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How to Save an Extra Rs 25 Lac

A three-bedroom apartment. Two cars. Enough flying miles to send an airline into losses (well almost!). Job with a foreign consulting company. Annual salary of Rs 30 lac…or around 45-times India’s average per capita income.

Yet my friend Rohan is not happy.

Whenever I meet him, he is, as I put it, caught on the “work-spend treadmill.”

So, last week when he was showing off his latest purchase, a third mobile, and one costing in excess of Rs 45,000, I told him, “Spend less money, my friend.”

“But spending money is what makes me happy,” he replied.

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“You don’t have to feel deprived when you spend less money,” I said. “In fact, if you keep spending and spending even as your income rises, you’ll keep running and running and never get anywhere.”

“Why?” he asked in a state of confusion, while playing with his new toy.

“Increases in income can be like that,” I said. “Your overall level of happiness doesn’t ever progress because you just get used to the new way of life.”

He replied, “But reducing spending means giving up the good things in life, which I think is difficult to give up!”

I had made up my mind to change his, so I countered, “You see, when you start earning more money, you might drive a Honda Accord instead of a Maruti Swift, shop at Marks & Spencers instead of Hypercity, and eat at TGIF instead of Dosa Plaza.”

“Yes, that’s my point!” he interrupted.

“Indeed!” I said. “So you’ll feel a burst of pleasure when your new lifestyle is still novel but eventually you’re likely to adjust back to your baseline level of happiness, even though your spending has permanently increased.”

“In effect, you will always remain on that hedonic treadmill!”

“Now you are confusing me!” he replied, finally keeping his handset aside. “What’s this hedonic treadmill, and what do you mean I will always remain on it?”

“Well, I read about the “hedonic treadmill” a few years back,” I replied. “Wikipedia describes it as…

…the tendency of humans to quickly return to a relatively stable level of happiness despite major positive or negative events or life changes.

According to this theory, as a person makes more money, expectations and desires rise in tandem, which results in no permanent gain in happiness.

“And how do you get off this hedonic treadmill, Vishal?” Rohan asked.

“Like I did!”

“And how did you do it?”

“Using four simple rules…

  1. Questioning each expenditure item, especially the big ones.
  2. Stepping down my expectations and aspirational spending.
  3. Not trying to keep up with the Joneses (there’s something really satisfying about driving a modest car when you could afford a lot more!)
  4. Getting excited about being a cheapskate (yes, it’s a virtue not a vice).”

“Great, but what did you achieve out of that?” Rohan asked.

“Rs 25 lac in extra savings over 6 years!”

“Wow! How?”

“You see Rohan, the idea that you need to go bigger to be happy is false,” I said. “I really believe that mindless acquisition of material goods doesn’t bring about happiness.

“And thanks to my willingness to not run on this hedonic treadmill, and thanks also to the due support from my wife, here is how I have saved approximately Rs 25 lac by NOT spending on…

  • Bigger house in 2007 – Saving of Rs 15 Lac (that Rs 15 lac would have multiplied by 5 times till-date is another matter, but I couldn’t have afforded a bigger house then!)
  • Bigger car in 2007 – Rs 5 Lac (my friends bought, so what?)
  • Timeshare holidays in 2009 – Rs 2.5 lac (got lucky, as stopped payment of the cheque at the last moment!)
  • Smarter mobile in 2010 – Rs 40,000 (I still use my handset only to text and call)
  • Shiny tablet PC in 2012 – Rs 40,000 (someone then gifted it to me :-))
  • Bright, beautiful toys for kids during 2009-2012 – Rs 50,000 (no peer pressure please!)
  • High-end clothes for myself during 2008-2012 – Rs 50,000 (I look handsome in plain cotton stuff)
  • Painting the house in 2010 – Rs 30,000 (my wife did it :-))
  • Other ego-boosting stuff – Rs 50,000 (first pocket, then ego)

“So total savings of around Rs 25 lac!”

Image Source: Lifehack[dot]org

Rohan seemed stunned to see these numbers, and thus I continued,” You see Rohan, saving money by not spending it is just one side of the picture. I have not told you about the better, brighter side!”

“And what’s that?” he asked, now with a disturbed look on his face.

