Last Updated on March 19, 2016 at 11:26 am
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.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
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.
A telezoom lens. We dont have one this big, but what we have is heavy enough for me! Photo credit: Ben Salter
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)