Saving, Inflation and Budgeting’s Role in life

Introducion

Ever had thoughts on why there are individuals who are always financially strong and other individuals with similar incomes who struggle? The issue isn’t necessarily about making more—it’s about smart saving, keen budgeting, and knowing inflation.

 

Let me make it simple. Saving is keeping something away from your earning for future use. Budgeting is deciding how precisely you will spend your money in such a manner that never ever your expenses exceed your income. And inflation? That’s the constant increase in prices over time which decreases the purchasing power of your money. Suppose what you get these days for ₹100 would cost you ₹110 or more after one year.

 

So if you don’t budget and save properly, inflation will steadily chip away at money’s value over time, and chances are good that you won’t have it when it matters most. That’s why budgeting, saving, and tracking inflation are really financial freedom’s true keys.

 

What is Saving and Why is it Important?

I would like to ask you one point – how often in a month do you arrive at the final day and realize not so much is in your account? That does happen to all of us. And it’s at such times that saving comes into importance.

But Sometimes What are you telling yourself—”I already make good money, I don’t have to worry about saving it.”
Well, here’s reality : saving money is not any less important for someone earning good as it is for someone living on tight budget.

i) Wealth Protection

Even if financially well today, tomorrow is not guaranteed. Good income-generating job, successful enterprise, or meteoric profits will change with changing conditions in the marketplace, slowing economy, or personal failures. Saving will make sure that your money is covered and you will never miss a good safety net. For instance, when the entire country was under lockdown by Covid-19 pandemic, all successful entrepreneurs had to utilize their savings to take care of their families as well as enterprises.

ii) Larger Aspirations Require Greater Saves

The greater earnings often translate into bigger ambitions as well—to own luxury real estate, finance children’s education outside India, business expansion, or early retirement. Such ambitions call for regular and systematic savings and not ability to spend. For instance, an earner of ₹2,00,000 per month will save ₹50,000 per month, and after 5 years they will accumulate ₹30 lakh corpus without any earnings from investments. That’s massive head start in meeting long-term goals.

iii) Financial Discipline

High incomes often generate false hopes—the belief one could buy whatever they want and don’t calculate costs. Without savings, however, even one who is financially strong will land into misery. We all hear examples from renowned individuals or sportspersons who had earned crores but got bankrupted as they had not saved or invested anything. Saving teaches you self-discipline and keeps your lifestyle sustainable for long.

Real-Life Situation Consider Arjun’s case. He was an IT professional who was earning ₹3 lakh every month. He would spend lavishly—on cars, trips, and gadgets—since money would never stop coming. His firm was closed down, and his earning plummeted. He had no savings to resort to. Now compare Arjun’s situation with Rohan’s. Rohan was also earning the same amount but was saving ₹50,000 every month. As a result When disaster struck, Rohan was not panicky—he had his savings to sustain himself till opportunity came knocking.

Saving is actually when someone saves some money from portion of money that you earn. Just like planting seeds—the seeds that you save today will grow bigger tomorrow.

why is it such an issue to save? Let’s simplify.

1. Financial Security

Life is full of unexpected incidents. Let’s assume one fine day your two-wheeler suddenly breaks off or arrives one unexpected Bill for medicine. If you save money in emergency funds, it’s easy to cover it without borrowing funds or getting anxious. For example, keeping even ₹20,000 aside in a separate account can give you peace of mind in such emergencies.

2. Emergency Fund

An emergency fund is your personal safety net. Let’s assume that you lost your job unexpectedly—it would take 2–3 months to get one again. So if you save ₹1,000/month, after two years you would already have nearly ₹24,000 apart from interests. You would use that money to buy yourself rent or groceries or bills until things get back to normal.

3. Achieving Future Goals

Savings also enable you to attain your dreams—to buy your dream phone, take vacations, buy a car or even a home. Let’s take buying a laptop for ₹60,000. If every month you save ₹5,000, you will own it in one year without incurring any loan or card debt.