“Well, it’s that this extra saving has helped me…

  1. Repay the small loan on my small car
  2. Repay the big loan on my big-enough house
  3. Erase the constant fear of having someone else deciding my financial future with words like “You are promoted” or “You are fired”
  4. Create the confidence to pursue my passion in life
  5. Create great amount of time to spend with my family
  6. Invest extra towards my future financial goals

“So even as you continue to pay the banks 60% of your income as EMIs,” I teased him, “I don’t pay a rupee, and instead make my money work for me!

“Plus, given that I earn lesser than what I was earning on my job (while saving more), I have become even more careful in spending money. So now I don’t waste money purchasing stuff. Rather, I purchase experiences like travelling the country and enjoying time out with my family.”

“You are living a perfect life, huh!” he said, this time seemingly jealous.

“Not perfect dear, for I have my own anxieties, fears, downtimes, pains, and emotional sufferings…but then someone said that perfectionism is slow death!

“So my life is not perfect, but I surely am financially free (well almost, as I still work an hour a day for money)! And that’s a great starting point for solving a lot of a man’s problems!

“Hmm!” said Rohan while packing away the mobile handset in its box.

“Let me tell you one final secret Rohan,” I said.

“What’s that?”

“Well, since I don’t need to spend a lot of money to enjoy life, I don’t need to spend a lot of time getting a lot of money. And that’s why you can come home anytime to discuss how you would plan to come off your own hedonic treadmill.”

I then shared with him a flowchart that has helped me a lot in saving a lot of money by leading me to NOT spend a lot of money on things I now consider frivolous.

Click here or on the image below to download the flowchart. It may not be a perfect one that solves your spending problems, but it has helped me a lot in saving those “extra” Rs 25 lac over the past six years.

In the chart, start reading from “Should I spend big money?”

(Want to save the full image? Click on the image above, then right-click, then click “Save image as…”)

Let me know what you think of this flowchart, and let me also know what you are doing to NOT spend money on things you DON’T really need.

If not yet, I would love to see you get off that hedonic treadmill as fast as possible. 🙂

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About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.


  1. Nice article!

  2. srikanth says:

    thnks vishal ………really good article abt financial planning………….keep it going

  3. Simply superb!

    Vishal, with every post you write, you beat your previous best. Like you did with this one. I have not read a better article on saving money (sorry, on NOT spending money :-)) in a long-long time.

    Thank you also for the great flowchart. It’s just amazing how you simplify things so well. I just wish I am able to get off the hedonic treadmill as fast as possible using your flowchart. 🙂

    Keep going. God bless you. Cheers!

  4. Nice article.. keep it up sir..

  5. Shantanu says:

    Thanks Vishal! ( And I don’t know how many times I have already done that in the past one year 🙂 )

    I just shared this wonderful post with my sisters who are on the threshold of completing their management programs and stepping on the corporate life.

    I didn’t have the luxury of hearing your or the like minded souls in this forum when I started my career in 2005.

    However, it always feels good to give some direction to youngsters right out of schools carrying boundless energy with them. How better to do that, than making them read your posts.

    Thanks again!

  6. Dear Vishal, thanks for the timely post! You just saved me Rs 35k that I was about to spend on a new phone. I now realize that I don’t really need it 🙂

    So your flowchart really works 🙂 Thank you so much for the same, and also for the amazing article. Have a nice day.

  7. Excellent post. I am looking forward to more similar posts in the future from you on how to save, spend less and being frugal and yet being happy, etc. Keep up the good work. You truly inspire me to follow you!

  8. Bhavesh Chauhan says:

    Awesome article Vishal. Indeed, higher spending many times comes down to peer pressure (again behavioural finance). Colleagues, friends, relatives have advanced cell phone, bigger car, bigger house etc etc.

    Hope this article is read by many many people. I certainly will do my part by sharing with as many as I can.

  9. Devanga Aravinda says:

    Excellent one vishal !!.

  10. Thanks for the insightful article. I would love to add Barry Schwartz’s argument that the vast and growing array of alternatives in every sphere of life robs us of contentment and endless price analysis and irrelevant comparisons drive us into a state of confusion ,frequent buyer’s remorse and frustration.

  11. Hey Vishal – Very effective & practical advise(s). Loved the flow chart 🙂

    Come out of rat race, live the life instead of running in life.
    Cheers & keep up the good work !

  12. Dear Vishal,

    As always nice post. I do follow/practice many of the things that you have said in your post, well you have put that in proper words in a post.

