I talk about investing and saving almost every day. This is because I work on placement and also, in my spare time, shoot placement-related videos on Youtube.
I often come across the following statement in investment discussions: I would invest if I earned more.
Another argument that I hear a few of that day is: I start investing as soon as I earn a little more.
I do not want my message to be misunderstood. In certain cases, it is understandable to buy food for the table and not consider the next purchase order for funds or stocks.
However, I dare say that in many cases this is not the case.
Millennials in particular have been born into a world where everything is immediately available. Or even if not everything is immediately available, we want everything right away. Perhaps the Everything for Me Now phenomenon is one reason why the volume of consumer credit has increased over the last ten years – as well as defaulting entries.
Youth – and why not the older generation as well – are under severe social pressure. What we wear on us, what kind of phone we dig out of our pockets, or how many times a month we post pictures of cool after work on Instagram matters to us. Posting a brunch picture is a way to build an identity, to feel part of something.
This, of course, all costs money. And a lot.
Our consumption behavior has changed significantly over the years. This may be noticeable especially when discussing with parents and grandparents.
Our parents have lived their youth or early adulthood during the recession of the 90s, the techno bubble of the 21st century, or the housing bubble of the 2010s. Our grandparents have seen wartime misery and poverty.
Our parents and their parents are used to preparing for a bad day.
How do we get rid of the vicious squirrel wheel of consumption?
If you have lived most of your life with the pay coming and going and the next payday you have zero euros in your account, it is clear that it is difficult to start saving and investing.
I think one of the best ways to save (if there is a chance!) Is to think of extra consumption – like new clothes, brunches, and dinners – as a reward.
But at what point does the reward become the norm? It’s good to ask yourself if a prize is no longer a prize if you accrue it many, many times a week. Perhaps at that point, the reward has become the norm and is no longer a viable means of saving.
Aware of your consumption behavior
If you find it difficult to outline your consumption behavior and the distribution of expenses between compulsory, not-so-compulsory, and not at all compulsory expenditure, you should tabulate all income and expenditure in Excel, for example, for a few months.
I tried the same thing myself in the past and was shocked when my Excel spreadsheet revealed that I usually spent 350 euros a month on food. And that’s not all: also, I spent almost 150 euros a month on restaurants.
The sums, I think, were cheeky in one person’s household.
From my own experience, I know that tracking costs can produce surprising results. Those “too little income” can sometimes be due to too much spending.
Five euros is enough
Saving becomes easy. This is evident, among others, in Shlomo Benartz’s article How Digital Tools and Behavioral Economics Will Save Retirement (Harvard Business Review, 2017), in which he states that investment automation is the most effective form of retirement savings.
It is therefore great that more and more banks have set out to push for cost-effective monthly savings. Historically, the stock market has generated an annual return of about 7 percent over the past 120 years.
Knowing your consumption behavior is important because then it will be easier to budget for money savings. Adults really: savings do not matter, the most important thing is to start a new way.
When you make a habit of saving for yourself – regardless of the amount saved – studies show that it is much easier to increase the amount saved. A person gets used to life with a little less. Thus, increasing the amount of savings may mean only a monthly increase in the euro, for example.
And that is why it is worth starting to save at least five euros a month.
I thought about the matter as follows: When an investment portfolio over time will grow, I can take a little more relaxed conservation. In other words, I will pass on my consumption to the future. At the same time, I secure my future in case of unexpected spending.
In conclusion, I want to share a guaranteed savings tip for all readers: Compete for all paid services such as security, electricity, internet, and phone contracts. If there is no money left in the savings, the above-mentioned tendering costs will certainly be reduced.