In response to their instinct for survival the first thing homo-sapiens learned was to save. Yet, when it comes to saving the most common refrain is: "I cannot save. I am hardly able to meet my current expenses". This is perhaps the most unwarranted self justification as it is not supported by logic.
Human mind or the entire process of development of Homo sapiens is a long narrative of adjustment and conformity to environment and prevailing situation whether they related to food or to climatic conditions. All people do not earn the same amount of money, yet all people must save to meet their future needs.
Unlike the present era of assured supplies of food and other necessities of life (thanks to development in science and technology), people had to save to survive. They were forced by circumstances to save if they wanted to exist in the scheme of Nature. The alternative was indeed very harsh - if you cannot save, you must perish.
Mothers, the First Savers
And they continue to do so even today despite their weakness for shopping. Always concerned and worried about finding food for their young ones when the entire earth was covered under thick sheets of ice, it were the mothers who gave the lead in the development of the great virtue of Saving.
Every mother had known by instinct that she must put aside some thing to feed her young ones the next day. It was all white snow outside the mountain caves everywhere on the entire surface of the globe. This instinct came handy when man moved down to the foothill to take up agriculture.
Saving a part of the produce was in his instinct no matter how hungry he felt. Without this trait of saving there would have been calamities and chaos everywhere. No seeds no crops. Agriculture was the first step towards development of human culture and all this was sustained by the trait to save.
When we say save something for tomorrow we never mention the quantum of money to be saved. How much one should keep aside for the future needs would depend upon the size of income and, of course, on the current financial commitments. There is as such nothing very surprising about the fact that people save a part of their current incomes for use in future without any reference to the size of their incomes. Saving is more a matter of attitude and habit than of size of income.
How to achieve financial Nirvana
Since all saving involves some kind of sacrifice, the process can only begin when you mentally agree to sacrifice your present needs. i.e. you sign an agreement with yourself to postpone satisfaction of some of your present needs to some future date. Now what does this mean? It means you have to rein in your wayward impulses and strive to successfully synchronize them with your long term objective of achieving financial security. Easier said than done. But then where there is a will there is always a way.
Write a cheque to yourself
All that we need to do is to tweak our spending pattern to make room for another head of expenditure called "saving". Sounds anachronistic - fire and water (saving and spending) cannot coexist. Of course this is an attribute of physical or material things. In the realm of attitudes and habits, every kind of combination or cohabitation is possible.
Write a check to yourself as you would write checks for whole lot of other items like utilities, car and home loan EMIs, school fee, insurance and you club dues. Writing a check to yourself is not going to face any inner resistance since you are used to apportioning you regular cash flow among various heads. . A small allocation to self is likely to escape the notice of Id - the most wayward and primitive part of your psychic apparatus. It wants instant gratification and cares little for any logic.
Budget Bondage
Bondage or servitude or slavery of any kind is bad. Another often heard and freely given piece of advice is we should never be a slave to our habits. Fine, but there is an exception to this old age admonition. Saving is a good habit and we should cultivate it most willingly and vehemently. Continuing in the same train of argument I would introduce the concept of budget. Prepare a budget and stick to what it enjoins upon. Budget serves two purposes. In the first place, in the processes of preparing a budget we give ourselves a moral commitment to keep our cash outflow as per the budget.
The first thing that the budget does for you is that it obtains a moral commitment from you that you will adhere to the spending pattern and quantum as put down in the budget. You will often find it difficult to wriggle yourself out of this self commitment. This can act as a restraining force and finally lead to the evolution of the most coveted trait of saving - the mother of wealth creation.
The seed money for growing the money crop or money tree. Secondly it affords us with an opportunity to know where we are financially - an exercise which most of us deny us for inexplicable reasons. Both lead to and help in the process of saving.
Observance of the limits of expenditure set out in the budget are not as strict as the Lakshman Rekha . You are definitely allowed to cross these limits if need be. But this flexibility is only to be availed of once you are certain that the compulsions have no Ravana lurking behind them.
Monitor Money Movement
The movement of product of labor pains and painful labor both need to be constantly monitored. What company they keep which corner they traverse has a lot to do with their growth. They must live under your lens until such time and stage when they reach a critical mass i.e. their future development becomes an automatic process.
Keeping track of every rupee that goes from your pocket would help you tweak your expenditure pattern so as to prune the avoidable or the ones which can be postponed without impairing your lifestyle in any significant way. We can surely reduce the outgo on movies to half and cut the number of junk food outings or have one shirt less every year. These are only examples Once you start probing the belly of expenditure side of your budget at the end of the month you will find lot of superfluities which can at once done away with.
So be fore you retire for the day take a pen and a diary and write down in detail where all and what all you (includes your family) spent during the day.
Wealth Creation
Not long back it was perfectly correct to save and sleep over your money. But not anymore. Our changed lifestyle has imposed further and stricter demands on us. Our ancestors hardly required any financial planning. Limited needs, joint family system, good interest rates was all that was needed. The rest of the calculation was simple. People could just work out their future financial requirement and align it with what they had saved or accumulated by the time they laid down their tools.
But today, no matter how much you save, it is not going to suffice till the end of your superannuation period. Today if you want to rest yourself your money must go out to work for you. Both you and your money cannot rest simultaneously. Now how do you deploy your money to earn for you so that you have enough corpus to meet the needs of changing life style - i.e . not mere survival or subsistence but of super existence. And that would require much more money than what your piggy bank can possibly hold. Wealth creation becomes a natural corollary of saving in today's financial scenario
An experienced financial planner can help you prepare a detailed plan of saving and investment based on your current and future financial needs and available resources.
One of the most common approach is to put money in a mutual fund preferably an equity or balanced fund (funds) depending upon the degree of your risk tolerance. Top Indian mutual funds have given a return of over 25% in the last five years. You can save and create wealth through the insurance route as well. Insurance no longer means parting with your money till the end of your life. Innovative insurance products like ULIP help you in the process of saving and wealth creation simultaneously..
Intoxicating Bank Balance
Intoxicating qualities of money which are better than the best of alcoholic drinks are well known . A comparatively worry free mental state is the first boon that a good financial state bestows on its possessor. Once you have through your determination saved an amount of money almost equivalent to three months of your monthly expenditure, things start getting easier.
Henceforth, saving of every next thousand involves much less pain than the previous one. The money sedative has started having its effect on you and you are well on the road to achieving Financial Nirvana.
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