Monday, October 1, 2012

Save or Spend?

Some say "Life is very Simple".  We often realize that it is not that simple.  For many, life is too complicated.  When we see such complicated persons, we feel life is not all that complicated!  Then which is true?  Does the truth lie somewhere between the two?  Does its simplicity or complexity change depending on the position at which we stand and view it?

One such issue in life that confronts us repeatedly, on some days more than once, is "Save or spend?".  While spending money the thought that often crosses the mind is, "Is this necessary?  Should I not save this money by avoiding this expenditure?".  While saving money, more so while investing long term, a question that may arise is, "Is it worth saving this money for that long? Do I really live long enough to enjoy the fruits at maturity?".  To "Save or to Spend" is as big a question as the one of  "To be or not to be, that is the question" that confronted The Prince of Denmark, in the play "Hamlet".  The dilemma is all the more intense for those who have crossed half way mark in life, but do not want to recognize that truth.

Each one has his/her own philosophy about saving and spending.  They may not realize it but they do practice it.  From Chaarvakas who believed in drinking Ghee (as against eating three or four spoonful a day) from borrowed money to ultra-savers who save even used plastic carry-bags.  And each carry-bag saved containing another nine in them, safely tucked away for future use. Even after knowing that they may never be used because there is fresh addition each day. What is the right proportion of saving and spending? Whether surplus should be saved or creating surplus for saving is the key ingredient?  Should we spend tomorrow's money today as if there is no tomorrow?  Or should we be frugal today to save everything for tomorrow, a tomorrow that is too uncertain and may never come?

There are some who believe in saving.  Saving from an early age.  Saving from the day earning starts.  If possible, even earlier when pocket money is given by the parents liberally.  Then go on saving. The only enjoyment they get out of life is watching their savings grow.  Growth due to added returns on the earlier savings as well as additional savings month after month.  There was one such "Savings Man" who saved regularly.  Maturing Fixed Deposits were always renewed with interest. Then there would be a new Recurring Deposit on the first day of the first month each year.  That meant one more new Fixed Deposit at the beginning of the next year.  Record of amounts and dates of deposits were maintained meticulously.  Due dates were memorized.  He would never eat in a restaurant.  Food was brought from home. Leave Travel concession (LTC) was never availed but Leave entitlement was duly cashed in.  That meant another Fixed Deposit in the basket.  He wore the shirts discarded by his son.  The shirts were small for him when his son was in school and college.  That did not bother him.  "Why throw away clothes that are still good enough to last another year?", he would ask.  Once a colleague asked him why he was saving so much money.  "Don't you need money to educate a son?', was his answer.  "You don't need to construct a college to educate a son!", the colleague retorted.  When he retired he was worth ten times more than his colleague who joined the service in the same batch and retired on the same day.  Perhaps the time had come for him to enjoy the fruits of his mammoth savings.  But BP and diabetes had also grown in his body like his savings in the bank.  The habit of saving did not end at his retirement.  Old habits die hard.  He went on saving his pension also.  He died within two years of retirement.  Saved too much but enjoyed too little.  Hundred on one side and Zero on the other.

Then there was another man who was the exact opposite of this "Saving Man".  He was the "Spending Man".  Total enjoyment and no savings.  Every available loan was taken by him before others realized that there was such a scheme.  He would be the first shareholder of every co-operative society that would promise a loan.  Anybody in need of money would go to him for consultation.  The consultant would never disappoint those who went to him with full faith.  He would always have a lesson to raise money form some source or the other.  Expensive clothes, perfumes and restaurants were his passion.  When his employer came up with a scheme for ex-Gratia payment to the legal heirs for meeting the funeral expenses of employees who die in harness, he even inquired whether the same can be discounted in advance.  He had a good argument to boot; death is certain as well as a funeral for the dead.  Then why not pay the employee when he is alive? He had a bunch of credit cards in his wallet.  Meet the bills on one of them by using another.  After some years, he had no friends because all of them had turned creditors.  Borrowers are afraid of lenders and avoid them.  But for this man, creditors avoided him for fear of further demands to lend.  What is already lent may not come back, but let us avoid further damage, was their strategy.   He realized that this was too good to last long.  Unfortunately, it was too late.  He had to sell his beautiful house to ward off some tough lenders. He had to take early retirement to en-cash retirement benefits to pay some other harder creditors.  Unlike the "Saving Man" who did not live long to enjoy the fruits of his savings, the "Spending Man" lived long to suffer the life of penury.  Zero on one side and hundred on the other.  At least until enjoyment lasted.

Both these are extreme but true cases.   But there are hundreds who are close to these two.  Either very little savings or very little enjoyment.  What is the right model to live?  80:20?  70:30?  50: 50? or 20: 80?  Difficult to quantify as they revolve on many variables.  The formula could be simplified to a limited extent; save the surplus.  In order to create surplus to save, keep the wants limited.   Savings should be like blood pressure.  Neither too high like the "Saving Man" nor too low like the "Spending Man".

15 comments:

  1. Excellent article .It is quite interesting and at the same time educative especially for a man like me who has hardly believed in saving without being on the other en dof the spectrum though.
    Rahul Aradhya

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  2. jab jab jo jo hona hai tab tab so so hota hai

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  3. Money is the second brother of God. It is omnipotent & omnipresent but not Omniscient. The wise will become wiser with ur writeup to make wise use of this omnipotent asset.

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  4. Excellent article! A very good read for a spendthrift like me....sure to take some insights from the same.
    Gayatri

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  5. Good insight for both extremists- very nice, Sir

    K B Raju

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  6. Agreat eye opener to majority of human being. Excellent narration.

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  7. Good article Sir, but the youngsters these are not at the either of the ends. Most of their philosophy is like earn some, save some of it and spend the rest of it like hell.
    My philosophy is have a plan, a goal. Plan how much to save and the purposes for which to save and most importantly, the time period of each saving and with the rest of the money, plan on how to spend. Planning enjoyment sounds not very great but when done properly, it brings both enjoyment and happiness without stress and fear of running short in the month ends thus running into debts. I believe in taking loans only for building property or buying something that appreciates better than the cost of the loan.

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  8. Worth reading. Real in nature. No exaggaration in presenting. Fine. Thank you.

    Vasudeva Rao HS.

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  9. Good! Everything should be in moderation!

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  10. Amazing article sir!!
    Being a newly married person, even i am looking up to a perfect blend ratio : that of saving and spending :-p

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  11. interesting article

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  12. interesting article to read and learn.....

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  13. So true....Art of balance!!

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