The ONE reason you fail at saving

Oct 27, 2021

We must save.  We should save. We have to save. So why do we struggle to save? Why is saving an uphill battle?

Behavioural Scientist Dan Ariely explains with an analogy. Imagine a bicycle you really want that costs $1,000. You can visualize your life with the bicycle, but it’s much harder to visualize what will happen to your life if you do not spend this $1,000.

What we see, imagine and feel is spending, whereas saving is more abstract, non-emotional and far away. Therefore, we don’t care as much about it and we aren’t as motivated.

As humans, we don’t do well with anything that has to do with now vs. later. Hence we overeat and under exercise; we overspend and under save.

So how do we tackle this?

Is Social Media your motivation?

Imagine children at a party playing with balloons. One child suddenly grabs a red balloon and yells: “This balloon is mine!” Inadvertently, all the children drop their balloons and fight over this red balloon. A very dumbed down example of what René Girard calls “mimetic desire.”

A lot of your desires don’t emerge from within, but from ‘outside’. You import your most powerful desires from imitating the desires of other people. So deep is mimetic desire that we are unaware that it is truly not our own but have claimed the desire of another as ours.

In fact, the entire advertising industry is founded on the exploitation of borrowed desire.

Human desire is not a linear process, where a person autonomously desires an inherently desirable object. Rather, we desire according to the desire of others. If we are not aware, others influence us on what to desire. And this is amplified on social media platforms such as Facebook and Instagram which are excellent conduits of mimetic desire.

Be careful of social comparisons because they really impact our financial decisions and emotional well-being. As explained by French thinker Montesquieu, “If we only wanted to be happy it would be easy; but we want to be happier than other people, which is almost always difficult, since we think them happier than they are.”

Is comparison ruining your wealth creation?

What is it you love spending money on?

Getting clear about what really matters to you is incredibly important, and not as simple as it appears. Don’t follow the desires of another. What makes them feel rich and fulfilled is not the same for you.

You may love to spend on one extravagant holiday every 18 months. Another may prefer two short breaks in a year. A third may not be interested in travelling and would rather indulge in electronics and gadgets.

There is no right and wrong. There is no good and bad. There is no normal and absurd. Just be true and honest to yourself. Someone else’s pleasures and material items may not bring you happiness. What fulfils them may not be your cup of tea.

To really get clarity on the above, try these questions:

  • Money is not an end in itself. So what would you really like your money to buy you? Experiences? Memories? Gadgets? Pets?
  • If you could double your spending, where would the money go?
  • If we were meeting 36 months from today, what would have to happen in order for you to feel like the past three years have been a success?

As financial planner Carl Richards says, connect the use of your capital to your goals.

Your money story could be destroying you

What are the emotions associated with savings?

  • A drag. I know what I am giving up, but for what?
  • A loss. I can’t get the gratification I want now.
  • A sacrifice. I have to rein in my spending. I can’t do what I want.

Change the story. Turn these negative emotions into something positive.

If you have done what is mentioned above, you would have tremendous clarity on what it is you really want. You would have questioned whether it is a deep desire or you are being played by society? Now, write it down.

Instead of taking the “no, you cannot afford it” route, try the “what would it feel like” one. What would it feel like to spend on the things you love?

Let motivation be the driving factor to save, not lack.

Once you know what you want to spend money extravagantly on, then you can cut costs mercilessly on the things you don't care about. You will be surprised at how much of frivolous spending comes to an end, as you get clarity.

Don't let your assumptions ruin your finances

The single biggest reason you are not saving, is not because of lack of discipline. It is because you have not connected the use of your capital to your deep desires, which are articulated as achievable goals.

Larissa Fernand is Senior Editor at Morningstar India. You can follow her on Twitter.

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