    It is all possible only if you have a like minded wife (luckily, I have) who believe in savings (not thrift spending). The same was the starting check point in your flow chart.

    The other dark side of it is that many of your relatives, friends, neighbours, etc. see you has a person a who doesn’t know how to enjoy life (you may be called kanjoos). I am okay with it, and already used to it. I am sure one day they all will realize, why was like that.

    Simply, if we are ready to follow some basics in life, you can avoid spending lots of money, save it and multiply the same. Few of the ones that I practice (it has worked well for me)are listed below:

    – Avoid Impulse Buying – Procrastinate, dont buy things at first or second or even third look. While many Procrastinate in Investing, one should actually follow it in spending.

    – Every time question your purchase requirement. Try to live without the item you intent to purchase for few days, weeks months and some times for years. If you feel the pinch for its real need in the process(not for the peer pressure, like my firend holding a I pad, Smart phone etc) go and buy it. But trust me, if you have avoided for weeks and months, you are most likely not going to buy that item (and I am sure you may not need it too).

    – If you are already spend thrift and want to come out of it, use always Cash for purchase. You are likely to spend less when you pay by cash. If you are a controlled spend thrift, use Debit cards. Use credit cards only when you have achieved that high financial discipline.
    – Always look for the best one to suit your requirement and not the expensive or the latest ones. Why to buy a Rolex / Swiss made expensive watch when you can get a best quality, affordability and purpose served in Titan. If your purpose of phone is only to call and text, why do you require an expensive I-phone. Keep a check on what you buy, why you buy and at what price you buy.
    – Mentally price most of the item on the basis of Future value. Consider a 12% return on the money saved. If you buy a gadget for 40,000 today, consider it that you are actually spending 80,000 from your life time saving. Actually it can grow easily to 80,000 in 5-6years. It can deter you from buying that gadget.
    – If you can afford, invest a equal amount of money that intend to spend before going ahead with that purchase. If you cannot afford to do that then you should re-think about the pruchase requirement. It is most likely you are stretching your limits to buy that item.
    – Read, learn, practice and preach Frugal Living. Frugal living isn’t about sacrifice and deprivation; it’s about living smarter, so that you can afford to live the life that you want to live – the life that you dream of living.
    – Finally, Don’t be sepnd thrift – when you can’t afford it and even when you can afford it.



  13. Arindam Majumdar says:

    Vishal, thank you very much for everything!

    I also believe the same way you do. I consider myself as “yet to be literate- financially”. But the good news is I have started and started with a great erg!

    Please continue doing what you are doing. It’s inspiring!

    Don’t know why but thought of sharing this to you – books that have changed my mindset or rather put me in the right track in last 2 years. You might have read them already if not I know you will.

    1. Think and grow rich by Napoleon Hill ( my bible! )
    2. Rich dad poor dad ( we all know )
    3. Thinking, fast and slow by Daniel Kahneman ( Nobel laureate in economics )
    4. The intelligent investor
    5. Poor charlie’s almanack ( currently reading ).

    With Best Wishes!
    Arindam Majumdar

  14. Really a good article. Good to see such inspiring posts.

  15. Abhishek Singhvi says:

    Good Post…!!
    Simple yet of utmost importance…

  16. Nilesh mundale says:

    Vishal, a must read article, as always. Thanks.

  17. Anant Patel says:

    Thanks vishal for your nice post.

  18. Your article reminded me of the following quote:
    “It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” – Robert Kiyosaki


  19. Thank you so much Vishal. The first step, “would my marriage survive if i don’t spend” has been an eye opener. I always thought if spending can reduce your spouse getting disappointed, lets spend.

  20. Again a excellent article about saving and Investing for good thing.

    I learned saving from my father. He is farmer and takes care of big family with single income from farms also helping to relatives and poor’s by saving money.

    I have the habit of saving and donating 2.5% of overall saving to needy people. Right now my income is increased multifold but I like to live very simple but my friends, colleagues and relatives are looking at me very strange they always say kanjoos but if they need any financial help they call me first.

    I never watched movie on first show. Whenever new mobile or gadgets are released I always read about bugs, negative feedback and disadvantages of the device to reduce temptation and wait for fix from manufacturer. Many times they don’t fix and release new version. So I just post pone buying.

