Think for a moment that you have 3 yrs worth of your salary in your bank account.
How does it feel?
So if you earn Rs 10 lacs a year, you have Rs 30 lacs lying in your savings (other than real estate). If you earn 20 lacs per annum, its 60 lacs!
But in real life, most of the people do not take enough effort to save more money. It’s on their wish list to “start saving from next month”, but the motivations soon fizzles out. Most of the people are so busy and stuck with various problems in life that with each day, saving money for future remains a distant dream for many.
Are you one of them?
Life has various dynamics.
Many people are stuck in a bad job, while some people are in a bad marriage which is draining all their energy and time. Some people are running around to arrange for a house down payment, while some are wondering if they should have second kid or not!
Life keeps throwing so many things at us, that we really forget where we are headed towards and we are not able to see how our actions today will shape our future.
We keep dealing with the NOW, only to realize many years later that our FUTURE is almost there waiving at us. And then suddenly we realize that we have so much to catch up in life. More health, More money and More happiness !
We start our jobs in our 20’s, then settle by the end of 30’s, move to next level in our lives while we are in our 40’s and then in this journey we realize we are approaching our 50’s and if we have not done a good job of saving enough money then we PANIC !
Reason #1 – To secure your future
Let’s start with the most basic and core objective of saving money. You save money to accumulate the money and use it for your future requirements.
Let me give you a surprise – “One day, your salary will stop coming in your bank account”
There will come a time when you will be left with 40 more years of your life and there won’t be a regular salary coming into your account like it happens today. You need to create a big enough corpus, which helps you to lead a life you desire for next few decades till you die.
You should actually not be worried about “death” in today’s world, It should be “living enough”.
Some people think they can avoid creating their wealth because their kids will take care of them. However it’s up to you to decide if that’s the right approach towards life or not.
Reason #2 – To do what you love in life
Do you love what you do?
No, I am not talking about pursuing your passion for living or doing full time job in the area which you love. All I am saying is do you have enough time and money to do things you love for few hours each week? Something which you truly want to do other than your regular job work?
- Do you love travelling to new places, but you are stuck because the EMI needs to be paid first?
- Do you love photography, but those costly lenses seem to be out of your budget?
- Do you want to socialize more by throwing a party for your friends, but worried how you will afford to do it?
- Are you afraid to tell your boss that you want to go on a month long road trip, with your best friend which was planned years back?
- Want to go on a weekend trip with your friends, but oops .. it’s out of the budget!
It’s going to be very tough to really achieve all the points mentioned above, if your bank balance is very low. Less money means less power with you!
While you cannot afford a lot of things, you can’t also arrange for a lot of time to do all these things, because you can’t take some tough decisions because you are so dependent on monthly paychecks.
Reason #3 – To spend and live a better lifestyle
A lot of things in life do not require money. A great nap, a conversation with a good friend, a simple meal with your loved ones.
But then there are things in life which require money.
Yes, I am talking about those materialistic things.
- A better Car
- A better house
- Dining in a great restaurant
- Partying with your friends
- Buying that gadget
- Going on that trip
- Redesigning your house
- That Ladakh road Trip
- That DSLR Camera
- Travelling to exotic places with your family
You will spend money on various experience and possessions, only if you have the money at the first place (not always, but most of the times), and you be able to do it only if you have money saved at your end at the first place.
Your lifestyle will improve only, if you have created enough money.
While you can always take a personal loan and upgrade your car or go on that vacation and earn all the facebook likes, I am not talking that!
Reason #4 – To be financially independent
Don’t confuse financial independence with retirement.
- Retirement happens “when you don’t work anymore”
- Financial Independence happens “when you don’t work for money anymore..”
While retirement is linked to age (which is generally around 60) , the financial independence is a function of wealth and not your age. Financial independence can happen even at the age of 35 (My best friend at age 32 is already financially independent)
Where do you stand in your financial independence?
Financial Independence is often referred as financial freedom. Nandish likes to describe as “A situation where your passive income equals your desired lifestyle expenses”
For a normal investor, financial independence can happen only when you start your wealth creation journey well in the start of your life and are disciplined enough not to disturb it for long time.
Do you always want to keep doing the same job you are doing? And wait desperately for that “salary credited” sms at the end of the month? How dependent are you on that monthly inflow in your bank account? How will your life look like if that sms that does not arrive (I mean the money) for next 6 months?
Millions of people go to their jobs in the morning with different moods depending on the day. They are happiest on Friday and very sad on Sunday night. You need to seriously start investing for the goal of financial independence if this is the case with you.
Reason #5 – Peace of mind
Not have enough money brings a lot of stress. If you need peace of mind, you need enough wealth on your side which can comfort you!
You will keep worrying about future every now and then and every small financial problem will give you goose bump and force you to think about your scary future.
Imagine a guy who is around 45 yrs of age, and has not create any significant wealth to show. By this time, he should have ideally created a corpus of 1 crore, but he has just 2 lacs in a FD which might get broken if some financial emergency happens !
This is bound to cause a lot of stress.
Various thoughts will cross the mind …
- How will I meet my financial goals?
- What if I lose my job?
- What if I suddenly need a lot of money?
- What if I am not able to give my kids all the things they want?
Reason #6 – To pass your wealth to next generation
A lot of families struggle for money generation after generations. The grandfather worked for money all their life, then father and then the son is also doing the same.
Many people who struggle financially set a goal in life that their kids should not face the same. They want to teach them money lessons and make them responsible, but also want to leave them a house and some wealth which makes their start a little easier in life.
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