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ant-and-grasshopper

Who would you rather be – the ant or the grasshopper?

ant-and-grasshopper

There was a time when my child’s favourite story was that of the ant and the grasshopper. For those of you who have let time take its toll on your memories, here it is. Once a hedonist grasshopper was singing in the bright summer sun, freeing up his voice to any and every melody he could conjure. An ant passed by with a heavy load of food on its back. The grasshopper saw her and ignored. Again the ant passed by, with food on her back. The grasshopper was amazed, unable to figure in his happy carefree mind why the ant was working so hard, and not swinging on a hammock in the cool breeze. Come winter, food was in short supply. The once carefree grasshopper was now forlorn and lost, without a morsel of food in sight.  He went begging to the ant, but the ant just slammed the door in his face.

So true is this for a lot of us, who want to stay happy and gay when the sun is shining, that we forget to save for the snowy day. Much as having fun is part of life, so is remembering that not every day will we be as fit and fine as we are today. Or have so few needs that the income we have today will suffice. Remember the piggy bank your parents gifted you on your sixth birthday? Well, if you thought piggy banks were only for kiddies, you were wrong. Putting aside money for the future is the only way to stay relaxed forever.

Much as it is important to save, you should also know exactly why you are saving – what is the end objective that you want to achieve? There can be several motives behind our need to save. Here are a few to help you put your thoughts in place:

  1. Fight inflation: Inflation, simply put, is how expensive things have become this year compared to previous year. If inflation of the economy is say 4%, and for your healthy breakfast routine, you buy packaged juice regularly which cost Rs. 100 per carton. This juice carton will cost you Rs. 104 one year down the line. This would probably skip your attention. But what after 20 years? The same item will cost Rs. 219. Does that make you wonder? Well, that was considering an inflation rate of 4%. Current yearly inflation rate for India is a little over 7%. Well your present day juice carton of Rs. 100 would then have become a whopping Rs. 387 in cost! Now where would we be on the rest of the items of the breakfast menu?
  2. Finance expenses: Few years down the line there might be foreseen expenses like your kid wanting to fly the spacecraft (let’s hope science would have advanced to that stage!) or your old father decides to take a trip to the North Pole and the obliging son that you are, you will be footing the bill. The question here is, does your current income support such expenses? Or would you rather save and let that savings grow so that the kitty is large enough in time. Let’s take your own example now. The last watch you bought for your birthday cost you Rs. 2000. Probably after a few promotions, you will not be satisfied with a watch less than Rs. 5000. Now the question is, will your salary have also hiked proportionately?
  3. Increase saving: Handing over your papers to your boss might be a daydream for a lot of us. Or you might grow old one day and just stop going to your office because you are tired of the routine and want a break. If at 25 you had envisaged this day, you would have saved for it. And come that day, you would not hesitate to pack your bags and say goodbye to office work.
  4. Increase income: Most smart guys I know are always thinking of some way or the other to have an instrument earning income parallel to them. This not only takes a certain pressure off them but also allows them the freedom to switch jobs without giving much thought to what hike they will get. What can this instrument be? Ah! Isn’t that the million dollar question? Think! And this holds true even for businessmen. No matter what your core business is, if you have a model in place which can be a silent earner for you, wouldn’t life become so much more hassle free?
  5. Reduce tax liability: This is the last in the list because this is perhaps one of the unmistakable reasons you would want to invest. The government lets you walk away with your hard earned money up to a certain amount without charging you anything as tax. Wait a minute, you pay for what you earn? Yes, we all do. And we also try by hook and by crook to think up of ways to save that money for ourselves rather than hand it over like a nice good boy to the government. So much for efforts to earn!

I am hoping by now, I have given you enough food for thought. Do sit back with a tub of popcorn and ponder over this, before the year is over and the popcorn guy comes running to you, asking you for change you didn’t pay!

Written by,

Khyati Bhatt,
Senior Consultant,
Plus Capital

Image courtsey: http://www.freedigitalphotos.net

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