Want to build a saving habit? Here's how you can go about it

Arijit, 25, has just embarked on a career in advertising. His father wants him to set and save for his financial goals. Arijit wants to save for a vacation, a car and for his retirement corpus. He knows that to build wealth, he has to save diligently. However, he often gives in to temptation with impulse buys. E-commerce sites make things tougher. He wonders if he’ll ever be able to get to his financial goals.

Investors are not always able to sacrifice immediate joys of spending for long-term goals. For Arijit, retirement is too far away to motivate a regular saving habit. However, there are three ways to build the habit.

Arijit should first create pre-emptive savings plans that leave less in hand to spend. Setting up a systematic investment plan, with the facility to increase the amount over time, is a good idea. Just like his PF deduction, the SIP can be deducted on the day he gets his salary. He can begin with putting aside a small amount. As the amount increases with time, his savings will also balloon. Savings should not be seen as the residual after spending. Spending should be seen as the residual after saving.

Arijit should make it difficult for himself to indulge in impulse shopping. If he uses a credit card, he will not feel the pinch when making large purchases. It is only when the bills arrive that the consequences of his impulsiveness sink in. If he uses a debit card, or net transfer instead, he will be able to see the immediate impact of his decisions on his bank balance. Reviewing his bank statement every week is a good way of keeping track of what was and what could have been, if money were not spent impusively. This helps rein in expenses.

Finally, Arijit should earmark a portion of unexpected gains towards investments. If he is able to allocate half of such amounts to saving, and half to spending, he will benefit. Arijit’s biggest ally is time, and the miracle of compounding. He should make the most out of it by developing a saving habit.



The content on this page is courtesy Centre for Investment Education and Learning (CIEL).