Hello blog-lings! Welcome back to another weekly post from me!
Today we’re gonna start our read, with a quick segue to goals. I’m sure you’ve set some goals for this month, year or decade. You made a plan for it, with smaller tasks that you perform everyday to get to where you need to. And aside from the fact that we got hit by a pandemic, I hope you’re on your way towards your goal.
One of my goals in life until a couple of years back, was an annual attempt to lose weight. I didn’t really stick to it most often because of a lack of discipline. Watching myself drop a few hundred grams every week, while motivating, felt like a realllllyyy long journey to a rather far off target. So more often than not, I would quit by the middle of the year and return back to the vision in January with more determination and a bigger number on the weighing scale. After all, it’s difficult to invest a whole year of discipline consistently, especially when bad days hit and you desperately need a sugar fix! Why couldn’t I just stay committed for a month and lose everything? I’m not asking for too much am I?
That’s how I used to be with my money too. Desperately hoping and wishing that it would double in a year, month or week. This mindset definitely keeps the wheels churning for Ponzi schemes. Now I wish I could tell you that there was a way to grow rich quickly (legally). But there isn’t. Keeping yourself patient and motivated in the whole savings and investment process can be tough especially when the end is far and not in sight.
In a world of deep seated instant gratification, it is especially tough to resist the urge and not spend. Especially when the short term returns could seem measly. For instance, when opening a recurring deposit for a year, you could be excited looking at the 5.15% rate of interest. But when you realise that at the end of the year you would have earned only a few thousand rupees in interest, you wonder what really is the point of your saving? Or when you can’t save the expert recommended 20-30% because your income is just not enough (or your expenses too high) you wonder if saving the 5% that you can is even worth it? You think that this 5% won’t help you get rich in anyway. Why not just blow it on that set of magnets or bookmarks?
As someone who has spent three years, blowing up all the 5%s that I could, I realise that if i’d just saved that money, I would have been better off. Especially when now I can’t track where that money went and for what (probably some thingamabob I have probably lost by now). Hindsight is a powerful tool for a mistake laden past. I realise given that patience is a key tool in the savings and financial independence journey and keeping motivation sustained is even more important. Here are some ways I keep myself from falling off and succumbing to the instant gratification carosel
- Returns are extra instalments: Your gains may seem small right now and almost insiginifact. For eg: I have started saving for an emergency fund in a recurring deposit at 5.15% interst, over a period of a year. At the end of the year I am going to receive close to Rs 7000 in interest, while I’m saving a monthly instalment of Rs. 12000. Honestly when I look at the year long horizon, Rs 7000 in interest does seem small. The fact that the return is small, makes me forget sometimes that the purpose is not the interest but actually building that emergency fund. So I decided to change my mindset a bit. For such short term deposits, I have started to look at this interest as an additional instalement. So if I were to put in Rs. 12000 every month for 12 months, I would have earned more than half a month’s instalment at the end of it in interest. That means effectively, I’ve saved technically 12.5 months of instalments in 12 months
- Compound interest calculators: This is my favourite pass time off late. I enter my monthly or annual investments into a compund interest calculator and check how much it would be worth at a conservative rate of interest (7-8%) over a period of a few years. This gives me a lot of perspective everytime I have the urge to splurge. For instance, even if I save Rs. 10000 every month, which would mean Rs. 1.2 lakhs every year at 7% return over 10 years, I would have Rs 17 lakhs in the bank. That thought is enough motivation for me to sit tight and save! Sometimes when I’m over come by larger urges, I take screenshots of these calculators and save them on my laptop, to look and remind myself why I’m doing this.
- Goal oriented saving: Finding your mission to save is very important. For eg: retirement or education or freedom. But finding smaller goals on the way to your mission are even more important. This would make your timeframe smaller and help you cultivate the neccessary patience to keep saving. For instance, my mission is financial independence or to put it bluntly, to never have to work a traditional job again. So my goals along the way are split into 1, 3 and 5 year horizons. My goals for year one are becoming debt free and have an emergency fund worth three months of expenses. My goals for years 2 and 3 are saving 50% of my income and investing 30% of that and so on.
- Automation: Another way I keep my distraction or temptation down is by automating my savings. On the first of every month, my emergency fund contribution gets deducted and I have to learn to live as though I never got it. It’s the oldest trick in the book, but honestly it’s the most effective. Your mind adjusts really quickly with not having that money.
Keeping your patience on track is super important to build your savings and you have to learn to find your ways to keep yourself motivated and on track. I hope my ways above have been helpful to you! Do share how you keep yourself motivated and pumped to save and be patient with your money.
I’m also going to be starting a new section in the blog where I talk about personal finance books I’ve read and how they can be applied. Do let me know your thoughts on that too!