Save first, spend later
“Don’t save what is left after spending; spend what is left after saving.” The founder of Berkshire Hathaway, Warren Buffet, once said. He isn’t known as the Oracle of Omaha for nothing. He certainly knows a thing or two more than a layman would, and as is evident from the ay he lives his life, investments and financial growth over the years, it would be a good idea to learn from one of the most financially successful entrepreneurs of our time. And he certainly does know about the importance of saving. Even this article’s thrust is about the importance of saving, useful investment tips, and how you need to save before you spend. The benefits of implementing basic financial planning tips are manifold. Some of them are:
Why save first, spend later?
• It prevents overspending
Instant gratification has become a trend in today’s age. A lot of people tend to overspend their hard-earned money on unnecessary things. As a result, you are left with little or no money to plan your investments. But you can curb this bad habit by saving first and then spending. These personal financial planning tips can allow you to invest more money and, consequently, reach your goals faster.
• You can plan your goals well
You may want to buy a house, a car, take an overseas trip and fund your child’s education. But if you can’t save enough, you’ll never be able to fulfil them. On the other hand, by saving first, you’ll have enough money to invest towards each life goal. This way, you won’t have to pick and choose your life goals.
• You can create an emergency fund
An emergency fund can take care of unplanned financial blows. But this fund is compromised if you spend before you save. Your expenses might blind you to the need of an emergency fund. But, such myopic vision can be corrected. If you save first, you have sufficient funds to build an emergency kitty. In fact, by the end of the year, you can build more than a month’s income by saving just 10% every month. For example, say your income is Rs 10, 000 per month and you save 10% of your income every month. This means you save Rs 1,000 every month and by the end of the year, you will have Rs 12,000 in your emergency fund. Hence, the amount will be more than your monthly salary.
• You can enjoy a longer investment tenure
Saving regularly for investing can also give you the benefit of compounding. For instance, if you invest Rs 1,000 every month at an interest rate of 10% for 30 years, you will receive Rs 22.6 lakh. This despite the fact that you saved Rs 3.6 lakh only. So, if you want to build your wealth, keep saving for a longer tenure. The higher the amount you save for investing, the higher the amount you’ll receive in the end. However, you can only achieve this if you save first and spend later.
To sum up
Warren Buffet was not born rich. He made his wealth by following the simple mantras of life, consistently and without fail, one of them being the golden rule of saving first and spending later. So, if you want to be like the Oracle himself, follow his principles. You wouldn’t need a financial advisor with these helpful family financial planning tips.
Once you start saving, you will have to make a financial calendar for yourself. That’s because every quarter has its own significance.
Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.