The Power of Penny Pinching: How Small Savings Can Lead to Big Financial Gains

Many people know the art of earning money, but that’s only a very small part of the puzzle. You also need to know how to multiply your money over time, and when you should (and should not ) spend on something. It requires tremendous discipline to invest as much money as possible into income-generating assets. Being fairly frugal, spending only on things that really affect your quality of life and saving money are crucial to achieving this and building wealth for generations.

One effective strategy for saving money is penny pinching, which is the practice of cutting small expenses in order to save money. While it may seem insignificant, penny pinching can lead to significant financial gains over time. Saving just INR 100 a day for 30 years at a 7% return rate would result in savings of over INR 1,20,000 (a return of INR 86,708 on an investment of INR 36,000). The same amount invested in equities would become INR 7,00,000 at 15% return over a period of 30 years! The difference in returns is significant, and it's one of the reasons why investing in equities is often recommended for long-term savings goals. The power of compounding allows your small savings to grow into large sums over time. Penny pinching is quiet effective as you keep saving to invest for a longer tenor you also reap benefit of compounding.

Another very important factor to consider when saving money is Inflation. Inflation, in general, increases prices and decreases purchasing power of money over time. Over a long period of time, inflation can erode the value of cash savings, so it's important to consider how to protect and grow your wealth through a combination of savings and investments. Equity investment is an income-generating asset that offers potential for higher returns over time, and unlike deposits it doesn’t let inflation eat-up your savings. Its essential to take right investment decisions as part of your plan for wealth creation.

Many people easily understand what Penny pinching is but find it difficult to practise it as it’s a lifestyle decision, but when you have your goal in sight you could easily take your first step towards building wealth for generations. By cutting small expenses, you can free up more money to invest. For example, cutting out daily coffee shop visits, eating out less, and buying cheaper groceries can save you INR 1000 per week which you could easily start investing. You can also think of more avenues of penny pinching such as snacking on home-made food, having house-parties rather than meeting friends in expensive restaurants, proudly using your older iphone even when the newer version is out, and simply sharing your office rides with friends and colleagues! Do not spend your hard-earned money to impress others, but invest it at a higher rate to build your wealth in private.

Penny pinching requires great determination and discipline, and it might not be for everyone. Occasionally, few would wonder why they were working so hard if they could not enjoy the fruits of their labor. But for the comfort of having a large corpus in your bank account - the freedom it gives and the power to sail through recessions and pandemics, would you ?