RAGS TO RICHES | The Savings Game
A monthly dose of finance for creative professionals, freelancers, artists, heavily aided by stories, puns, memes and examples.
Written by Ragini Singh Khushwaha, founder of ArtNowThus and subject matter expert on the arts, media and content, cats, random factlets from around the world and productivity hacks.
With inputs from Sakina and Husein Merchant, Chartered Accountants who attempt to bring out their best selves by combining their professional skills and their love of being around and learning from other creators.
Like most comfortably middle-income Indian kids in the 90s (even now maybe?) I grew up with a sense of saving money, but not much understanding about investing it. My parents weren’t really big on the pocket money idea, so every time I needed to ask for money there would follow a huge song and dance routine about why I needed the money. And then I would get some portion of my original ask. You would think that would make me an expert negotiator in my older years, but no such luck.
As a teenager, I spent all that money as soon as I got it. And then when I was twenty and a very important professional intern at my first job ever, a friend gave me some advice about money management. The idea was to save Rs.1000 every month and keep it at the back of my cupboard. At the end of the year, I would have saved Rs.12000 and I could probably make a trip to Goa with that money. Not a bad deal at all!
I don’t quite remember how that exercise played out, or if I ever got that trip to Goa but the basic approach of setting aside some money each month became the cornerstone of my money management philosophy.
If you’re savvy, by now you’ve realised that what I’m talking about is a rudimentary SIP or a recurring deposit. Money saved in more sophisticated financial instruments does have the big added advantage of earning interest and compounding. The money stashed at the back of my cupboard was doing no such thing and was clearly not the most effective savings plan. But what this exercise did do, is give me a really solid baseline to begin my savings journey when I didn’t quite understand financial planning. That initial amount of Rs.1000 per month, would grow just a little bit more in the following couple of years - not a lot, maybe 500/-, maybe another 1000/-. And every time I would take that little savings nest out to count, it would give me a little high. At 22, I couldn’t believe I had about 30,000/- just saved up lying there in front of me. Humble beginnings, but it was thrilling!
It became a game to see how much I could put aside each month. If someone gave me some extra money as a gift, I would put it straight to the back of my cupboard. It was exciting to see how much I was doing each month and it was a challenge to increase each month from the previous month #levelup.
After some time of doing this, I was bragging to my dad about what a little savings genius I was. And while I’m sure he was very proud, he also gave me a quick reality check about why it wasn’t such a great idea to have my savings hang around in cold hard cash (and not only because I wasn’t probably doing as many of those promised #GoaTrips with it).
It took one session with a compound interest calculator to have me sold on moving everything into SIPs.
The gameplay stayed the exact same except it was now automated. All I had to do was decide how much I was putting in each month. And instead of counting real cash that I took out of my cupboard, I could look through my monthly statements and see how much I had saved up.
Ever since I’ve continued to consistently put in a manageable amount of money each month towards an SIP. While I love the automation of it all, what I absolutely am hooked to is watching that savings pool grow. It’s no longer only the sum of every tiny amount I was setting aside. It’s compounding and growing. And I LOVE the high of going through my savings statements and checking the value of each investment - how much I’ve accumulated, how much it’s grown to. Every now and then, I’ll realise that maybe I could up it a little bit more - that’s taking the game one level higher than where I was playing at. And then some times, I’ll get a cheat code handed to me in the month. Maybe I get a bonus at work, maybe there’s a refund on an old expense - any extra money that comes in goes straight in, and I can gaze at it in my statement next month.
Saving money can be an overwhelming prospect, even for some of the more financially astute amongst us. Making a game of it, brought in some child-like fun to it for me. It made it feel less stressful and honestly, just kept me motivated with it all.
For a bunch of reasons that I will not get into this edition, I spent 2022 without a salary. It was a planned break from work, so I did have some money set aside to tide me through the year. After a chat with Husein and putting together a money plan for my gap year, I realised that between my existing savings, some income from interest on an investment and my existing SIPs, I could still set aside about 10k each month for investing. So I did.
I also got lucky in the year and realised I had a Forex Card from a trip long ago that I needed to get the cash out of. That was another 95000/- added to the pool. By the time 2022 was done my total savings in the year with no salary was over two lakhs. And this wasn’t hard to do at all. I’d automated a monthly debit at the start of the year itself and when I got some unexpected extra cash, it didn’t go towards spending money - it went straight to my investments. It’s not even discipline if I’m being honest, it’s just the need to keep playing.
Now since I’ve spilt the numbers for the year to you, I’m going to give you the big picture on this.
Savings from 2022 2.15L
+ Savings from monthly SIPs in 5 years 4.8L
= Total Investment: 6.95L
* Assumed rate of return: 8% pa
* Number of years: 5
= Savings after 5 years: 8.81L
If I keep this up for ten years my total invested amount of 12.95L is now 20.53L. That’s quite a tidy little sum right there.
My personal socio-economic situation and privilege is definitely a factor in my ability to be able to save the way I did last year. So the numbers that make sense to me, might feel absolutely ludicrous to you. The intention is not to overwhelm, but in order to drive my personal example home - being transparent about the numbers is a requisite.
And this might not apply to you in the same way, that’s perfectly fine. Rs.10000 a month might feel too high right now. I started this with Rs.1000 each month. Go as low as you need to. It’s about starting to play the game first and then levelling up as you go along. If you’re on the other end of the spectrum and 10k is a paltry sum for you, good on you! Go ahead and up that monthly savings amount to something that feels more worthwhile.
Probably Relevant Side-Note: Want to play around and see how the numbers might look for you? Enjoy this handy compound interest calculator!
That 1000/- going to the back of my cupboard began as a way to keep some money out of sight, and therefore away from any potential spending. But over the years, it helped me create the mindset for a long-term savings plan - a mindset that stayed with me even through phases when setting money aside for my savings goals wasn’t manageable, at times for longer periods of time than I’d originally anticipated. The challenge then was to learn to go easy on myself and be okay with taking a break from the game. But when I could get going again, back in the game I got! It changed my approach to saving money - it wasn't the boring thing for me to do with my money. Saving money was an exciting game, one that I was winning at.
It’s a simple enough game, but I got to say - it’s hella rewarding!
ENDNOTE AND DISCLAIMER
Rags to Riches is a monthly column published for the ArtNowThus Blog and Newsletter. Meant for creative professionals, freelancers, artists - anyone really who hasn’t yet quite figured it out and needs a place to start from scratch.
All Rags to Riches articles are put together with the help of experts, and heavily aided by stories, puns, memes and examples - this is a finance blog you will actually want to read and (hopefully) put to use in your personal finance lives.
We’d like to establish that while the principles outlined in this section should pertain to anyone, we’ve put this together with a focus on creative professionals and freelance workers. Also, while we do have Husein and Sakina consulting with us on this column and keeping us straight, we’re not financial advisors. This column is for informational and recreational purposes only and in no way meant to offer advice or recommendations.