7 Ways Smart Spenders Save and Invest Their Money

Spend today, or save for tomorrow? The former gives us a rush of instant pleasure, while the latter helps us build a solid future for ourselves and our families. However, what’s the point of putting in long hours at the office if you cannot enjoy the fruits of your labour – at least partially? The key lies in maintaining a balanced approach between saving and spending so that one act does not cannibalise the other. Also, it’s essential to invest into mutual funds through SIP’s to let your ‘savings’ compound and grow over the long term. Here are seven things all smart spenders tend to do. You should, too!

1. They save first

While reckless spenders indulge themselves to their content the day their pay checks hit their accounts, smart spenders save for their financial goals first. They’ve usually got a well-documented financial plan in place, and with it, they have a fair degree of awareness about just how much they need to put away each month to make these dreams a reality. Having saved first, smart spenders enjoy the luxury of ‘guilt free spending’.

2. They have a written budget in place

The boring old budget is the bedrock of the smart spender’s financial plan. By earmarking sums of money each month for things such as home purchases, dining out, electricity, fuel and the like, they inadvertently follow the tried and tested ‘coffee can’ system of bucketing monthly spends. If they exceed their budget in one category in a given month (say, a great play hits but the tickets cost a bomb), they cover the deficit by scrimping on another one ( clothes bought for one month never killed anyone!).

3. They ‘sleep’ on large purchases

Smart Spenders avoid the infamous “buyers regret” syndrome by delaying the impulse to make big ticket purchases before properly thinking them through. Tempting as that 100-inch flat screen TV seems to them as they stroll past it in the mall, smart spenders will rarely succumb to the impulse buy. Instead, they’ll head home and contemplate the purchase decision and its ramifications with mind. If it still seems good tomorrow, they’ll head right back to the mall and buy it!

4. Occasionally, they observe ‘fiscal fasts’

Smart spenders are known to go on self-inflicted ‘fiscal fasts’ . These purchase hiatuses could last from a few weeks to a few and can be very cathartic indeed. By restricting themselves to only spending on ‘needs’ and not ‘wants’ for a few weeks in a year, smart spenders effectively deleverage themselves - scaling back on money draining, costly credit and stabilising their financial situations in the process. In doing so, they also build their willpower to resist impulse purchases that could potentially set off a vicious cycle of unhappiness-inducing credit.

5. They don’t bother with ‘keeping up with the Jones’s’

Smart spenders understand that buying things merely to impress others is utterly futile, and akin to a never-ending race with a constantly shifting goalpost. They buy things with the singular intent of making themselves happy. They never overextend their finances and spend their future incomes by taking on expensive personal loans or strapping on EMIs on their credit cards. In other words, they spend what they have, and for themselves alone.

6. They know that saving isn’t investing

Smart spenders understand that saving money alone won’t make them rich, unless they invest it fruitfully. Instead of procrastinating their investments, they deploy their savings into mutual fund investment plans through SIP’s, to secure their financial futures. Without curtailing their financial freedom, they invest into mutual fund SIP’s, which allow them to amounts as small as Rs. 500 per month.

7. They believe in ‘tax-saving’ wealth creation

Smart spenders invest into tax saving mutual funds and enjoy ‘tax-saving wealth creation’. They start their SIP’s into tax saving mutual funds early on in the financial year, and enjoy deductions under Section 80(C) in the process. Smart spenders usually choose ELSS mutual funds over traditional tax saving instruments, which give them the dual benefits of tax saving and wealth creation.