  21. This is in line with “save and then spend what is left after saving, rather than spend and then save what is left after spending”.
    These simple sounding lines, sayings or charts are obviously not so simple to follow and need a lot of discipline and deep understanding of human nature starting with one’s own nature and limitations.
    With materialism the order of the day or rather the norm, being thrifty is like being an outcast.
    I myself struggle with spending urges but as you mentioned give it a few days and invariably you realise how you were succumbing to the marketing blitz and save yourself !

  22. Hi vishal.

    Awesome post. Would take a print of your post and stick it on my wall.

    Wondering, could you please create a map like that that helps save time? I can make money but I can’t make time.


  23. Akhilesh Pathak says:

    Dear Vishal,

    Indeed, a different perspective on saving. We can start emulating some of them immediately without any side effects (like breaking the marriage etc.) 🙂 . In-fact, I see a lot of positive comments from tribesmen who are already on a similar journey to realise the “True Wealth” including the one who is writing this comment !!

    Thank you Vishal and tribesmen, more so because I have read somewhere that – “Collaboration breeds success, everything you accomplish owes to the help of someone else.”

    Just wanted to share some of the great thoughts from Thoreau’s proclamation in Walden: “Give me that poverty that knows true wealth.”

    Thoreau, living for two years in his tiny cabin on the shores of Walden Pond in the mid-19th century, had proven conclusively to the industrialized world that simplicity and “mean living” were the highest spiritual ideals, for they refined one’s sense of beauty and truth. “Simplify, simplify,” said Thoreau, and I wanted to heed his advice. The fewer my possessions and the smaller my quarters, the loftier my hopes could be—and the freer I could remain to realize them. (Courtsey – Get Rich Slowly)

    With warm regards

    • Thanks for your amazing feedback as ever, Akhilesh! 🙂 Thanks also for sharing Thoreau’s great ideas!

      All the best in your journey of realizing your “true” wealth. Regards.

  24. Read it; very good article. I agree with it too…

  25. Very apt article for the current times. I like the concept of “hedonic treadmill”. If a person can escape from peer pressure, half the job is done.

  26. Chandresh Shah says:

    Nice article sir..

  27. Reni George says:

    Dear Vishal

    Good Morning to you
    So now i know why i like you…because our thinking is on the same wavelength…..that is money is just a source it cannot be the epitome of Happiness.Well do you get happiness by getting bigger and better things…well not you just get a shot of Happiness and that is for a few minutes…as soon as you go home with your purchase the happiness diminishes,while at the same time enjoy a outing in the rain with you friends or family…and see that happiness that lingers you with a long time to come.

    For me well materials have never given me happiness.On the record I have not purchased a mobile phone for myself though i might have bought some and gifted it to my brother,sister and wife.The first mobile was a nokia 3310 gifted to me by my previous employer during the 90’s commending my sales figure,that mobile i used it for 8 years,then my uncle gifted me a Nokia N70,which he found too advanced for his own use….it has been six years that i have been using it and still it is going strong…what happens you get into a strong emotional connect with these type of non-living this,as they have been there with you always and that also gives you a lot of happiness…you need not be wired to the world 24/7,my mobile is just for voice and sms connectivity …no internet…no facebook…no checking or udating useless status….

    When i am riding alone…i take my bike…that helps me in commuting faster and completing my work faster…the first car i used it for 12 years…now the second one has already completed 4 years and still looking lovely….as i keep care of my non living things…well that gives a sense of happiness.

    Dress for me is jeans…..and with jeans you could go for any damn less expensive t-shirt or shirt and you look the same…

    That does not mean…I do not spend…I spend on food…creating new delicacies and enjoying the food with my friends and family which gives a lasting happiness.

    I used to smoke for short term mood puller,just the way people used to buy expensive items…but that also i have quit..through which i save an additional 20000 per year which goes in one mutual fund…and which is increasing as day passes by and not decreasing like a cigarette in hand…..Now i run a lot which gives my long term pleasure…

    so these are all the long term happiness which i am accumulating…as a value investor i find value in this happiness..more than the short term bout of happiness booster which we get in doses from spending of material shenanigans.

    Thanks vishal for this post…carry on dear

    Thanks and Regards
    Happy Investing

    Reni George

    • i would dare to think that a lot of the tribesmen have or want to have similar value systems and that is what keeps this community going strong, sharing and enjoying at leisure. From a lot of the mails we can learn so many things and adapt them to our needs. Thrift being a universal message in all mails and articles. Thank you Mr George.

