#5) A modern day approach to save money- A 4 way system !

How to get in the groove of Saving  Vitamin(M)oney 💰 ;

Hey guys welcome to lesson No 3 in this series . In this blog we will see about the psychology of saving money in the present day. 

We will see ,  how do one trick his/her mind into saving more money and importantly how to break the habit of spending money on unnecessary stuffs month on month.

Let me please reiterate this , that this blog series is not to tell you, not to enjoy life, not to have a life which you aspire—Nope !! that is not the intention of the blog series.  This series is about, the basics of savings and investing, so that it can help you later in your life and even during the earning stages of your life.😊 ( Enjoy - Enjoy like Naruto 😆)

As such, if you could get the right perspective of this series, such saving and investing will only help you to become what you really want to become in the course of time. For instance, you could go for a solo trip around the globe or start a new venture, write songs -make albums or quit you job or even you if wanted to grow wealthier keeping investing and become trillionaire.  The point I am driving is --Saving and Investing money, does not reduce your current capacity but enhances towards a greater embodiment of yourself through your self-made economic prowess! ( Become like what Naruto aspired to be - The greatest Hokage( The top most Ninja warrior of the Konaha Leaf Village)

Coming back to the topic. How do you trick your mind into saving money?

A] Process No 1: HAVE A FINANCIAL GOAL.

Why setting a financial goal is important?

It is important to set on a financial goal because of the traits of the human mind. Our human minds work in a way by which ,in order to do anything our human mind requires to know why the act is being done in the first place.  To make saving money as a habit, our human minds searches for that “why” and the answer lies in fixing a relevant financial goal. It solves most of the financial issues by simply identifying and setting a financial goal.

For example, If I ask you to write a random exam, will anyone go and write that exam? Well, you won’t, right? However, if I tell you, if you write that exam, you will get a job and with that job you will get salary which could streamline your life, now you may write the exam for obvious reasons. Therefore, in order to save money, you should first set a financial goal.

If you don’t have a financial goal then there is no reason to save that money. Hence to nail the point “Financial Goal gives you a reason to save money”.  The other advantages of setting financial goals, is that it helps to measure, track and adjust the financial journey to accomplish such goals.

Now what is a Financial Goal?

A financial goal could be a) Short term goal, b) Mid Term, c) Long term.

A short-term financial goal could be to go for domestic vacation or buy a new car or simply quitting your job or go to your favorite university and study.

A mid term financial goal could be to buy a house, wedding, or saving for a family trip.

A long term could be your retirement plan, or for your children education etc.

Now you must have got an idea that financial goals are determined on a time period.

Alright, now let’s work on the real stuff. Let’s consider you are going to quit your job to get a better job and you require 6 months to get prepared for that better job.

The goal is to get a better job in span of 6 months. Now how could we attain this goal and make it financially viable?

Step 1 is to figure out what is your monthly living expenses.

Now your living expenses is divided is basically divided into three things they are i) Living Expenses (Food, Transport, Groceries, Rent, Mobile, Maid/cook etc), ii) Wants (Like shopping, eat out etc) & iii) Savings. 

Let’s assume your living expenses is Rs 25000 for a month therefore for six months we require Rs 1.50 lakh= (Rs 25000* 6 months without a job) in your bank account at any given time.

Once you have that 1.5 lakhs, then you can just quit your job with right confidence to sustain yourself and plan and work on activities for the better 2^nd job in the span of 6 months. This way you can feel assured, as you have measured for all liabilities and expenses, planned a time frame, built your corpus with respect to your savings ability ,with that , finally with confidence, you could lay down that paper to your manager with a smile and confidence.

B] PROCESS No 2: TRACK YOUR EXPENSES and work on a BUDGET.

 

It is actually to show yourself, how much money you are actually spending month on month. Use mobile apps to track your expenses with budgeting options (there are plethora of apps in both    play store and app store.) Just look for Expense tracker with Budgeting feature.

In such apps you can fix a budget for different expense and it sweetly reminds/nudges you, if you are in the fast track on maxing your budget. Such nudges could slow down your expenses and help take control of your expenditures. It psychologically helps to keep your expenses in your control.

 Try out, it works splendid! ( I use an app named Walnut)

C] PROCESS NO 3: AUTOMATE YOUR SAVINGS.

Let’s say you get Rs 30,000 as salary in your bank account every month. So, for a start, open a recurring deposit account.

Now, what is recurring deposit – To simply put, it is a fixed amount which gets deducted every month from your bank savings account and get deposited in recurring deposit account of the bank which pays slightly better interests than a savings bank account.

Assume that you want to save Rs 5000 from your salary of Rs 30,000/-. Now when the salary hits the bank account, Rs 5000 automatically gets deposited in the recurring deposit. Now this is done month on month, you cannot touch that amount for another 11 months, as recurring deposit are paid out full with interest after 12 months (if tenure chosen is 1 year). Voila! After a year, you get Rs 60,000 with the interest amount. These days you can automate such kind of recurring deposits through the mobile banking apps. (Mind you - Recurring deposits ideally should not be used for long term financial goals). We will see more about the financial products with their metrics, utilities and suitability in an upcoming blog.

So, if you think of spending, think within that Rs25,000/- and that becomes you needs and wants budget.

D] PROCESS NO 4: PIGGY BANK EFFECT

 

 The growth of money gives one a good throttle in his/her financial life, while some grab this positively and some squander that feeling. When money grows, you want to grow it more and it is a natural feeling, growth in the long term will get you automatically motivated to save more.  It takes time, patience for the money to grow, hence it is possible that you could not get the idea what it feels like with respect to the compounding effect, but trust the statement, “when you see it grow, you want it to grow more “and that is Piggy Bank Effect-Embrace that moment and do the rightful thing.  In a distant future in time, the statement should hopefully help you in the right choice and not squander that glorious opportunity. Appreciate the smallest of the growth in your investments and that is the seed for your future financial orchid.

These are 4 basic simple hacks to trick your mind to save money,  

              1) Have a financial Goal

              2) Track and Budget your Expense (Download a budget and expense tracker app.)

              3)Automate your saving

              4) Experience the feeling of the Piggy Bank Effect.

           Use the 4 steps as a process and work on them to gainfully get into the habit of savings.

For attaining financial freedom, first is discipline (creating a habit) then comes the money part which is just the result of that disciplined process.

To be financially disciplined (Follow the basics and its process), then you are good to explore on efficient investment avenues to fulfil your financial milestones with greater efficacy.

In the next blog which would be the last part in this series, we shall understand “How to Create a Financial Goal”?

Hope you enjoyed reading this one. Thank You, keep safe & Be Empowered... 😊

This blog “Empower Finclass "is an effort to educate and spread the word of financial knowledge and awareness whilst empowering the community with a touch of practicality on personal finance.

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