My parents have always been big on savings. They taught me to save as much as I can and to start as early as I can because you never know when you need that safety couch to fall onto.
When I was in school, my father lost his job two times and both times it took him a year or more to find another. For a year we survived just because of the savings my parents had. Nothing is permanent, not even the job.
My cousin is now working for approximately 3 years. We are so the same age but I went for further studies before getting a job. I have saved more in a year than he did in three.
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Here are the simple things to keep in mind for a better and secure future.
1. I Live With My Parents
In India, almost everyone lives with their parents unless they have to move to another city for work. My first job was not in my hometown so I had to rent a place and at that time I saved very little (also because of other reckless purchases). After I got another job in my hometown I switched and currently living happily with my family.
It allows me to save over an extra $140 per month, which means $1,680 per year.
. . .
2. I Have Allotted Pocket Money for Myself
When I got my first job, I did not have a plan. I was never an over-spender and bought only necessary things. So, I thought I will keep doing what I am doing and it will be enough.
Six months later, I had very little in my bank account and I was shocked. I never fully understood where I spend all my money. After that incident, I have a strict budget.
I save 80% of my income. It is not as hard as it seems but the saving percentage is high for me because I do not have any study loans and live with my parents. But fixing the amount of money you will save really helps in the long term. It will keep you from spending more than necessary and a good way to avoid reckless purchases.
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3. Never Buy on the EMI
My family has to the date never broken this rule. If you start buying things on EMI, you’ll buy something that is out of your income range. This causes reckless spending.
When I was two months into my first job, I wanted to buy a laptop. My brother suggested a top model laptop that cost more than my 2-month salary. If I had bought it on EMI, I would still be paying for it. Instead, I bought a cheaper but efficient laptop, according to my needs, in cash. All I had to do on the laptop was write. I do not need to run Android Studio on it (which required a very good hardware configuration). I just needed MS Office and Chrome.
. . .
4. No Alcohol, No Smoking
I have never had a drink in my life, nor do I smoke. I have no plan of doing it in the future too.
According to the Bureau of Labor Statistics, an average American household spends approximately $565 a year on alcohol. That means I saved $2,825 of my parent’s money and my pocket money till now by not drinking (the legal age of drinking in my country is 21).
Also, I am saving myself from future health problems (hopefully).
. . .
5. Living With Little Expenses
I do not buy things in an instant. All the decisions I have made in a hurry always ended up in me wasting my money. I spend $100 on membership on a study app. I thought I needed it but later realised it was a mistake.
Some things are just money-pit but some are a necessity. First, think with a calm mind — Is this something I need or want? If you want it and have money for it, then it is not so bad to buy something just for yourself now and then (from your pocket money) but not every time. But if it is a need, buy it. But after considering every alternative without compromising with quality.
My cousin bought $34 earphones. My $3 earphones work just fine. He also has a $200 watch, $1300 two-wheeler and a $1000 laptop. I travel in trains and buses, have a $10 watch and $400 laptop. Both of us have the same salary and he is working for four years and has less saving than me. I have only worked for a year.
The 20% of my salary I spend is usually on books and fast food. Because of the pandemic, I no longer eat fast food and Amazon is only delivering essentials and apparently, books are not essential services. So I am saving 100% of my salary. Because my parents feed me and I have no shame in that. Even if I lived alone, I would have saved a lot of money right now, close to 80%.
. . .
6. Do Not Invest Everything in One Place
Currently, I have Fixed Deposits and Recurring Deposit in my bank but also ELSS (Equity Linked Saving Scheme) fund and multiple mutual funds and SIPs. I have some deposits which have a long lock-in period, but I also have savings I can take out immediately when in need.
Currently, my bank provides an interest rate of just a little over 4% for Fixed Deposits but my investments in Mutual funds have a combined rate of over 30% right now. It changes according to the market. But in long-term savings, I find there is always profit. That does not mean I put 100% of my income in mutual funds or share market. Do not invest everything in one place. So if you lose one, you have something else to fall back onto.
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7. Even a Small Side Hustle Can Make a Lot of Difference
I have a 9 to 5 job and no plan of leaving that job. But I also want one small side hustle for the extra cash. Maybe someday if everything works out, I will leave my job and start freelancing but right now I am not ready for such a big risk.
As of today, I make a little in my side hustle (very little), but it is something I love doing and if not for the money, it’s good for my mental health to keep doing things I love. So, if you want to do something for a long time, do not start anything you know you’ll hate. Do something you love because side hustles take time and if you do not enjoy it, you’ll leave it in less than two weeks.
This is also completely optional. You can have a very meaningful life and carefree life in a 9 to 5 job.
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8. Save One Spend Other
This is for the partners, which I do not have yet (I have a partner but we do not live together yet). But I have seen people do this successfully and with amazing results. If you and your partner both have a steady income, then it will be helpful if you completely save one income.
Making financial decisions together is a great part of a successful marriage/ relationship and if you are hoping to retire early, this is a great way to do it. It also helps if you want to travel or start a business and gives you a great safety net in emergencies.
. . .
You may not do everything I do for saving, but minor changes help in the long term. Be vigilant about how you spend your money. Find out the things on which you spend the most and then analyse how much of this was really necessary to avoid any reckless purchases in the future.
After wasting six months of salary on reckless purchases, I have learned my lesson. I know where I spend the most (books and food) and now have a budget. I will still buy books and eat out but now I will not spend all my income on it, only my pocket money.
The earlier you start saving, the better it will be in the long run. You’ll always need things and the temptations are not going anywhere. They will just increase with time. There is always a better and much costly version of everything you own.
Save at your own pace but keep it consistent and stick to your resolve. Even 20–30% of total income saved is better than being in debt with time.
P.S. — Do not fall into credit card debts.
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This post was previously published on Change Becomes You.
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