      • Reni George says:

        Thanks Sudhir
        Well the benefits are there to be seen….My mornings are beautiful without any peer pressure to reach on time and my evenings are wonderful with a glass of tea and some discussions with me son and wife….without any pressures of reaching any targets…..

    • Amazing thoughts Reni! Thanks for sharing! Wish more people learn from your story. Regards.

    • Excellent Reni 🙂

  28. Thanx Vishal for excellent post and Reni for sharing your experiences. A lot of vicarious learning there.

  29. Eye opener for people running rat race

  30. Thanks for the nice post and flowchart, Vishal. Based on your advice elsewhere, we started following a wishlist (soon after I got married :P) and now any non-trivial spend idea first goes into wishlist, need to stay there for at least a month, and then we assess if we really need it, else we defer that spend, and filter only the “must buy” items and plan for them, align purchase dates with credit card cycles to defer payments as much as we can (negative working capital / cycle for shopping:P), yet without incurring debt – I’m using credit cards for last 6 years and have paid interest only once – that too a few hundred bucks…

    Indeed, you need support to do that and I’d thank my wife for it, warna girls ko shopping se control karna is very difficult 😛

  31. Dear Vishal,
    Amazing Post.!! I am gonna follow this from now.
    “money saved is money earned”


    Good article, Vishal, and worth experiencing at the first hand. Thanks.

  33. Excellent article Vishal, I like your note on purchasing Experiences instead 🙂


  34. Hello Vishal,

    Nice Post! I started working on getting off the “work-spend treadmill” and hitting the “health club treadmill” more regularly about a little more than a year back. It has paid off to a certain extent. Hopefully this year will be much better than last year.

  35. Hi Vishal,

    Downloaded the flow-chart. However, the bottom part is cut in the image. Can you please give a link/source to download the full image?
    Also, curious to know which tool you used to create this flow-chart 🙂

  36. Mohammad Riazuddin says:

    Great write up Vishal…Its true most of the things that really give us happiness, money cant buy those stuff…and when we cant get that, we try to compensate it with things that money CAN buy. Its really difficult to, but am sure not impossible, to get out of this vicious cycle. Most of the time we live a life what we want to project to others and barely what we want to live for ourselves. One of the best examples would be people when travel, instead of enjoying the place they are, the get busy clicking the best profile pic and great shots which they can post and share on social networking sites. Its like those black holes that keep sucking u in…but good u’ve managed to move away from it and wish most of us make an effort to do and be the same too…

  37. Great article. One thing which i highliy appreciate is that you reply to each and every comment. That shows the warmth and encourages us.

  38. manish yadav says:

    Excellent post, as I am reading after couple of blogs related to minimalism its making lot of sense

  39. Balaji Parthasarathy says:


    I recently stumbled upon your blog and have been an avid reader of your blog since then. This is a awesome flowchart and excellent way to save money. Wish i could have got this flowchart after my marriage. Anyways great article.

    Also i noticed something funny in the flowchart… In the Decision “Is it for spouse ?” both outcomes are “No”.. So basically it means.. if it is for spouse, go for it.. :)) There is no choice there 🙂 lol That is a truth only married would know..


  40. anirban says:

    Hi Vishal,

    You’ve doled out some much needed sound common sense, enjoyed reading the article.

    I have an input to your very useful flow-chart. For your next edition you can use the diamond shape for the decision boxes, instead of rectangles – that’s the standard 🙂

    Thanks for sharing your valuable insights in life.

  41. Excellent article! Exactly talks about something I am trying to do in my life. 🙂

  42. Anil K Kapoor says:

    Read this article at the right time. Amazing!!! I was planning to buy a sofa today. Now I don’t know I will be able to buy it or not. Hopefully it will not be so expensive now.

  43. Very nicely written article. Your style of writing is highly engrossing.

  44. I not only read this one …but took it to heart…
    so perfect that every can apply in their life
    and save/spend wisely.Thanks vishal for your articles

  45. thanks for the article, double thanks for the flow chart. this is surely an eye opener 🙂


  1. […] Rs 25 lac is good enough saving for an Indian middle class family over a period of 5-6 years. But how about an “extra” Rs 25 lac? Here’s how you can achieve it. […]

  2. […] not to spend such amounts – small and big – at several occasions has helped me add an extra Rs 25 lac to my wealth over the last few […]

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