The Real Wealth Builder: It's Your Savings Rate

 

Remember that satisfying feeling as a kid, dropping coins into your piggy bank and hearing them clink? That simple act, it turns out, is a powerful key to building real wealth, much more so than just hoping for a lucky break!

This part of our journey looks closely at why saving is the true hero in your financial story, especially in those important early years.

Think of it like baking a cake. Sure, a fancy oven (high
investment returns) might help bake it faster, but without the right ingredients (your savings), you won't have a cake at all!

Saving: The Main Ingredient

In the first ten years of your financial life, a big chunk – around 70-75% – of your wealth comes from what you actually save, not from some complicated investment strategy. It's like patiently adding those coins to your piggy bank – it adds up faster than you might think!

Let's look at a simple example:

Say you save ₹10,000 every month for 10 years. That's ₹12 lakhs just from your own pocket! Even if your investments grow at a decent rate of 10% per year, your total wealth would be around ₹17 lakhs. See? ₹12 lakhs (almost 70%) came from your own saving, while only ₹5 lakhs (roughly 30%) came from the growth of your investments.

So, what's the big idea here?

Don't get too caught up in trying to find the hottest investments in your early years. Instead, focus on becoming a consistent saver, like a superhero who trains hard every day. The more you save, the stronger your base will be for future growth.

Your Money Tools: Knowing What Comes In and Goes Out

Remember those simple ways to track your income and expenses we talked about? They're like your detective tools, helping you find where your money is going and where you can save more.

Here's how to use them:

1. Sort your spending: Think of it like sorting your toys. Put the "needs" (things you absolutely have to pay for like rent and food) in one pile and the "wants" (fun things like eating out or that new gadget) in another. 
2. Find the saving spots: Look for areas where you can spend a little less on the "wants" without feeling like you're missing out on everything. Maybe cook more meals at home or find free things to do in your city.
3. Send your savings to work: Once you've found that extra money, put it directly into your investment account. Think of it as sending your superhero team on a mission to make your wealth grow!

For example:

• Before: You earn ₹50,000 and spend ₹40,000, saving ₹10,000 (that's 20% of your income).
• After: By cutting back a little on eating out, entertainment, and shopping, you save an extra ₹5,000. Now you're saving ₹15,000 (that's 30% of your income)! That's a big win!

Level Up Your Saving Skills

As you earn more money, think of it as moving up a level in a game. Here's how to save even more as your income grows:

• Don't let your spending grow too fast: Just because you're earning more doesn't mean you need to spend it all. Instead of upgrading everything when you get a raise, put a good chunk of that extra money into savings.
• Make saving automatic: Set up regular transfers from your bank account to your investment accounts. It's like having a reliable sidekick who automatically puts your savings where they need to go, so you don't even have to think about it!
• Look for extra ways to earn: Explore opportunities to make extra money, like doing freelance work or starting a small side business. It's like having a secret weapon to boost your savings even more!

The Magic of Growth: Your Saving Superpower

Saving consistently is like turning on your superpower – the amazing power of compounding. In the early years, it's mostly about how much you put in. But over time, the returns from your investments start to do a lot of the work.

Here's how it works:

Let's go back to our example. If you keep saving ₹10,000 per month for 20 years, your wealth could grow to a massive ₹76 lakhs! Of that, ₹24 lakhs would be the money you actually saved yourself, while a huge ₹52 lakhs would come from the magic of your investments growing over time!

The Big Idea

Don't worry too much about finding the "perfect" investment or chasing after those super high returns right away. Focus on what you can control – how much money you save. It's like mastering your own special power before relying on anything else.

Remember: Building wealth isn't about luck or some secret trick; it's about building good habits. Start with the habit of saving, and watch your wealth grow steadily over time.

Your Mission:

1. Get your income and expense information (your detective tools) and see where your money is going.
2. Find areas where you can spend a little less and save more.
3. Set a goal to save a higher percentage of your income – like a superhero aiming for a new record!

In the end, building wealth isn't about finding the most exciting investment or trying to outsmart the market. It's about developing the simple, but very powerful, habit of saving. Think of your saving rate as your financial superpower – the higher it is, the faster you can reach your financial goals.

While it's true that how well your investments do becomes more important over time, it's your consistent saving habit that builds the strong base for lasting financial success. Without that solid base, even the best investment plan might not work out as well.

So, embrace your inner saving superhero, make saving a priority, and watch your wealth grow steadily over the years. Remember, it's not just about how much you earn, but how much you keep that truly matters.