Saving Mentality is More Important Than How Much You Earn

If there is anything I have learnt about saving money then it is one thing- it is more about your brain than your pocket. What I mean is, if you have a saving mentality, chances are you will save more than someone with double the income and lack of saving mentality.

Spendypants Mrs. S

Over past decade we have seen our friends amass a lot of stuff. We have collected an impressive amount of things considering we started with a few bags of clothes when we got married. The only difference is we stopped when we had all that was required for our comfort and daily functioning. We haven’t replaced any appliance or furniture in past 5+ years. As people go out and buy new this and that or exchange a perfectly working fridge for the latest model we prefer saving.

Lest you think we have always been so you would be half right. Mr.S has always been the saver of the family. I on the other hand did not fare as well especially with my attachment to footwear. When I joined my first job over 7 years ago saving was definitely not one of my goals. It was luxurious life, good food, clothes and shoes. Sure it seemed cool to have 1 lac in my bank but that was almost 6 month’s pay and then me, could definitely not save that much on my meager salary. When we got married he had 1 lac saved up and thankfully I had also started saving a small sum each month.

At that time we believed saving 10% of your income is good, after all we don’t really make much right. Wrong. I can now see where we wasted money and how we could have been in much better situation than we were. I have talked about our wasteful habits before and a lot of those were a result of consumer mentality. Fully stocked fridge and pantry was in my mind a given even though we were eating out most of the nights. A lot of food was wasted and 5 years ago we were spending at least 1.5 times of our current expenses every month even though the city we lived in was far cheaper than where we are today.

What we assumed was a result of our low incomes was actually a result of our wasteful consumer mentality. When I look back now I could have easily saved over 10K more every month and even if invested poorly they would have made us far richer than we currently are. We might not have been earning a huge sum (which we aren’t earning today as well) but a few lacs saved over the years would have helped us to reduce the amount of home loan or even to build a corpus which allows us to retire and live the life we want.

Shift to Saving Mentality

When you shift your wealth building focus from earning to saving you get triple bonus. Your expenses come down which means you need less money to survive. This also means your savings will stretch farther. As your income increases over the years the saving mentality will allow you to save even more while you maintain low expenses. If you save 10% it will take you 9 years to be able to take 1 year off; but if you save 30% you get a year off every 2-2.5 years.

When we shifted to the expensive city we were told that it will be next to impossible for us to save any amount. The people who told us this were right and we would have suffered if we had not chosen the right home close to office, monitored and reduced our expenses. We did negotiate a raise in months following the move, but we are currently spending far less than we were barely 1 year ago. Our spending in expensive town is almost half of our previous budget. This is when we pay higher utility charges and almost everything is costs more.

Now we concentrate on maintaining and increasing our savings while living our royally frugal lifestyle. Having a saving mentality does not mean starving or depriving yourself. If that was the case we would not have been switching to organic food as we try to save more. Our lifestyle is very important for us and to be true not much has changed except we go out eating less often. Apart from resulting in a healthy amount of savings it is definitely making us healthy as well.

The Results

Would we have been able to even think about retiring at 40 without previous spend as you go mentality? Nope.

Would we have survived the move to expensive city without dipping into our existing savings? Nope.

We would probably not even have been able to equate our home loan. Even though our calculations taught us that keeping money in our investments was better than locking it to equate the loan we can finish off the debt if we want to. This is a very strong psychological motivator and depending on how you think can result in more spending or more savings.

It would be easy for one of us to say ’let’s not save anything this month and go out and buy this thing or that’. There is nothing really we need to save for anymore if financial independence was not on our radar. There are times when I think back and am thankful that I don’t feel the same way about money. I now see money as a means to my independence rather than a tool to increase dependence on more things.

Want to shift your focus?

If you are in the same boat where we were five years ago I know it feels like nothing is working for you and whatever you earn goes somewhere which is not your bank. I also have a two steps for you to start with.

  1. Take a reality check and Know exactly down to the last digit how much you owe in debt and how much you have in assets. Subtract the debt from assets and that is your real net worth.
  2. Write down your expenses –every single one (including those cigarettes) counts. (Drop the habit it will be life changing!)

These two might not be the last steps in actually increasing your savings but they are for sure the biggest steeps you will take. A lot of us don’t realize how much we spend on frivolous things like TV, expensive clothes and accessories and most importantly eating out. A few thousands every month will make a huge difference in how your net worth sits not just a few months from now but also when you call it quits.

Changing your mentality can take time or in some cases like ours it just becomes a necessity. Once you start looking at the expenses through savings tinted glass you will find a lot of ways to cut your losses.

10 thoughts on “Saving Mentality is More Important Than How Much You Earn

  1. Well written post on focusing saving than earning. Yes, it’s very true to be royally frugal from the day we start our career. But, most of us don’t realize this in the first 10 years after we starts earning 🙂

    It happened to visit your blog today, liked the idea behind your blog. Added your blog into my reading list as I could relate it more with our lifestyle. We too set up similar goal for us this year, started the frugal journey, but 10 years later than you 🙂

    Let’s see how it goes in the next 10 years, looking forward learning together…

    1. Great to have someone in the same situation as ours! We would love to get some feedback, learn and grow in these 10 years. And if everything goes as we planned become financially independent as well. Here’s to a decade to freedom!!

  2. First of all, kudos to you both to work towards realizing your goal.
    I have read ‘almost’ every post here and subscribed for more. I have been ‘thinking’ of financial independence since a couple of years. Already 38 yo, I have been preparing myself to be free by 45. However, I have not done even 5% of planning that you have done.
    I live overseas and plan to stay in India after retirement. I have not even factored in the city yet, though I Mumbai is high on the list.
    Looking forward to more informative posts.

    1. Hey Raj,
      Thanks for all the kind words. We chanced upon MMM’s blog and it was a major eye opener to us. Most of the Indian blogs however were telling us that it could not be done at all. Like I always say our worst option is the only option most people have.
      If you have not zeroed in on the city I would really recommend you look into other cities like Hyderabad, Bengaluru and Pune instead of Mumbai. Do share your planning with us. that’s why we started the blog- to get some feedback.

      1. Thanks Mrs.S for replying 🙂
        Well, the only reason I had Mumbai on the list is that’s where I was born and bred. My family and relatives live there. I have a smallish paid-off flat there.
        However, my preference is stay in a smaller town like Dehradun, Shimla, Pondicherry, etc, that is large enough to provide all basic and medical facilities, but small enough to be less polluted (both noise and air). I don’t quite like metros, so Bglr, Hyd and Pune is not on the radar.
        We have 2 girls and elder one in primary school. The biggest issue in my case would be to find a school good enough for her. The younger one will too young to differentiate the schools. I am not one of those competitive parents who want their kid to cram for exams and get good grades. But, at least want a good school that has a holistic learning approach and not just aim at marks in the exams.
        Fortunately, I have done some good investment choices and have a few Crs already in equity. Hence, if I follow your path and (blog ;)), I could retire sooner.
        Unfortunately, wifey is not yet sold on the idea of moving back to India. Working towards it.

        1. 🙂 Well having a paid off flat in Mumbai is a big thing and you might be able to retire simply by selling it and moving elsewhere. Check out Sholai School, we don’t have a kid but that’s the kind of school I would want if we can. Moving back to India is a big decision, take your time on it. Maybe you can retire there and split your time especially if your wife also works.

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