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Why you should invest first and then spend

We as human beings are driven and controlled by our wants and desires, we tend want more than we require and spend more than we need on non essential things. This is human nature and we can’t seem to do much about it, but there is one simple solution that can help us reduce the damage we cause to our bank balance and financial position by investing before we start spending. Most of us receive our income on particular dates once a month, if we start investing a nominal amount of money into financial instruments like SIP’s (systematic investment plans) and equities once a month as soon as we receive our income we would be able to reduce the amount of money that we are able to blow away on non essential items.

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SIP Investment Plan- Best SIP Plan for Long Term Investment

If you receive $ 100 on the 1st of every month and you start an SIP that invests $20 on the 2nd of every month you are effectively left with only $80 to spend on other non essential things. This would have a psychological impact that would help you limit your expenditure to $80 a month rather than spending all your disposable income away.

Many times we tend to miss our SIP instalments and tend to push our investment dates forward if we spend before investing and are not left with enough money to invest. When we invest as soon as we receive our salaries or allowances we effectively remove the chances of us missing the SIP installements and other SIP Investment schemes. This would also make a habit of investing regularly without financial constraints and lag in investing due to less financial balances.

Our favourite investor here at Begininvest Mr. Warren Buffett said, “Do not save what is left after spending, but spend what is left after saving”. This quote effectively gives you an idea of what we are trying to communicate, if you save or invest after spending than your amount might fluctuate and sometimes you might sway in favour of investing or saving lower as a result of increased spending but if you save and invest before your spending you eliminate your chances of lower savings or investments.

Investing practices such as SIP’s provide lucrative benefits when you continue to invest in them through a long period of time in an effective way and the habit of investing before spending will help you in the long term to keep your investment uniform and easy to maintain for a long term.

To learn more about investing and starting an SIP Investment please visit Begininvest.com