Money management with an expensive lifestyle

Many people ask, "how much should I save each month from my salary?". They are not looking for 'dumb' answers like, "invest as much as possible";"use a retirement calculator and goal calculator to find out"; "have you thought about financial freedom in future?"

They are looking for a nice low percentage like 10%, preferably 5%, so that they can blow the rest free of guilt - 'I asked in XYZ forum and they said 10% is good enough for start. I can't do 10% right now. Right now, I am out of money by the middle of the month, but I will get around to 10% soon. I have time!'.

This the familiar refrain of so many young earners today. Perhaps it was always the refrain of young earners. Perhaps that is how it should be!

For many young earners it is a phase. Perhaps it is a necessary phase, perhaps not. Who can tell.

The trouble is, an expensive lifestyle is hard to cast aside. Especially when there are so many choices and so easy to spend.

I can think of two kinds of expensive lifestyles:

Type I Dominated by peer pressure; impulse buying; unhealthy socializing; habits that can not only kill, but also destroy a household etc.

Type II Dominated by passion, an inner urge. A hobby, a pastime that is more fruitful than work or ordinary forms of leisure.

Type I requires curtailing. There is no question about it. An unhealthy lifestyle today, pretty much guarantees an unhealthy lifestyle tomorrow, one way or another (assuming the person survives!).

Preaching will not work. All we can do is to propose an alternative pursuit: watching money grow productively

Perhaps if they see this happen, they might take to it and invest more. I cannot think of any other way such a lifestyle can be altered. We can give lofty presentations about power of compounding, cost of postponement, real return etc. but unless they realize the importance of disciplined investing, not much will work.

Type II is tricky. There is no question of curtailing it, unless the person has huge debts because of the hobby. What has got to be done. has got to be done and best done when young.  Trouble is, many of these activities are quite expensive. Be it adventure sports, astronomy or photography, the equipment is do darn expensive. There can also be recurring expenses like travel, maintenance etc.

Perhaps a gear related EMI is inevitable for an young earner, but as long as it can be paid each month, it should be okay.

The trouble with this group is that they are always hungry for more! They have one piece of expensive equipment, soon get the hang of it and long for something more expensive!

If upgrading is done frequently, they will be no different from the type I guys.

Striking a balance is crucial. Yes, there are certain things that are best done when young - investing is also one of them!

For example, if you have an expensive hobby, consider investing for 10 months a years, spending the rest as desired. Some such arrangement in which investing is not left out of the equation.

It will take a couple of years to establish this balance, and that is fine. The desire to create such a balance should take us there.

When my wife wanted to take up astronomy and photography, we had to briefly interrupt our investment schedule. To ensure that we did not feel guilty about it, we researched about telescopes, binoculars, tripods and cameras for about 6 months before making the purchase.

They say postponement is one way of curing impulse buying. I agree, but I recommend productive postponement with a survey and comparison of product features. This way we can understand fine print, arrive at a good fit and get bang for the buck.

Many unmarried youngsters state that they have no investment objective. Although incorrect, it is understandable. If only they get to invest that 5% or 10% each month in a productive asset, they will watch it grow and gradually recognize the importance of watching it grow. If only.

lens

A telezoom lens. We dont have one this big, but what we have is heavy enough for me! Photo credit: Ben Salter

Install Financial Freedom App! (Google Play Store)

Install Freefincal Retirement Planner App! (Google Play Store)

book-footer

Buy our New Book!

You Can Be Rich With Goal-based Investing A book by  P V Subramanyam (subramoney.com) & M Pattabiraman. Hard bound. Price: Rs. 399/- and Kindle Rs. 349/-. Read more about the book and pre-order now!
Practical advice + calculators for you to develop personalised investment solutions

Thank you for reading. You may also like

About Freefincal

Freefincal has open-source, comprehensive Excel spreadsheets, tools, analysis and unbiased, conflict of interest-free commentary on different aspects of personal finance and investing. If you find the content useful, please consider supporting us by (1) sharing our articles and (2) disabling ad-blockers for our site if you are using one. We do not accept sponsored posts, links or guest posts request from content writers and agencies.

Blog Comment Policy

Your thoughts are vital to the health of this blog and are the driving force behind the analysis and calculators that you see here. We welcome criticism and differing opinions. I will do my very best to respond to all comments asap. Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete  the entire comment or remove the links before approving them.

17 thoughts on “Money management with an expensive lifestyle

  1. ANISH MOHAN

    Dear Pattu-Sir, once more, an article of my favourite topic. I regularly get to see/interact/supervise/interview a whole batch of young engineers. It may be at engineering colleges for their campus interviews or in my team who join and report to me. The pattern amongst these bright youngsters are all the same, some want to go skiing in the Alps and some want to buy expensive bikes. They live on plastic currency. and sometimes they would go broke. I keep on advising them on your articles, sometimes send them hyperlinks and use your graphs ( pardon me if I have violated copyright rules or IPR), certainly I will tell them to refer to your website or Valueresearch. I take sessions with them to temper their profligacy and in some cases, make them track the market daily (I know that is something you are abhorent about). But the intention is to keep them glued to see their money grow. I would not say it works 100% but few intelligent guys take the cue. The other section is the working class, my driver and the maid. The investible surplus is low, the percentage of gain will be miniscule. It will make them chase the chit funds like Saradha for quick gains (which I have closely followed being in Kolkata). That is another section of people and I think the present government is doing a good job to at least bring them under banking coverage.

