You must have said this to yourself at some point time in your life that in spite of earning enough you are not able to save. The answer is simple. With every rise in income, there is rise in expenses leading to higher loans and EMIs and nothing much left for savings.
So why do you increase consumption with every rise in income?
Well, the typical answer is ‘to maintain the standard of living’. So, with a rise in income you tend to buy more material things and spend more to keep pace with your standard of living. Besides buying material things like new gadgets, gives you a certain “high” and satisfies your status quo.
But is buying material things and consuming more the main culprit?
No, the main culprit is not buying more to upgrade your lifestyle. Maintaining a good standard of living is absolutely not a problem, rather you should always strive to achieve that.
Then what is the ultimate problem?
The main problem is not buying things, but purchasing things beyond your budget. Whenever you buy something, you want nothing but the best. So the problem is chasing that “best” in everything we buy.
Let’s understand this by analysing the way you buy any product.
Well, you will always start with your “budget” in place before you buy anything. Say you want to buy a mobile phone and your budget is Rs.10,000. The next step would be to do a lot of research and finalising the decision.
What happens when you go to purchase it?
You visit the mall and the salesman shows you the desired mobile phone and when you are about to pay for it, another angel (i.e. a salesman) turns up and shows you another handset with same make, but with a few extra features and costing Rs.13,000.
Now which one would you end up buying?
Most of us would buy the higher one, right?
What exactly goes in your mind which compels you to buy a product beyond budget?
The answer is our typical thinking “We buy a phone once in a year”. The thing is you settle for it because you are not going to buy that product again and again, and that exactly is the trap! Ask yourself honestly about how many things you bought with the same attitude in order to upgrade your lifestyle.
That’s precisely the reason for not saving money in spite of earning enough! 🙂
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