Money Matters -4

 SAVINGS EQUATION

How to Save more? Answer lies in knowing & understanding SAVINGS EQUATION

The equation is simple:   Savings = Income -  Expenditure  —S = I - E  

Simple, but difficult to practise!  Why I choose to express it in an equation? 

Easy to remember always.  Give it a thought as often as you can, every time you spend, which is more 

often in our life, albeit daily! LOWER the Expenditure HIGHER the SAVINGS. So, Aim to lower the 

Expenditure. Avoid the avoidable, or at least postpone. Think twice. Chances are you will not spend 

on impulsive purchases and you will realise, it was a good decision. Often this is the easier part of the 

Equation. Even rich people follow it. CAUTION : you do not have to become MISERLY!

The other leg of the Equation is INCOME. You should aim to earn more. Learn new skill, Improve your 

Qualifications, Look for better opportunities. Be assertive to get recognised for your work or efforts.

EARNING YEARS are limited unless you are on your OWN business or profession! See if you can 

aspire to be your Own Master. That is active part of Income.

Know there is a PASSIVE part of Income. Income like Interest (on savings), Dividend on Investments, 

Annuities, Capital Gains ( Profit on sale of assets/ investments), Rental Income etc fall under this 

category. Of course, you need Savings or inheritance of assets for this. 

Strive to have as many streams of passive income as possible.  Then plan, set goals and work for 

increasing them. 

Knowing this is important. Expenses by nature will increase year after year, due to needs of different 

Stages of life ad it’s responsibilities.  Above all, Inflation is unavoidable. Look back on your expenses 

one, five, ten years ago under each Head of Expenses, you will realise it. Never underestimate this aspect.

Income, at least for working class, though may increase, slowly, will cease or drastically reduce over 

a period of time. THIS TRUTH WILL STARE AT YOU. Remember this. That would help to get 

a perspective of how difficult it is to achieve your savings goal. 

SIMPLE EQUATION but requires lot of efforts to practise it. If you know this at the outset, start early to 

save, save regularly, set goal and plan and execute on both sides of the Equation, you will achieve it and 

live a happy life. 

Bye until next blog.