For many of us growing up, we have seen how our parents manage the household finances, raise their children and yet had some savings each month. They did not have all the budgeting tools, or other types of income streams; however, saving money felt like second nature and was accomplished on a regular basis.
Presently, with significantly greater salaries and improved access to information about managing personal finances; saving money seems to be an elusive goal and a difficult task. You may find that your monthly salary appears and disappears quickly. Your expenses do not seem to be extravagant but at the end of the month you have little to no money available for savings. It creates a quiet anxiety—If I am having such difficulty saving today, then what will the future hold?
In reality, the world of money has evolved in some very subtle ways. The habits, expectations, and pressures regarding money are much different than those of your parents’ generation.
#1 The salary illusion: Why earning more doesn’t mean keeping more
Our salaries today are much larger than what our parents earned; however, by the time the month is over, the money is gone.
In the past, with one income source, there were funds remaining after paying rent, buying food, sending children to school and still had money saved. Today, many people have two sources of income and feel challenged to save money.
Rent that used to take up a smaller portion of income is now taking approximately 30% of income. In addition, the cost of education, health care and daily living expenses continue to rise. What is left for savings is very limited.
#2 The subscription economy: Death by a thousand cuts
Our parents never had monthly payments on smartphones or streaming services; nor would they have had food deliveries, paid for fitness apps, or constantly upgraded their phone. These things were an entertainment expense when needed, and certainly not something they paid for each month.
Although the individual cost of each of these is negligible (e.g., ₹299 per month, etc.), collectively they can quickly add up to thousands in one’s monthly spending before you ever think about where your money has gone, which then impacts your ability to save.
#3 The ‘base rate’ of living: Why Rs 50,000 is the new zerro
A “normal” life is now much more expensive than it was in the past, even if most of us do not live in a luxurious manner.
For instance, renting a good two-bedroom home (apartment) in a major metropolitan city could cost anywhere from ₹25,000 to ₹40,000 per month. In addition, you could expect to spend approximately ₹8,000 to ₹12,000 per month for your children’s education, ₹5,000 per month for food and groceries, ₹3,000 to ₹5,000 per month for electricity and the internet, and ₹4,000 to ₹6,000 per month for transportation before you have spent a single rupee on something that brings you enjoyment. Thus, at least ₹45,000 to ₹60,000 per month has been spent before you ever get to spend money on something you enjoy.
It should be noted that our parents built families with many fewer fixed monthly expenses. Currently, simply keeping a family safe, and financially stable, will leave very little money to put into savings — without involving any luxury items.
#4 The EMI trap: Spending tomorrow’s income today
In the past, people would save money for the future, then spend it. Now, in many cases, consumers are using an EMI on their purchase prior to saving money for other things.
For example, when you buy a mobile phone that costs about ₹70,000 for ₹3,000 each month, buying this expensive item seems reasonable. The same thing happens with cars; if a car is priced at approximately ₹12 lakh and can be purchased by monthly payments of approximately ₹18,000 per month, adding an EMI of ₹30,000 to ₹50,000 for a home loan will leave a significant portion of your income locked down prior to the end of the month.
Using an EMI for an expensive purchase makes the cost appear lower than what it really is, but it also locks up future income, and the money that would have been put towards savings, is instead being put toward making monthly EMI payments, providing little financial flexibility or “breathing room.”
#5 The ‘Instagram tax’: The high cost of social comparison
Our parents used to compare their lifestyles to those of our neighbours or co-workers. We now compare ours to hundreds of others on social media.
Constantly, social media presents us with an image of a home that is superior to ours, international vacations, new cars, and what appears to be effortless success. This makes pressure to keep pace, even if we are currently doing well. We begin to feel spending is necessary — not to indulge in something we want — but to stay “on track.”
It is this silent comparison which can drive us to upgrade our lifestyle choices at a rate far greater than our income will grow. We do not have poor savings habits, however, our expectations for our lifestyle are growing quietly all the time.
#6 The gig economy anxiety: Why we hoard cash instead of investing
Many of us grew up in a time where our parents had a single job for 20-30 years; we knew how much they made each month and what we could count on. We were able to make long term plans.
Today, people are being laid off, or working as independent contractors, or switching jobs frequently. Many highly trained professionals also fear that at some point in their careers there will be a period when they have no income.
When the future feels uncertain, people hesitate to lock money away for long-term savings and instead keep more cash for short-term security. Ironically, this uncertainty makes saving even more important—but emotionally, it makes saving harder.
#7 The procrastination penalty: How ‘waiting one year’ costs you lakhs
Many people delay their savings as it appears to be “for the future,” rather than “now.” In light of numerous short term objectives such as acquiring a new phone costing ₹70,000, planning a trip (vacation) costing ₹2 lakh or acquiring a new laptop; they focus on what is short term.
For example, someone earning ₹70,000 a month might think, “I will start saving ₹10,000 a month next year when my salary increases.” By delaying even one year, they lose the benefit of compounding. Small delays like this, repeated over 5 – 10 years, can mean missing out on lakhs of potential savings.
#8 Analysis Paralysis: When too many options lead to zero action
Too many options for saving and investing are available to us compared to previous generations (i.e. SIPs, mutual funds, public provident fund, digital wallets, insurance and stocks). All of these choices are beneficial but it can also create confusion and cause many people to delay in making a decision on how to save their money.
There are numerous other factors besides having too much choice that make saving harder than it was when our parents were growing up. For example, higher cost of living, more responsibilities (work and personal), increased pressure from lifestyle and credit, comparing ourselves to others, uncertainty at work, and our own psychological habits each take away from the amount we can set aside.
Knowing about the issues that prevent us from saving money is a great first step towards creating a plan to save money by being deliberate with what is important to us and creating a savings habit that will be effective in today’s world. Saving money may be more difficult today; however, it is definitely not impossible.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult a qualified professional before making investment decisions