Real-Life Example

Let’s consider two friends—Rahul and Amit. They both receive ₹25,000 per month. Rahul spends nearly all that he earns and has zero by the close of the month. Amit saves ₹3,000 per month. At the close of two years, Amit has over ₹72,000 saved up, and Rahul is still stuck paycheck to paycheck.

Once there arises an emergency situation, Amit is okay, and Rahul borrows. That’s the reality difference that saving makes. That is, it’s not about cutting yourself off from happiness or miserable living. Being financially smart today so that in tomorrow you won’t worry. Even small savings like ₹1,000 per month will create a strong financial buffer in the long term.

What is Budgeting and Why Does it Matter?

Budgeting is simply the process of planning how to use your money. In everyday life, it means deciding in advance how much of your income will go toward needs (like rent, groceries, bills) and how much you’ll keep for wants (like shopping, vacations, or eating out), savings, and investments.

Consider it as a map for your money—it tells you where your money should be going rather than having you guess where it all went.

Why Budgeting is Essential for a Normal Person

For someone of low income, budgeting is oxygen. Without it, it is extremely easy to spend on extras and then not have money at the end of the month. A budget will help keep expenses under control, avoid overspending, and ensure you always have money for essentials.

Example: Suppose your salary per month is ₹30,000. You can allocate ₹15,000 for needs, ₹8,000 for desires, and ₹7,000 for savings/investments. In this manner, even if there are emergencies, you won’t get anxious since your money is already mapped out.

Real-life scenario: Ravi receives ₹25,000. Without a budget, he tends to spend way too much money on dining out and gadgets. By the end of the month, he struggles to pay bills. His friend Sameer, who earns the same, makes a budget and saves ₹5,000 every month. One year later, Sameer has ₹60,000 saved, and Ravi is filled with regrets alone. That’s what working with a budget can do.

Why Budgeting is Important for Someone Financially Good

Now, you can pose the question to yourself—”If I earn a high income, why do I need a budget?” The answer is simple: the higher your income, the more complex your financial situation becomes. With increased income comes increased goals, increased spending, and sometimes out-of-control spending behavior. A budget keeps everything under control.

Wealth Protection: Budgeting prevents you from spending money on unnecessary things and forgetting long-term goals like retirement or investments.

Bigger Dreams: If you have ambitions of buying property, opening a business, or sending children abroad to study, budgeting channels your newfound earnings into such aspirations.

Avoiding Lifestyle Inflation: Most high-income earners are lifestyle inflation victims—using more as they earn more. Budgeting keeps your expenditure from spiraling out of control.

For example, let’s say that Arjun earns ₹2,50,000 a month. He spends freely on luxuries, vacations, and eating out, without even a budget. When the year is over, he discovers he has saved almost nothing. Conversely, Neha earns as much as him, but she has a budget to her name—she spends ₹1,50,000, saves ₹50,000, and invests ₹50,000 a month. After five years, Neha has a corpus of lakhs of money, while Arjun still manages to live paycheck to paycheck, despite the fact that he earns good money.

In short words: Budgeting matters to all—regardless of whether you earn ₹20,000 or ₹2,50,000. For a commoner, it’s about survival and not being in debt. For an economically responsible person, it’s about discipline, betterment, and locking in long-term wealth.

Budgeting Formula: 50-30-20 Rule

One of the simplest and most widely used formulas to begin budgeting is the 50-30-20 rule. It breaks down your income into three easy parts:

50% for Needs → rent, groceries, bills, transport, education, medicines.

30% for Wants → shopping, eating out, entertainment, holidays.

20% for Savings & Investments → emergency fund, fixed deposits, mutual funds, retirement planning.

This rule helps you strike a balance between enjoying life today and securing your future.

Example for a Normal Person

Let’s say your monthly salary is ₹30,000:

₹15,000 (50%) → Needs: house rent, groceries, electricity, and transport.

