Under relatively few assumptions, it can be shown that every Rs 1 that you save each month and invest becomes Rs 277 at the end of ten years (Rs 1,100 at the end of 20 years), assuming you also invest it well. It can be hard to delay the gratification of spending that Rs 1 now so that you have Rs 277 in ten years time.
How can one put that in perspective? Here are some examples that should hopefully motivate you to make some lifestyle changes and make significant savings.
Dinner with friends
You meet some friends for dinner once every week. The dinner costs you Rs 1,000. Every month, this amounts to Rs 4,500. If you replace two of these dinner trips with cooking at home and invest the remaining, it will compound to Rs 6.25 lakhs ten years down the line.
A movie at a PVR or any multiplex costs approximately Rs 300. For a family of four, that’s Rs 1,200 per movie. Two movies per month cost Rs 2,400. Imagine that you replaced one of those movie trips with a basic Streaming service subscription for Rs 500. That’s Rs 700 in savings, that will eventually compound to Rs 1.94 lakhs in ten year time.
Dropping your postpaid mobile subscription by one to two levels can save anywhere between Rs 100- 300 per month. This compounds in ten years to Rs 27,000-Rs 83,000.
A closer shave
An 8-pack of Gilette Mach 3 blades costs Rs 800 on Amazon. One blade usually lasts for two weeks, with no special care. This results in a monthly cost of Rs 200. With some attention, such as drying the blade after use, you can make each blade last an additional week. That makes Rs 100 per month in savings. That compounds in ten years to Rs 28,000.
Dropping your postpaid mobile subscription by one to two levels can save anywhere between Rs 100- 300 per month. This compounds in ten years to Rs 27,000-Rs. 83,000.
Drink less, save money, become fitter
A domestically brewed beer costs approximately Rs 150 for half a litre. Depending on how much beer you drink every month, this can cost anywhere between Rs 600-800. By investing that second or third pint instead, you are saving yourself almost Rs 85,000.
It’s been a long week and you could really do with a facial to ease the stress of work. The closest parlour has some good ones for Rs 1500. You head there once a month. Simply reducing the frequency to once every two months and investing the remaining yields Rs 2.1 lakhs in ten years.
Small changes, big money
With some fairly simple habit changes, you have managed to save approximately Rs 12 lakhs for your future self, ten years from now. If you are imaginative about your expense sharing, it can be a lot bigger number.
If you’re a freshly graduated 25-year-old, it isn’t that hard to imagine that your 35-year-old self will be extremely grateful for these savings when buying their first home.
This article was authored anonymously by a 25-year-old in his first job and is part of a series of articles wherein we invite readers of our blog to share their personal finance and investment experiences with the world, through the Scripbox Blog. If you'd like to contribute, do write in to firstname.lastname@example.org.