Letter to A Young Investor #6: A Powerful Habit That Changes Everything

Dear Young Investor,

I hope this letter finds you in good spirits and reflective about the lessons we’ve covered so far.

In my previous letter, we talked about the importance of “standing alone”—of learning to trust your own judgment and take responsibility for your decisions. It’s a vital skill, especially in today’s noisy world, where everyone has an opinion about everything (including yours truly).

Standing alone is about independence, but there’s something else just as fundamental that underpins this independence: saving.

In today’s letter, I want to talk to you about why saving is the cornerstone of financial freedom and why it matters so much in your journey as an investor. In fact, saving is like a first principle in investing. Without it, you have nothing to invest.

Let me take you to a time early in my career, 21 years ago. Like most young professionals, my plan was simple: earn a lot of money to live what I thought was a ‘good’ life.

I understood that saving was important, but thought it was a “later” problem.

It was around this time that I had a conversation with my uncle, whom I had introduced to you in my first letter. He had an uncanny ability to simplify complex ideas into truths that stayed with you.

In one of my visits to my hometown just after joining my job, he casually asked me in a post-dinner conversation, “What are you doing with your money?”

I was caught off guard, and talked about paying bills, buying a few things I wanted, and maybe saving a bit when I could. He listened patiently, smiled, and then said something that has stayed with me ever since:

“Earning money is important, but knowing what to do with it is what truly sets you free. Saving isn’t just about setting aside cash—it’s about giving yourself options. It’s about building freedom.”

Today, financial freedom is a buzzword, but back then, few people talked about ‘building’ freedom through consistent saving. As my uncle explained to me, saving wasn’t about deprivation or self-denial, but about creating a buffer between myself and life’s uncertainties. It was about having the flexibility to handle challenges or seize opportunities without constantly worrying about where the money would come from.

“Look,” he said, “you can’t control a lot of things in life—the economy, the markets, the decisions of others. But you can control how much you save. That’s power. Every rupee you save is a step toward independence. It’s a way of saying, ‘I’m preparing for what’s to come, even if I don’t know exactly what it will be.’”

That idea stuck with me. Saving, I realised, wasn’t about money—it was about freedom.

Freedom to handle the unexpected.

Freedom to take risks.

Freedom to walk away from situations that didn’t align with my values.

It was about creating a life where I wasn’t constantly reacting to circumstances but instead shaping them.

Over the years, I’ve come to see saving not just as a practical necessity but as something deeply philosophical (trust me to find philosophy even in places where it may not exist!). When you save, you acknowledge that the future is uncertain, but you prepare for it anyway.

It’s a quiet act of humility, or a recognition that while you can’t control everything, you can take steps to build yourself a margin of safety against the uncontrollable of life. It’s also an act of optimism, a belief that your future self is worth the effort you’re putting in today.

Seneca, the Stoic philosopher, said, “Luck is what happens when preparation meets opportunity.” That’s precisely what saving does—it prepares you for the good luck and the bad, for the doors that open unexpectedly and the storms that roll in unannounced.

And yet, saving is also about balance. My uncle wasn’t a miser. He believed in enjoying life and spending on things that truly mattered. He taught me that saving isn’t about giving up joy; it’s about spending wisely, intentionally, and in line with your values.

“Save enough for your future,” he said, “but don’t forget to live in the present. Just make sure what you spend on is worth it.”

It’s a lesson I’ve carried with me ever since. Saving is about choices—choosing what matters most, both now and in the future.

It’s not about denying yourself the little pleasures of today, but about ensuring you have the resources to pursue the bigger joys of tomorrow.

You might be wondering, “How much should I save? And where do I even start?” Well, there’s no one-size-fits-all answer. But here’s a simple guideline that works for many: aim to save at least 20% of what you earn. If that feels overwhelming, start smaller—maybe 5% or 10%—and increase it gradually as you build the habit. The key isn’t the amount; it’s the consistency.

So, how do you save? Adopt the mindset of paying yourself first. Treat saving like a bill that must be paid every month—before you spend on anything else. Automating your savings—whether it’s transferring a portion of your salary to a separate savings account or a mutual fund—removes the effort and ensures the habit sticks.

This is exactly what I did early in my career. My salary came in on the 10th of every month, and by the 9th of the next month, my bank balance was often close to zero. Not because I had spent it all, but because I had spent what I needed while consistently setting aside a part of the salary to mutual funds without fail.

It’s important to remember that saving doesn’t have to be perfect. Life will have its ups and downs. What truly matters is that you keep returning to it, even if you have to pause or restart. Over time, those small, consistent efforts will add to something remarkable.

I have observed that saving, when managed thoughtfully, can deliver great benefits that go beyond just financial security. These benefits can transform not only how you approach money but also how you live your life. Here are just three of them:

1. If you have money, you don’t have to worry about it.

Well, this isn’t something that is guaranteed. I’ve seen a lot of rich men who are always worried about their finances. However, the real idea is that if you save and invest diligently, you should reach the point where money worries are relatively rare.

2. Money can give you the freedom to pursue your passions.

When you picture your financial freedom, what do you see? Enjoying your life to the fullest given that you’ve ensured that your family’s needs have been taken care of? Seeing around the world? Working on a cause you are passionate about?

Saving and investing can help you achieve mukti (freedom) from all your financial worries, so that you can attain complete peace of mind and pursue your passions.

3. Money can buy you time with friends and family.

What are we all living for? When I used to work at a job, the best part of my waking hours was when I came home at night…to my family. Now I stay with them 24×7 while also taking care of them financially.

Research has found that regularly being with your friends and family can provide a huge boost to your happiness. And money can help you in this regard.

When you reach a point where you no longer need to work for money, it frees you to spend precious time with family and friends. Your bank account may seem inadequate, but your life will be far richer.

Anyway, I want to leave you with one more thought: saving is the foundation of investing. You can’t plant a forest without seeds, and you can’t invest without savings. Saving is where it all begins. It’s not glamorous or exciting, but it’s the quiet force that makes everything else possible.

So, start small if you need to. Save a little, save often, and save with intention. Every rupee you set aside is a building block for your future. And when the time comes to invest, you’ll have the resources—and the mindset—to do it well.

Warm regards,
Vishal

This article is authored by Vishal Khandelwal of safalniveshak.com, an initiative to teach investors how to make simple and wise investment decisions.

Also Read:

• Letter to A Young Investor #5: You Stand Alone
• Letter to A Young Investor #4: The Art of Waiting
• Letter to A Young Investor #3: The Quiet Wonder
• Letter to A Young Investor #2: The Money Manual
• Letter to A Young Investor #1: The Philosophy of Wealth