We should save. We get it. For the future, for our marriage, for our kids, for retirement. Blah, Blah, blah. Heard it all before. Yet, we don’t. Because saving isn’t sexy. Or fun. Or exciting. It’s boring. The future seems so far off. Our goals seem so far off.

“Retirement? I haven’t even started earning properly yet!”

AND we’re not making enough money

AND we’ll miss out on life

Our friends are putting up reels of sundowners in Goa.

Why should WE save?

So, we postpone saving. We’ll start tomorrow. Next month. Next year. Just not today.

But We Should Save. Because. Life. Is. Crazy. Almost like a Bollywood movie. One moment, we’re happily dancing around a tree. Next moment, we’re hit by a flying coconut. Medical emergencies. Job losses. Lawsuits. Unexpected death in the family.

Also. Because. We. Have. Dreams. That house, that car, that fancy vacation, kid’s education. Plus our retirement one day. Our money today has to pay for our desires tomorrow.

Savings give you the ultimate F***-You power. The power to walk away from a job you hate. The power to handle a medical emergency without depleting your reserves. The power to get a better interest rate on a loan. The power to move into your own place. The power to live life on your terms. You don’t have to give up what you love. Saving does not equal stopping spending. Sitting at home. Being miserable. Once you’ve decided how much you want to save, spend the rest on whatever you want. With no guilt.

How do I start saving?

Unless you know why you’re saving, you don’t know how much to save. If you’re just “saving”, it’s a random number. If you don’t hit it, you don’t care. So the drinks are always on you. You’re always up for Zomato/Swiggy. Always ready to take that holiday. There’s nothing stopping you. So, whatever you earn will always be little. Whatever you spend, you’ll always feel guilty. Whatever you save and invest, you’ll never know if it’s enough. You’ll keep chasing money all your life. But if you’re “saving for a vacation” or “saving for a house”, the goal gives you purpose. It sharpens your decisions. Reduces temptations. Brings focus. Small difference. Big impact. Set your goals. Know how much each one will cost.

List your goals. When do you want to achieve them?

• Long-term goals: Typically >10 years E.g., kids’ education, retirement, down payment on a house.

• Medium-term goals: Typically goals you want to achieve in 3–10 years E.g., international vacation, further education, marriage, car.

• Short-term goals: <3 years. E.g., insurance, an emergency fund, a domestic holiday, a phone.

Figure out how much each goal will cost you.

• Quote an approximate current price (ballpark) for each goal. The price won’t stay the same forever, though. Because, inflation – the rate at which prices for goods and services rise over a period of time.

• Calculate the “future price” of your goal, based on the time frame you’ve set Assume an annual inflation rate of ~6 per cent. E.g., your goal is to get married in 7 years. You need ₹10 lakh. Assuming 6 per cent annual inflation, the final cost will be ~Rs 15 lakh.

And then build the saving mindset.

Your target should be to save at least 20 per cent of your salary. Remember the 50:30:20 budget rule?

50 per cent of your salary on your needs (essential spends). 30 per cent of your salary on your wants (desires, because, hey, you have a life!). 20 per cent of your salary on your savings (and thus investments – for your short-, medium- and long-term goals).

Save first. Spend later.

Most of us think that saving is income minus expenses. That’s wrong. What if expenses go haywire one month? Does that mean you won’t save? As soon as your income is credited, divert 20 per cent to your savings. Automate that process – through SIPs, by sweeping it to a different bank account, whatever it takes! Savings = Needs minus Ego. Your needs: Rent, groceries, electricity and other can’t-avoid-it essential bills. Enter your ego: The new iPhone that you want, the Starbucks coffee you must have every day to look cool, those cool sneakers, the high-end gym membership, etc. When you take out your ego expenses from what you’re left with after your needs, that’s savings.

Don’t just save. Invest.

We were always told to save. But that, for most of us, meant keeping that money in a bank account. NO! We save to invest. Not to let the money rot in a bank account. These investments will generate returns to cover short/medium/long-term goals. Where to invest is just as important as how much to save. Savings mean nothing if you do not invest wisely. That doesn’t always mean investing where you get the maximum returns. It means understanding how different investments work for different goals. Mix and match to hit your goals.

Excerpted with permission from Make Epic Money, Ankur Warikoo, Penguin India.