How can I balance investing and spending freely without guilt?

Published: November 23, 2020 at 12:19 pm

A few days ago, we discussed the lifestyle of Santhosh a middle-class crorepati. I received three questions from young earners that can be paraphrased as, “I cannot be like Santhosh. I like to live a good life with a car and expensive smartphones. However, I feel guilty that if I continued my lifestyle, it will impact my investments and the wealth I would create in future. How can I balance the two?

The article on Santhosh or for that matter an account of any frugal person is often met with a few comments that reveal a rather extreme misunderstanding of what frugal means. It also ends up confusing young earners as above. So let us try and find that all-so-difficult balance.

There is a common misconception that people like Santhosh are depriving themselves of a good life. When he says “I do not have a car”, it only means “he does not have a car”. It should not be interpreted as “it is bad to have a car” or “one should not buy a car”.

If buying a car or buying iPhone 12 Pro makes you happy, you should go ahead and do that as long as you can afford it. When you want something, can afford it but do not buy it because you are worried or feel guilty, then that is deprivation.

If buying a car does not excite you in any way or seems unnecessary, then there is no guilt involved. In my opinion, there is also no frugality involved – that is a judgemental word almost always misused.


Every action has an equal and opposite reaction. If the action is a fundamental force in nature, the reaction is instantaneous. If the action involves a lifestyle choice, the reaction may appear the next week or after 20 years.

A person who does not have a car of their own may struggle (to borrow an example given by a doctor in FB group Asan Ideas for Wealth) to find transport in the middle of the night to take a breathless family member to the hospital.

A person who buys a car (or a house) without evaluating the impact of the purchase on their future goals like children’s education or retirement may end up downgrading their lifestyle or depending on their children years later. See: Why have we not seen a retirement crisis in India?

There is one difference between the “reactions”. A person without facility but with the networth can throw money at a problem. A person who desires facilities without accounting for the future cannot do that later.

Investing without spending on luxury is just as bad as spending on luxury without investing. A person who puts off holidaying for later could regret it if he does not have the health/circumstance to travel. A person who prioritises holidaying without investing may need to downgrade their lifestyle significantly later on.

There is no point in comparing our lifestyle with the Santhoshs’ of the world. All that matters is, “can we find a reasonable balance between spending and investing?”. There is no harm in wanting an Apple iPhone 12 pro. The trouble is in wanting it immediately, wanting it because everyone else has it and wanting to upgrade each time a new version is announced.

How to find this balance? It is hardly rocket science. The first step is to start investing. Let us not do any complete financial planning as that would kill all the fun. At the very least, one should invest (include the mandatory EPF or NPS contribution) 25 to 30% to gross salary whether you are going to start EMIs (for car, phone, home) or not.

If you want to buy a gadget with cash and it if it would hurt your say, next four months investment (into a Nifty index fund), go ahead and buy it. However, keep track of the amount not invested and manually invest more a little each month later on to compensate.  That way, you have got what you wanted, excuse me, needed and also made sure you caught up with the investing guilt-free.

Instead of finding this balance, why speak/think in extremes? Why praise or criticise others without understanding their circumstances? No one but us can find this balance.

Partying today is important. Making sure the party does not stop tomorrow is also important.

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About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements write to pattu [at] freefincal [dot] com
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