I Earn, I Spend, I cant Save...

I earn I spend I can’t save. It’s true for most of us. India as a country is in its best growth phase, the country having the demographic advantage. More youngsters making big money that their parents couldn’t dream off, buying cars in their late twenties, buying home in their 30’s, exotic foreign trips. But the sad part is most of us (not all) are not happy. Even when driving the new car, sitting in the balcony of apartment there is something haunting our mind. The biggest “Satan” is the EMI commitment for next month. Then comes the credit card bill, have been paying minimum due for last few months credit card company is happy so are we. We use top notch brand products, let it be perfumes, there are many like Hugo boss or Davidoff with a price tag of 3k plus. Even underwear people has become brand conscious. Nothing less than a jockey is considered cheap.

Is this for good? The answer is everything is good as far as it doesn’t put you in a debt trap.  Irrespective of the income let it be 5000INR or 500000 INR a month it’s not difficult to spend.  The urge for spending more than your income is due to the phenomenon called “instant gratification”.

Gratification can be explained as “the pleasurable emotional reaction of happiness in response to a fulfilment of a desire or goal”. And instant gratification is what we want; we want right now not ready to wait. It is human tendency and it is very difficult to control instant gratification. When we go to shopping mall or any big retail outlet we tend to buy more than what is required, with lot of discount sale. For buying 1 shirt we end up buying 3 by paying for 2. Good deal. Was there a need for the 2^nd shirt?? We ourselves don’t know why we bought it. Another good example, once we get a job with few payslips in hand we are ready to buy our first car, why? because everyone  around us are doing the same. Get some money borrowed from parents or if the pay cheque is fat enough use that to fund 10% of on road price of car.. rest is simple, sign few documents within hours the loan will be disbursed by your banker.

Now let us look into a different scenario, what if you could delay your gratification. Preparing a proper plan and budget before shopping. Instead of buying the car immediately make investments for 3 years or so to build a corpus to fund the first car. Even 10% of income channelized to the right investment avenues like mutual fund in a systematic way can make wonders. The power of compounding can do wonders. Few things that you need to keep in mind to ensure u not making a hole in your wallet.

• ·         Just because credit is easily assessable don’t leverage too much
• ·         Have a proper planning and budget before shopping.
• ·         Restrict the use of credit cards. Use in time of emergencies not for your day to day expenses.
• ·         Understand wealth can be created in long run only.
• ·         Not more than 25% of your income must go for EMI.
• ·         “Deserve before you desire” it’s a harsh statement but valid create a corpus and just don’t start leveraging your pay slip or ITR.
• ·         It doesn’t matter how much you earn 5k or 5 lac a month if you cannot control your spending, it’s all same.
• ·         We all live in an uncertain world, a job loss or loss in business may also happen. Have an emergency fund in place.
• ·         Investment in equity fund SIP can help to take advantage of power of compounding. Eg: 2000Rs invested in HDFC top 200 in last five years would have grown to 212622Rs. Invested amount 2000x60 = 120000 current value = 212622.

Do plan your finance, control your expenses, have a happy and healthy life ahead. CheersJ