₹9,000 (30%) → Wants: eating out, clothes, movies, or weekend trips.

₹6,000 (20%) → Savings/Investments: build an emergency fund, recurring deposit, or SIP (Systematic Investment Plan).

This way, even with a modest income, you’re saving while still enjoying life.

Example for a Financially Good Person

Now, let’s take someone with a monthly income of ₹2,50,000. The same rule applies, but the amounts are bigger, so the savings power is much higher:

₹1,25,000 (50%) → Needs: home loan EMI, groceries, utilities, school fees, transport.

₹75,000 (30%) → Wants: luxury vacations, shopping, dining, hobbies.

₹50,000 (20%) → Savings/Investments: mutual funds, shares, retirement fund, or even planning for an additional property.

Notice the difference? For a high-income person, budgeting ensures that a large portion of money is being channeled into wealth creation instead of just being spent on lifestyle upgrades.

Tip: You don’t have to strictly follow 50-30-20. If your income is higher, you can even make it 40-30-30 (save more, spend less) and reach your financial goals faster.

Understanding Inflation

Let’s imagine you walk into your nearby shop today and buy a packet of bread for ₹30. Now, fast forward a few years—you go to the same shop, pick up the same bread, but this time the shopkeeper says, “₹40, please.”

The bread hasn’t changed, the size is the same, the taste is the same—but the price has gone up. This is what we call inflation.

In simple words, inflation means a rise in prices of goods and services over time, which reduces the value of your money. Think of it like this: the money in your wallet today will not be able to buy the same amount of things tomorrow.

Why Does This Matter to You?

Most people ignore inflation because it feels slow and invisible. But it eats into your savings like termites on wood.

Let’s say you keep ₹1,00,000 in a savings account for 10 years, and your bank gives you 3% interest.
If inflation is around 6% every year, then while your bank balance grows to maybe ₹1,34,000, the cost of things you want to buy almost doubles.

Result? Even though you “saved money,” your purchasing power actually went down.

A Real-Life Example You Can Relate To : Then: Your parents might tell you stories like, “We used to buy petrol for ₹20 a liter.”

Now: The same liter costs ₹100+ in many places.

The petrol is the same, but your money doesn’t stretch as far as it once did.

Why Ignoring Inflation is Dangerous

If you simply keep money idle in your savings account or at home, inflation quietly makes it weaker year after year. That’s why investing becomes so important. Investments like mutual funds, stocks, or real estate generally give higher returns than inflation, which helps protect and grow your money.

• • The Big Lesson: Inflation is like a silent thief. You may not notice it daily, but it’s always there, reducing the power of your money. If you want to secure your future goals—like buying a house, sending your kids to college, or enjoying a stress-free retirement—you need to not just save, but invest smartly so that your money grows faster than inflation

Inflation in Real Life: Past vs Present Prices :

Item	Price 10–15 Years Ago	Price Today (Approx.)	What It Shows
Bread (500g)	₹15–20	₹35–40	Same bread, but costs almost double.
Milk (1 liter)	₹20–25	₹55–60	Daily essentials hit the hardest.
Petrol (1 liter)	₹45–50	₹100+	Transportation costs have skyrocketed.
Gold (10g)	₹15,000–18,000	₹60,000+	A classic example of long-term inflation.
Movie Ticket	₹50–70	₹200–400	Entertainment is not spared either.

The Real Impact of Inflation on Your Money

Ever wondered why the money you’ve been saving up doesn’t seem to go as far as it used to? You’re not alone. You might be doing the right thing by saving money in your bank account—but if that money is just sitting there, you could be losing it slowly without even realizing it.

Let’s talk about the silent enemy of your money: inflation—and why just saving in a bank isn’t enough anymore.

Now here’s the catch—while prices are going up every year, your saved money stays the same unless it’s growing. That’s how inflation quietly eats away at your savings.

