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There are 2 school of thoughts with respect to savings. One school talks about increasing the expenses and the other encourages more savings in the current circumstances. However, very few understand that following only one path will make it more difficult. The current environment is very fluid. The only constant is change. The ongoing pandemic has contributed to it and changed the way how people work. International boundaries have been shattered. The most talented will always stay ahead of the curve and find work from home opportunities.

Most of the confusion towards building financial security takes place due to misplaced priorities coupled with an unrealistic estimate of time and efforts required to achieve a financial goal. Let me explain why ?

1. Focus on increasing income

Focusing too much on increasing the current income may push one to take unnecessary risks. It may include jumping jobs often, doing part time gigs etc. However, following this strategy alone will drain a lot of energy. Best option would be to get used to it and enjoy the process. It will definitely leave less time for you to thing aloud. One has to live with it and make the most of the available time.

If this strategy is not balanced with limiting current expenses, the actual financial condition is most likely to remain stagnant overtime.  E.g. You buy an expensive car as soon as your income increases. Repayments are done via EMI. Thus it would definitely help to build a budget and time expensive purchases according to the income earned. Expensive EMI debt should be closed at the earliest.

2. Focus on increasing savings

Increasing savings is important but not to the extent of starving oneself. Many who follow this strategy go to great lengths and starve themselves and family members of daily necessities like a decent education, medical attention etc. There is no point in ignore and avoid the necessary expenses, which will act a tailwinds to achieve a goal. In the medium to long term avoiding or curtailing such expenses can backfire. For example, when education or self development  is starved for lack of funds, one is limiting self growth and future career possibilities. Similarly, when limiting right nutrition  or exercise to save, may put health to risk. In the end it becomes more expensive to get back to the desired situation.

Optimizing credit card usage, using coupons, rotating OTT subscription, sharing newspapers and books can go a long way in increasing savings.

Hence, think actively and set priorities with a timeline. Health and self development priorities should be in line with short, medium and long term goals. Don’t be in a hurry and ensure tasks that commence see the logical end.

3. Combination approach

The combination approach is the best road to achieving financials dreams. One strategy cannot work in exclusion of the other. Both need to be inclusive and symbiotic.

Both are have their own advantages. One will prepare you for the future and the other will help you stay grounded in the present moment.

A regular saving habit has no relation to current level of earnings. I realized this late in life but is extremely important to understand. Specially for freshers, who are just debuting in a workplace. Saving first and then planning remaining expenses goes a long way towards building a financial cushion to help you soft land, when facing a crisis. One can easily aim to save at least 10% every week or month from the earnings received. At the same time stick to the budget and don’t overspend.

While you are conserving cash, build additional income streams. The world has never been so connected. We are living in a truly global village. Different options include learning to trade, writing a blog, recurring affiliate marketing, offering a course, learning a new language, freelancing on Fiverr, starting a YouTube channel etc. There are numerous opportunities around. Start building at a time and try to automate sales.

Initial efforts may consume a lot of time but everything would be worth it. In the process, you will also learn a lot, which will prove to be valuable when building a team. The key is to be consistent and soon the sampling will grow into a strong tree.

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