    Reply
  2. ANISH MOHAN

    Dear Pattu-Sir, once more, an article of my favourite topic. I regularly get to see/interact/supervise/interview a whole batch of young engineers. It may be at engineering colleges for their campus interviews or in my team who join and report to me. The pattern amongst these bright youngsters are all the same, some want to go skiing in the Alps and some want to buy expensive bikes. They live on plastic currency. and sometimes they would go broke. I keep on advising them on your articles, sometimes send them hyperlinks and use your graphs ( pardon me if I have violated copyright rules or IPR), certainly I will tell them to refer to your website or Valueresearch. I take sessions with them to temper their profligacy and in some cases, make them track the market daily (I know that is something you are abhorent about). But the intention is to keep them glued to see their money grow. I would not say it works 100% but few intelligent guys take the cue. The other section is the working class, my driver and the maid. The investible surplus is low, the percentage of gain will be miniscule. It will make them chase the chit funds like Saradha for quick gains (which I have closely followed being in Kolkata). That is another section of people and I think the present government is doing a good job to at least bring them under banking coverage.

    Reply
  3. Ranjan George Thomas

    I think Indian youth could use a crash course in frugality and conscious spending. Spend well on what YOU love or adds value to your life and don't spend money to impress random strangers (status watches, fancy cars, latest phone comes to mind in this respect). If this is followed there is always an investable surplus after expenses....of course this is hard to do, as a developing market with a young population we are ripe for corporations and their marketing departments to brainwash us into thinking that self worth = flashy material possessions i.e the high flying lifestyle while being owned by HDFC Bank 😀

    Reply
  4. Ranjan George Thomas

    I think Indian youth could use a crash course in frugality and conscious spending. Spend well on what YOU love or adds value to your life and don't spend money to impress random strangers (status watches, fancy cars, latest phone comes to mind in this respect). If this is followed there is always an investable surplus after expenses....of course this is hard to do, as a developing market with a young population we are ripe for corporations and their marketing departments to brainwash us into thinking that self worth = flashy material possessions i.e the high flying lifestyle while being owned by HDFC Bank 😀

    Reply
  5. Ashok

    I remember what one of the trainers advised me when I joined my first job. He said your goal should be to save 50% of your salary, think of it like this, you work for 25 years and you put 50% of your salary of these 25 years away for 25 years in retirement. the interest and compounding will make sure of inflation protection. If you can't save, then you're living beyond your means (unless you're repaying family debt or some such loans) or you should aim to increase your salary to reach that level

    Reply
  6. Ashok

    I remember what one of the trainers advised me when I joined my first job. He said your goal should be to save 50% of your salary, think of it like this, you work for 25 years and you put 50% of your salary of these 25 years away for 25 years in retirement. the interest and compounding will make sure of inflation protection. If you can't save, then you're living beyond your means (unless you're repaying family debt or some such loans) or you should aim to increase your salary to reach that level

    Reply
  7. Shan

    It is for these people that buying a home on emi is a good option assuming they already don't own a home (and even if they do, a case can be made). They'll never default on the emi and the amount goes away every month so there's no cash left to blow away.
    So yeah for these kind of people forget about investing saving and what not, just go out and buy a home on emi.

    Reply
  8. Shan

    It is for these people that buying a home on emi is a good option assuming they already don't own a home (and even if they do, a case can be made). They'll never default on the emi and the amount goes away every month so there's no cash left to blow away.
    So yeah for these kind of people forget about investing saving and what not, just go out and buy a home on emi.

    Reply
  9. Shan

    The best advice for these people is to just go out and buy an house on emi. Forget saving investing and all that. The emi goes out of they paycheck and there's no cash left to blow away...

    Reply
  10. Shan

    The best advice for these people is to just go out and buy an house on emi. Forget saving investing and all that. The emi goes out of they paycheck and there's no cash left to blow away...

    Reply
  11. Kishore

    I think it is impossible to convince the Type 1 people. They always has an excuse for spending. Some say they will make big money by working abroad after a few years or starting a business. If nothing else, they will say they believe in increasing income by hard work, rather than cutting expense and saving. It is like alcoholism, you cannot convince them unless they feel it from inner selves.

    Reply
  12. Kishore

    I think it is impossible to convince the Type 1 people. They always has an excuse for spending. Some say they will make big money by working abroad after a few years or starting a business. If nothing else, they will say they believe in increasing income by hard work, rather than cutting expense and saving. It is like alcoholism, you cannot convince them unless they feel it from inner selves.

    Reply
  13. Partha Sadhukhan

    I am very lucky that I have never suffered from any of the issues you have mentioned. I consciously avoid all kinds of addiction including food, blogging or watching TV.. Whenever something goes high I curtail that activity and concertante on other things..

    Reply
  14. Partha Sadhukhan

    I am very lucky that I have never suffered from any of the issues you have mentioned. I consciously avoid all kinds of addiction including food, blogging or watching TV.. Whenever something goes high I curtail that activity and concertante on other things..

    Reply
  15. Raj Chakravarty

    Speaking of astronomy which telescope did you buy ? Can you post some pics of the views through your scope ? What do you think about the celestron 60 az ?

    Reply

Do let us know what you think about the article