How Inflation Eats Away at Your Idle Savings

Let’s say you have ₹10,000 in your savings account. Most banks offer around 3% interest per year on regular savings accounts.

Now, if inflation is around 6% per year, here’s what actually happens:

• • Your bank adds ₹300 as interest (3% of ₹10,000)

• • But inflation means you now need ₹10,600 to buy what ₹10,000 could have bought you a year ago

Result: Even after saving, you’re losing ₹300 in real value because your money didn’t grow fast enough to match the rise in prices.

So while your bank balance looks like it’s growing slowly, its purchasing power is actually shrinking.

Real-Life Example: Saving vs Investing ₹10,000

Let’s break this down with a very relatable example.

Scenario 1: Keeping ₹10,000 in Savings Account

• • Interest earned annually: 3%
  • After 1 year: ₹10,300
  • Inflation: 6%
  • Effective purchasing power: ₹9,700
  • You actually lost ₹300 in real value due to inflation.

Scenario 2: Investing ₹10,000 in Mutual Funds

• • Average return: ~10–12% per year (historical average for diversified equity mutual funds)
  • After 1 year: ₹11,000 – ₹11,200
  • Inflation: 6%
  • Effective purchasing power: ₹10,400+
  • Your money grew in value, beating inflation by staying ahead of rising prices.

This is why investing—especially in mutual funds, SIPs, or stocks—isn’t just a rich person’s game. It’s a necessity for anyone who wants their hard-earned savings to hold real value over time.

Why Relying Only on Savings is Risky

Here’s a reality check:
If your money is growing at 3%, but the prices around you are rising at 6%—you’re technically going backward.

Let’s say you’re saving for a goal that will cost ₹5 lakh in 10 years.

• • If you only save ₹4,000/month in a bank savings account (3%), you’ll end up with around ₹5.5 lakh.
  • But thanks to inflation, that goal might now cost ₹8–9 lakh.
  • You’ll fall short—despite “saving.”

This gap is why so many people struggle financially later in life—even if they were disciplined savers. They saved, but didn’t grow their money.

Why Investing is the Answer

Saving is important, but investing is what protects and multiplies your savings. Investments in mutual funds, index funds, real estate, or even gold have historically beaten inflation and helped people grow wealth.

Benefits of Investing:

• • Beats inflation
  • Builds long-term wealth
  • Helps achieve life goals faster (home, education, retirement)
  • Offers compound growth (your money earns, then that earning earns more)

SIP (Systematic Investment Plan) is a great way to start—even with small amounts like ₹500 or ₹1,000/month. Over time, it builds up significantly.

Final Thoughts: Inflation is Inevitable—So Plan Smart

Inflation is like gravity—you can’t avoid it, but you can prepare for it.
Saving alone is no longer enough in today’s economy. To truly secure your future, you must ensure your money is growing faster than inflation.

Here’s your action plan:

• • Don’t leave large sums idle in your savings account
  • Start small with SIPs in mutual funds
  • Keep an eye on inflation rates
  • Review your financial goals every year
  • Make your money work harder than you do

Impact of Inflation on Your Money

Aspect	Just Saving	Saving + Investing
Returns	2–4%	10–12% (on average)
Beats Inflation?	No	Yes
Long-term Growth	Slow	Fast
Purchasing Power	Reduces over time	Increases over time
Financial Goals	Harder to meet	Easier to achieve

Remember:

It’s not about how much you earn—it’s about how smartly you save and where you invest.

So stop letting inflation rob you quietly.
Start investing today and take control of your financial future.

How Saving, Budgeting, and Inflation Work Together to Build Long-Term Wealth

Most people talk about saving money. Some talk about budgeting. A few even understand inflation. But rarely do we realize that these three powerful money habits—saving, budgeting, and investing to beat inflation—work best together.

When combined, they become the foundation of true financial stability and long-term wealth creation. Let’s break this down in a simple and relatable way so you understand exactly how they all fit together.

