{"id":413,"date":"2019-04-09T09:07:47","date_gmt":"2019-04-09T01:07:47","guid":{"rendered":"http:\/\/dushyantnomics.com\/?p=413"},"modified":"2023-03-18T12:52:30","modified_gmt":"2023-03-18T07:22:30","slug":"saving-without-a-purpose-is-meaningless","status":"publish","type":"post","link":"https:\/\/dushyantnomics.com\/saving-without-a-purpose-is-meaningless\/","title":{"rendered":"Why Saving Without a Purpose is Meaningless"},"content":{"rendered":"\n
George Clooney’s character in the movie \u201cUp in the Air\u201d delivers a fine example of saving without a purpose when it comes to airline miles. <\/p>\n\n\n\n
The movie offers a personal finance gem<\/span>:<\/p>\n\n\n\n Sometimes we can get so bogged down in the process of making money that we lose sight of the eventual purpose for which we are saving<\/strong><\/span> that money.<\/p>\n\n\n\n Clooney\u2019s character in the movie (Ryan Bingham) is obsessed about collecting frequent flier miles. <\/p>\n\n\n\n There is one thing different about his obsession.<\/p>\n\n\n\n Unlike most travellers who collect miles for an eventual free trip or a holiday, he has no eventual goal set for the miles he is collecting.<\/p>\n\n\n\n For him the collection of miles becomes the goal in itself. He is collecting air-miles just for the sake of collecting air-miles.<\/p>\n\n\n\n We are all susceptible to falling in that trap when it comes to our relationship with money. <\/p>\n\n\n\n At times we end up doing with money what George Clooney\u2019s character is doing with airline miles.<\/p>\n\n\n\n You work really hard every single day at your job. <\/p>\n\n\n\n You hope the company will notice your performance and reward you with a salary hike or a big bonus.<\/p>\n\n\n\n Every once in a while you may also argue with your boss about how your salary is not high enough and you deserve more.<\/p>\n\n\n\n All this is part and parcel in the daily life of a corporate employee. <\/p>\n\n\n\n Our jobs are the primary source of our incomes that allow us to make a decent living.<\/p>\n\n\n\n Depending on how financially prudent you are, you might be saving a small (or hopefully a large) part of your salary each month.<\/p>\n\n\n\n Now ask yourself \u2013 How well do you know exactly what are you saving for?<\/strong><\/span><\/p>\n\n\n\n There are a number of things that may immediately come to your mind to answer that question.<\/p>\n\n\n\n You want to offer a better quality of life to your family, good education for your kids, get proper medical care for your ageing parents or some other cause that is personal to you.<\/p>\n\n\n\n Now those are indeed good and the most common reasons why we push ourselves to do well (and earn more) at our jobs.<\/p>\n\n\n\n But there is a small glitch in that thinking:<\/p>\n\n\n\n A majority of corporate professionals miss out on taking the next critical step<\/strong><\/span> in their saving journey.<\/p>\n\n\n\n And that step is – Putting a specific money value to each of those individual financial goals<\/strong><\/span> that you are saving for.<\/p>\n\n\n\n \u201cIf you don\u2019t know where you are going any road will take you <\/b>ther<\/b><\/font><\/em>e.\u201d <\/em><\/strong><\/span> <\/p>\n\n\n\n Alice in Wonderland<\/p>\n\n\n\n If you don\u2019t know what you are saving for you can easily become disoriented in your personal financial journey.<\/p>\n\n\n\n We put in an extra-ordinary amount of effort to earn more money but spend very little time in actually tracking how it is helping us to get to our goals.<\/p>\n\n\n\n It is always good to have more money but do you know exactly how much more money you need?<\/p>\n\n\n\n How much further do you need to travel on your financial journey? <\/p>\n\n\n\n Are you already at 10, 20 or 50% of your way to your eventual financial destination?<\/p>\n\n\n\n Once you are able to put a specific money value to each of your financial goals it will become much easier to start working towards those specific goals.<\/p>\n\n\n\n Consider this example:<\/strong><\/span><\/p>\n\n\n\n It is one thing to say that you are saving money for your daughter\u2019s college education. <\/p>\n\n\n\n That in itself does not give you a clear target to work towards.<\/p>\n\n\n\n Now compare this with a specific financial goal<\/strong><\/span> \u2013 I will need USD 25,000 for my daughter\u2019s college education and I will need it 8 years from now.<\/strong> <\/span><\/p>\n\n\n\n A clear money goal like this helps to turn your future financial plans into specific milestones that you can start saving and investing towards.<\/p>\n\n\n\n These financial goals become a subset of your overall financial plan<\/a> that you should aim to have in place.<\/p>\n\n\n\n How you invest your savings will have a huge impact if you are ultimately able to reach your personal financial goals.<\/p>\n\n\n\nSaving Without Clear Goals is Meaningless<\/strong><\/span><\/h2>\n\n\n\n
Saving Money Should Be Linked to Specific Financial Goals<\/strong><\/span><\/h2>\n\n\n\n
Clear Financial Goals Will Help You Choose the Right Investments<\/strong><\/span><\/h2>\n\n\n\n