Small wins are often ignored!

I was in for a surprise when I was at a leading coffee shop recently. Service tax of 14% is not levied for takeaways. Only for the dine-in service, it was charged.

I was frowned upon when I discussed this with a friend that we can save INR 100 per bill if we choose the takeaway option. His response was, “What difference does a saving of INR 100 can do to one’s life?” If you are a person who regularly smokes, you would have been at the receiving end of people telling how much you would have saved, if you were a non-smoker. The usual justification by the smoker would be, “What difference does it make?” These little savings would add up to a sizeable amount over a period of time.

A practical scenario can better illustrate the concept of small wins and its significance. For example, I may not be in a position to buy a house that costs say Rs.50 lakhs by paying that amount upfront. But I can still own the house by taking a loan and repaying it in small, affordable chunks popularly known as EMI or Equated Monthly Installment. A cousin of my friend used to spend 10% of his salary on cigarettes. He had recently quit smoking (not the Mark Twain’s way of quitting) and he is now talking about buying a plot. I am not kidding!

Trust me, these small wins or savings will add to a significant sum over a period of time. After all, it is the little drops of water that make the mighty ocean. You will end up saving at least 1000 INR per year if you frequent coffee shops like I do. Another common pitfall we traders get into is our choice of brokers. We no longer need a broker’s software to give us buy and sell signals. Most of us use high-end software platforms to analyze. Many of my friends pay only 10% of what they used to pay earlier by opening trading accounts with discount brokers.

Another parallel that can be drawn to the small-win analogy is about SIPs or savings on a regular basis for children’s education or marriage. Time value of money comes into play here. If you start with INR 5 lakhs today in a mutual fund which gives you 15% returns per year, you will end up with INR 40 lakhs in 15 years. That is the power of compounding. Albert Einstein once said,

“Compound interest is the greatest mathematical discovery of all time.”

I started a SIP in Gold for my daughter since the day she was born. Now I sleep peacefully as the time value of money and power of compounding are on my side. I may not encounter a situation to take a loan for her as I am well planned ahead of time.

The point I wish to drive home is that the small wins and small savings on a regular basis reduces your financial burden in the long run thereby resulting in a better quality of life. Not for a moment am I advocating a miserly way of life; my point is not to lose an opportunity to save. A penny saved is a penny earned.