Saving Builds Your Money

Think of saving as your first step toward financial freedom.

Whenever you set aside a part of your income—whether it’s ₹500 or ₹5,000—you are planting a seed. That seed can grow only when you protect it (with smart budgeting) and nourish it (with growth through investing).

Why Saving Matters:

• • Acts as a financial cushion during emergencies
  • Helps you reach short-term goals like buying a phone or funding a vacation
  • Forms the foundation for future investing
  • But here’s the truth: saving alone is not enough. Especially in a world where prices are always rising.

Budgeting Controls Your Money

If saving is planting the seed, budgeting is watering it regularly.

Budgeting helps you control where your money goes, so you don’t reach the end of the month wondering where all your salary disappeared.

Why Budgeting is Important:

• • Helps prevent overspending
  • Allocates money for needs, wants, and savings
  • Keeps you disciplined and financially aware
  • Makes saving and investing a consistent habit

A good budget doesn’t limit your happiness—it gives you freedom without guilt.

Pro Tip: Use the 50-30-20 Rule

• • 50% for needs
  • 30% for wants
  • 20% for savings and investments

This simple formula helps you manage your money with clarity and purpose.

Investing Grows Your Money (and Beats Inflation)

Here’s where most people go wrong—they save, they might even budget, but they ignore inflation.

Now imagine this:
You saved ₹1,00,000 over 5 years. Sounds great, right?

But if you didn’t invest it, and inflation was rising at 6% per year, the actual value of your money might now only be ₹75,000 in today’s terms.

That’s why investing is not optional—it’s essential.

Why Investing Matters:

Beats inflation and protects your money’s real value

• • Grows your savings through compounding
  • Helps you achieve long-term goals like retirement, home, education
  • Makes your money work for you

Mutual funds, SIPs, PPF, stocks, and even real estate are ways to invest. The key is to start—even small amounts make a big difference over time.

How They All Work Together ?

Now let’s connect the dots:

Habit	What It Does	Impact
Saving	Keeps a portion of your income aside	Builds your financial base
Budgeting	Manages your income and expenses	Controls spending & increases saving potential
Investing	Grows your savings over time	Beats inflation & builds wealth

These three are not separate efforts. They are steps in a single system that creates financial success.

Imagine trying to build a house:

• • Saving is collecting the bricks.
  • Budgeting is drawing the blueprint.
  • Investing is constructing the house to last.

When you do all three, you don’t just survive financially—you thrive.

Real-Life Flow: The Smart Money Cycle

Here’s how a smart person handles their money monthly:

1. 1. Earns ₹30,000/month
   2. Budgets it → ₹15,000 (needs) + ₹9,000 (wants) + ₹6,000 (savings)
   3. Saves ₹6,000 → Part of it goes to emergency fund
   4. Invests ₹3,000–₹4,000 via SIPs or mutual funds
   5. Beats inflation, builds wealth, and gets closer to their goals each month

This isn’t magic—it’s a method.

Final Thoughts: A Complete Financial Strategy

If you truly want financial peace of mind—not just today but for the rest of your life—you must:

• • Save consistently
  • Budget wisely
  • Invest smartly to beat inflation

Individually, they help. But together, they transform your finances.

You all no longer be stuck paycheck to paycheck or stressed by unexpected expenses.

You’ll be confident.

You all be in control. You’ll be on the path to financial independence.

Ready to Take Action?

If this post helped you understand the bigger picture, don’t stop here! Start your budgeting journal, open a SIP, and make saving a non-negotiable habit.

Even small steps today can lead to big financial wins tomorrow.

Conclusion

Saving and budgeting may sound simple, but they are the foundation of financial success. When combined with an understanding of inflation, you can protect and grow your money. Start small today—because even small steps bring big changes in your financial future.

If you really want to be ahead , Of the WORLD and You don’t understand the things then “Learn, Read or Ask”.

Catch you later guys….. Keep learning.

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Chapter 1 : Finance an Introduction