on those expenses.
The expenses are exactly like the Occamies. They will expand as much as you provide them space to. So keep giving them a larger room and they would fill it all. To bring them inside the teapot you have to lure them in.
You need to pay yourself before you pay others. But, what does paying yourself mean? You may argue that all the money you have is already yours but I will tell you one clear fact. NO, IT IS NOT YOURS.
This is the money that you are going to pay out for your various expenses. So what is left for you? The Occamy expanded and all money is gone.
Paying yourself means keeping aside a certain amount at the beginning of the month in a separate account which cannot be spent for any expenses. Do not wait for the end of the month to save the leftover.
Are you working so hard to feed yourself on leftovers? No. Respect yourself and pay yourself before you pay anyone else.
No matter how much or how little you earn, at the beginning of the month put away ten percent of your income. Give your expenses a teapot to fit in. Initially, for a month or two, you may have trouble making the ends meet. But slowly your expenses would adjust themselves to the smaller space and you would have a better principle to compound on.
Gradually you can increase the percentage of savings from ten percent to 12 percent. And soon, you will find yourself saving up to 20% of your income.
If you cannot start with putting aside ten percent at once and feel like it may be too much, you can start with five percent. And gradually increase it to ten percent over the period of six months. What is important is that you keep that amount aside for yourself and build the habit of saving.
Teach your kids to save. Tell them to keep an amount aside from their allowances and teach them to build a capital for themselves. Financial education is something that our generation missed in the school. Therefore, we should try our best to impart this knowledge that we have on to the next generation.
Where to invest them to get the right returns is another matter at hand but to have a capital to start with is what matters the most. Whether we want to start a business or invest in a good opportunity the first complaint we have is that we do not have enough capital.
So build your capital. It is clearly in your hand to fit the occamy in a smaller place and take your first step away from ‘not enough.’
A version of this was earlier published here.
Picture credits: Pexels
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A counselor, Life skills trainer and Dance and Movement Therapy Practitioner by profession I am
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