The danger of impulsive buying

I keep telling all my colleagues, friends, and acquaintances: it is not how much your earn that makes you rich. It is how much you save.

Money might come pouring in from all your investments or from the high-paying job that you do, but you will not become wealthy unless you stop spending on that thing of desire that catches your fancy every once in a while. The road to riches has many diversions taking you away from it - and all those diversions are rooted in impulsive buying.

You have been thinking of jogging in the morning. You seem to be possessed by it. You read up all the health magazines. You end up buying running shoes (even though you already have a pair of sports shoes; but they are not running shoes, are they?) a pair of track pants, a head band and wrist bands, some weights (the magazines say that weights are essential to give you maximum benefit of jogging) and ... this list goes on and on. A year down the line you have stopped jogging. And the junk lies in your garage.

That is money down the drain.

There is another aspect of spending that you need to be very careful about. And this is my personal experience. Coming from the background I come from, I was very reluctant to purchase big ticket items. But you know what. You just have to break the first barrier and buy an object of desire that is slightly beyond what you have purchased till now. Suddenly you are free. You start purchasing more items of similar price range. Let's say I was reluctant to buy anything beyond Rs. 10,000. Then one day, I go ahead and buy something - let's say a bicycle - worth Rs. 13000 (I really, really needed that object). It took me a great effort to buy that. But once I have done that, I suddenly find myself window-shopping for objects of that price range. It took me a while to realize that I had crossed the threshold and that the reluctance had disappeared.

This to my mind is more pernicious than impulsive purchases.

I am not advocating a non-materialistic live - where is the fun then? Once in a while it is ok to give in to impulses. Sometimes. Just be careful of breaking the upper limit of spending barriers. If you are feeling uneasy about buying something, perhaps there is something you should feel uneasy about.

Insure you way to wealth

To become rich, get insured. 'You must be joking," you say.
Insurance has the lowest Return On Investment.
So I must be out of my mind when I propose that one of the ways to become rich, you need to get insured.
Hear me out please.

Contrary to popular belief, insurance is not just for your future. Yes, you pay a premium to offset any future eventuality.

So, for instance, if you are hospitalized and you have a medical insurance, the insurance will cover your expenses.
If you are disabled and you are covered by insurance, you get an amount that will take care of your loss of capability to earn.

If you die, your family will get a sum of money that will hopefully take the place of the earning member - you - who is no longer there.

But this is only part of the story.
Insurance allows you to take risks in the present.
This is not recognised easily.
If you are insured for the future for a small premium, you do not have to bother to save a huge amount of money for any eventuality.

You can take a part of your present income and start investing without fear of a failure.
And investing, though fraught with risks, is the only game in town that can make you rich.

Lesson: Cover yourself adequately for the future. Get insured. And then invest boldly in the present.