Small changes leading to Big Savings
How I created and adopted mental models for better savings
Today I complete 8 years of my employment, during this tenure I’ve committed many mistakes but the realization of these mistakes has helped me to shape my perspective. Out of other things, one that I’ve mastered well is wealth management. Often I speak a lot about savings and the investment ideas that are on top of my mind with the people around me. Few dismiss it as utter nonsense and few get curious and would want to know more about these ideas. Today I’ve jotted down some learnings and models that have helped me to do better savings.
Although I started alone, but I was lucky to marry my friend Namrata who has bettered these crazy ideas. And thats why I am going to use We for the narration.
Separate Bank Account
On the first of every month when the salaries are credited, we transfer 70–75% of it to a separate bank account(non-salary account). This account is only used in special situations, for our SIPs, other investments, travel expenses, and sometimes to fulfill our lavish desire. We manage our monthly expenses using the leftover 30%.
We realized that we were spending too much money when our bank account showed us big numbers, we would feel grandeur about ourselves(like some king) and started spending similarly. This model has not only brought down our expenses but made us more humble than before.
Lifestyle Upgrades
Year after year with our salaries getting upgraded, unconsciously we were upgrading too. High-end mobile phones, branded apparel, extraordinary dining, car, and many similar things easily become part of life and every year the list would get bigger and costlier. Suddenly these luxuries become our necessity.
One day I started observing my dad who is a non-salaried businessman and I realized, for years he is still using the same old motorbike to his work, wears the same old non-branded apparel, he is not concerned about what phone he uses. And more importantly, he was really happy with his simpler lifestyle.
The reason why most non-salaried classes are wealthier than the salaried class is that salaried class upgrades their lifestyle too often. While the non-salaried people are too hesitant to upgrade.
Knowing this, now we are more aware of the changes in our lifestyle and try to keep it as simpler as possible.
No Debts
Debts are the greatest wealth destroyer. Something we have learned and followed to date and we are going to follow for most of our lifetimes. Not to buy anything on credit, no EMIs, no loans in short no debts. For any reason, if you hold any debt, please make it a priority to close it. Delay all your unnecessary expenses until you become debt-free.
You wouldn’t be able to build your wealth unless you are debt-free.
Not going big on Electronics
The technological advances we are seeing in TV, fridge, washing machine, air-conditioner, mobile phone, and many such electronic products is immense. Every day something new or path-breaking is released and the product we own gets outdated too quickly. We are also seeing that the longevity of the products is drastically getting lesser than before.
Keeping this in mind, we try to avoid making big purchases on electronics. Rather than going for a top model product from a top company, we buy the medium model from the above-average company. This reduces the price of the same product to half. A 50% saving. Also, we try not to pay for unnecessary features that we don’t need in our regular life.
What Next?
I’ve decided that I would be sharing my experiences more often. Interesting ideas, multiple perspectives, things that didn’t go my way or things that did, things I’ve learned from the people I met.
If this interests you, then you can follow me on twitter, where I will continue to document my journey.
