Foregoing today`s consumption otherwise cutting down discretionary expenses is the first step in the process of creating wealth and getting rich. This means inducing the habit of prudent savings very early in one`s lifestyle. One should start saving enough right from their first income or salary. It is pertinent to make the habit of savings like any other habit through consistent planning and practice. Its really difficult to say `NO` to many attractive offers especially in the era of Ecommerce & Easy financing where everything is available on the smartphone. All it take is just a swipe or click to make an order and its there are at your doorstep in 2 days. All online commerce sites have deployed artificial intelligence and analytics to personalize the website pages according to your products of interests. For commerce sites, its an inherent advantage to allure more customers and make them spend more time on their sites. More time on their sites, more purchases customer make. This creates an intense addiction in customer behavior and spending habits and like any other addiction in life, one gets hitched to it and becomes extremely difficult to overcome this.
Savings is all about saying NO:
Putting through a rigor in savings habit is easily said than done. It takes lot of self-control to keep yourselves from saying NO. Its not only the commerce sites that distracts and derails you from savings process. Easy availability of financing is another important factor that detriments the process of savings. The current generation or so called millennial population is not impervious to taking financial liabilities which means buying your future ahead by many years. One get bonded to financial liabilities for next 5, 10 or even 20 years paying off debt in equal instalments. This means you are buying your future 20 years that creates the inability to save money and invest. To quote world’s richest billionaire Warren Buffet “If you buy things you do not need, soon you will have to sell things you need“
As Buffet advised, consider using automatic deductions from your paycheck or automatic transfers from your checking account into a savings or investment account to make forming this good habit as painless as possible. Instead of trying to make a quick buck, he says, you should be focused on increasing your purchasing power over your entire lifetime.
So get into the first step in the process of getting rich that is Saving money to invest. And learn to say NO to things you do not need but are tempting enough to buy. Practice this rigorously for a larger goal of becoming wealthy.
A simple tip on how I implemented this practice of savings in my life: I tend to be conscious of spending or purchasing and I think of financial situation after 1 week of purchasing or spending that money. It helped because many times we end up buying due to the shopping ambiances, momentary active involvement and temptation and if we can overcome that moment like any addiction, we can successfully delay that purchase. Another way to attack the spending is to delay the gratification. There is a whole science and number of articles on delayed gratification. To keep it simple in this context, delay the purchase by either thinking of buying something better and bigger in the future. This helps not only to save that money by delaying your purchase but also helps to invest and multiply that money by 10 times in next 10 years. For example think of it this way: A brand new BMW car bought at the age of 28 by shelving out $60,000 or even worse through loan is a disastrous step towards one’s financial future. Instant gratification might make feel one rich by possessing the expensive car for few months but that’s feeling is not the real wealth. Its not $60,000 that’s gone for a depreciating asset like car which loses 30% of its value the minute it hits the road, rather it’s a potential $6 Million that could have been created through investing and compounding for 20-25 years. If we develop a mindset of delayed gratification, its really helpful in the Saving process which is the first step in Wealth creation journey. Delayed gratification is a key technique not only in the Savings process but even in the process of building self discipline. Walter Mischel is a psychologist who specialized in personality theory and social psychology. He is known for his famous Marshmallow test that substantiates how human mind gravitate towards instant gratification. Here is a video to see more details about delayed gratification and how it works: