How your savings can dictate whether you sulk or brim with confidence

Gajendra Kothari

The following excerpt is a quote from a First Federal Savings newspaper advertisement in the St. Petersburg Times from the early 1960s. This is one of the finest print advertisements I have seen in a long time on money. It has a powerful social message.

‘Your savings, believe it or not, affect the way you stand, the way you walk, the tone of your voice. In short, your physical well-being and confidence.’

One of my advisor colleagues shared it a few days back, and I was utterly overwhelmed with the deep meaning of the message. The timing couldn’t be better.

So here I am. But first, let’s read the whole advertisement at least three times.

I am sure you must be mesmerised too.

Savings and body language

As an advisor who has met thousands of individual investors over the last 16 years, it is easy to spot a person who is very confident, backed by his/her high savings. And vice-versa too. People with meagre savings, coupled with a loan burden, are the most vulnerable as COVID-19 has proved. A few of our investors who had very high savings and have lost jobs are the least worried because they know they have a good corpus to back them up. They are now spending quality time with family which could not have been earlier possible and are also learning stuff to keep them relevant and occupied. And there are an unfortunate few who lost their jobs and have very slim savings in these tough times, resulting in their stress levels going up 10 times.

I remember when I first started my serious savings in the form of a Rs 10,000 SIP in August 2010, I didn’t realise the power of savings. But today, whatever little wealth I have created is all because of a disciplined regime of increasing my savings year after year. I continue to bump up my savings every year come what may. At present, my family’s SIP is Rs 8.70 lakh per month, and hopefully, by March 2021, it should cross the Rs 10 lakh SIP mark. And, I will not stop until I chase my dream of touching the coveted Rs 100 crore mark by age 50 and become One Idiot. And that reminds me, whenever I talk about the One Idiot goal, the first question people ask me is where I am investing my money and what is the expected return and very few people ask how much I am saving in the first place. Always remember how much you save and how long you save for is in your control; returns are not. So we should control what is controllable and leave the returns to markets.

When I look at many of my MBA friends (I did my MBA in 2004), they must easily be earning in the range of Rs 30 lakh to Rs 1 crore p.a., but sadly the savings have not kept pace with their earnings while the expenses surely have. This can be attributed to the below phenomenon. They have all been victims of the normal approach of savings while the short movie One Idiot made sure I take the smart approach. This doesn’t mean I don’t spend. I do enjoy all the pleasures of life after making sure that my saving for the month has happened. By doing this, I don’t feel guilty at all, mainly when I am on a shopping spree on Amazon.

Planned saving

This pandemic has highlighted the importance of planned savings even more. Most investors do not have an emergency fund (6-12 months of monthly expenses). People want to plan for their children’s education or a house purchase, but will not think about maintaining a contingency fund. In fact, this should be the first goal of any saver/investor. A sound emergency fund will help them precisely in these difficult times, so they don’t have to pull out from long-term investments, especially when markets are volatile.

I have personally seen many people who have taken a housing loan being comfortable working in the same company even if they are not enjoying it (mostly due to a terrible boss), simply because they have an EMI burden on their.

As mentioned in the print advertisement, a person with high savings will always be confident about his/her work and will never become a victim of office politics and indeed not a “Yes” man to his/her boss.

The importance of savings also takes centre-stage today because we have a finite period to earn money and this pandemic has proved that business models can change overnight and there is nothing called job guarantee. One of our doctor clients had to work overtime in a reputed hospital with a 20 per cent salary cut (never heard doctors taking pay cuts and that too in a pandemic when they are required the most!). As a result, the person had to curtail/stop SIPs, and we know that once there is a break in something, it’s challenging to build the momentum again.

May be, this advertisement can push us into building our savings all over again if we have not done so already.

(The writer is Managing Director and CEO of Etica Wealth Management)