It is always a conundrum for young earners who are told to save, but they have their own aspirations/desires and FOMO and to be seen as part of the young up swinging crowd.
While it may stem from pent up desires to spend on things you want, UNLESS you are earning a phenomenal amount of money, SAVING is a key ingredient for life long success.
Going out, travelling, buying things for short term use etc. should be done if at least 30% of your salary saving is done apart from your day to day expenses. If money is still left over after that, think of spending. Till such time, belt tightening or holding on to your gratification is key for a financially peaceful old age.
In older generation, investment in the house was key and once that was done, pension used to take care or expenses were kept to minimal in terms of food/health.
Expectations from children were very high to take them through old age. Saving and Investment was not possible given the frugal income, large family of own and taking care of their parents.
But today's world is changing. The children have their own life and parents should have saved. The children also should start saving as they will be left in a no man's land with parents not leaving much and having spent their money in their youth, find themselves in a difficult situation.
Most of the realizations come when someone is in their 40's when they start to panic as they feel that in next 10-15 years they will retire and do not have the CASH or financial comfort to manage their old age.
40's also brings in panic investment and Banks usually bank on this insecurity and provide products which are more to get commissions than a safety net for the investor.
Believe it or not, a comfortable financial security at the time of retirement will bring far more happiness than the spends done at young age and in particular taking Debts or EMIs. If gratification can be postponed, and savings encouraged when young could lead to a peaceful retirement without the need to worry about the next meal.
Read an interesting post and thought I will update this post on saving.
Method 1
Suppose you earn 100 - You will spend ,say, 60 on Needs like food/shelter/basics etc., you will spend 40 on Wants - like buying a new phone, new clothes, eating out, entertainment etc. You will end up saving Zero, which will impact you going forward.
Take the other saving scenario.
Method 2
Suppose you earn 100- you save 20. You will spend 60 on Needs like food/shelter/basics etc. Now you are left with only 20 for your Wants and that will decide which of the want is critical and will buy or wait till you have enough money.
This will ensure you save going by the 2nd method.
The thumb rule for spending money wisely is
50% on Needs - housing, food, transportation, utilities, insurance etc.
30% on Savings -investments, emergency funds
20% on Wants - Travel, entertainment, clothes, electronic purchase etc.
1 and 2 can vary, but ensure the 2nd is maintained as closely as possible to the %age to avoid retirement worries.
