Money Mantra #1: Don’t Save What is Left After Spending, Spend What is Left After Saving
What is the first thought that comes to your mind when you think about money? Is it just a piece of printed paper?
Did you ever hear phrases like ‘Money is the root cause of all evil’ or ‘You can not be rich, as well as, spiritual’ or ‘Money cannot buy you happiness’?
Well, the one thing that differentiates man from animals is financial worries. Financial stress is one of the biggest causes for 90% of the sickness that human beings suffer. And the root cause of all this is a lack of financial literacy. Over 90% of us are slaves of money. I, too, was a slave of money till I started applying these 10 Money Mantras, which eventually helped me to free myself from the shackles of financial slavery. Through these stories, I hope I am able to gift each one of you financial independence, which should be our birthright
“Aww…my googly-woosh, Mumma will make all your dreams come true,” Stacy promised her six-month-old son, Brandon, while playing with him in the nursery. However, as soon as she promised to ensure a bright future for Brandon, Stacy felt a bit queasy. She had a feeling that her promise was hollow.
Stacy and Kevin met in college, and after their respective campus placements, they said their ‘I Dos,’ five years ago. Ambitious, hardworking and intelligent, both Kevin and Stacy did extremely well in their careers. Kevin got a meteoric growth in the pharmaceutical company he worked, and in record time, was gearing up to be a part of the senior management team. Stacy, on the other hand, was already appointed as the Head of Marketing of India and South East Asia for the wellness products’ company, where she had joined as an Assistant Manager in the Marketing function. At present, she was on extended maternity leave from work.
The accelerated career growth also meant a sharp increase in the monthly salaries of the couple. The combined household income was enough to buy the most exquisite and lavish things in life; and they lived in style. The couple shifted to an up-class neighbourhood, bought two very expensive imported cars and frequented all the up-class restaurants and clubs in the town. Besides, whenever the two got time together, which wasn’t often due to their busy work schedules, they travelled exotic places around the globe.
Kevin loved Stacy, and to compensate the lost time together, he would often buy her unique gifts – diamonds, artwork, shoes, etc. Stacy, too, loved the glamorous life she was living, however, at times, she also had the nagging realization that they were spending all that they earned and not a penny was being saved.
Whenever she tried to discuss the subject of saving with Kevin, he would simply say, “We will save, dear, we will. My promotion is around the corner and we will save the increment portion religiously.”
But that never happened. There were always EMIs to be paid, Credit Card bills to be paid, or an international trip to be planned.
Now, cradling little Brandon, Stacy couldn’t help but think of millions of rupees Kevin and she spent on things that they didn’t need. Only if I could get back all that money and keep it aside for my son. She thought reproachfully.
A sudden thought brought her to attention, and she dialled a number. Anita, her colleague, had long ago told her to meet a well-respected financial expert to discuss savings and investments. Stacy couldn’t visit the expert that time as they never had any savings left after monthly expenses, and she thought that it was useless to discuss investments when they had nothing to save!
Stacy was about to find how wrong she was. After taking the number from Anita, Stacy fixed an appointment with the expert. She also pursued Kevin to accompany her.
Hearing out Stacy’s story and her concerns, the financial expert said, “You guys are making the classic mistake that most Indians make.” He explained that the natural impulse is to pay off your expenses and spend on things you want as soon as you receive your salary. This leaves nothing in the end for savings. But if you save before you spend, you will learn to curb your unwanted expenses and also make it a practice to save regularly.
The expert’s words were a revelation for the couple, who never paid a thought about saving before spending their monthly income.
“You two must save at least 25% of your salaries and keep the rest for spending. In fact, you must invest 25% of your salary,” he said. The financial expert then explained the concept of mutual fund investments through Systematic Investment Plans (SIPs).
“Instead of keeping your savings idle in bank accounts or putting them in traditional saving schemes, you can actually make your money grow at a faster rate by investing in mutual funds,” he explained.
Kevin and Stacy promised the financial expert to follow his advice and soon started to invest a big chunk of their salaries in mutual funds through SIPs. This small step changed their lives, and the duo was startled to realise the importance of saving before spending. Motivated with their swelling investments, they became more economical and further reduced their expenditures.
Ten years later, Kevin and Stacy were at the peak of their careers. They were earning astronomical salaries, yet they were not dependent on their monthly income for survival. Investing before spending helped them grow a huge portfolio, which was self-sustaining and grew perpetually. On Brandon’s 10th birthday, Kevin and Stacy took one more life-changing decision. Their ever-growing portfolio ensured a comfortable life for them, as well as, a world-class education for Brandon. Stacy left her job to spend more time with Brandon and positively influence his growth, while Kevin left his job to run his dream social project in micro-financing for the poor of India. A small money mantra helped Kevin and Stacy find their calling in life and provide opportunities to many others!
Dr. Celso Fernandes, Goa’s financial doctor can be reached at +91-9422058741.