Living within our means is both art and skill — But can deliver fascinating rewards in life

The road to Financial Independence (Part 2)

Note: This article continues from my earlier post and can be found here.

Some of the biggest regrets and complaints I hear from my peers have resulted from a lack of timely financial planning

  • I want to start a business but I can’t stop working
  • I got laid off and I have these monthly expenses, now I’m struggling to manage
  • I want to quit the rat race or take some time off, but I can’t afford to
  • I want to switch my line / career, but starting from a lower pay isn’t sustainable
Note that 1500 is exactly 15% of my total income. That is a healthy percentage, and higher is obviously encouraged

However, you also need to be mindful of something called ‘Lifestyle Creep’. This happens when your standard of living rises as your discretionary cash / income rises.

Be careful not to start spending more money just because of higher income. You could ruin any progress you’ve made with being able to manage your budgeting. In the example above, 15% was my discretionary, and if I received a raise, I would start saving a little bit more now (maybe 20%) to help meet my financial goals faster. I have friends who make up to Rs 5 Lakhs (USD 7,000) a month and struggle financially because they haven’t done the necessary ground work before increasing their standards of living. They’ve invested in expensive real estate and nice cars, but when an emergency comes up, they are unable to suddenly drop expenses because they’ve committed to them for the long term.

Lokyatha is an education focused initiative to enable young adults to live better, more fruitful lives by delivering real world life skills.