The normal advice you hear from people is that you need to pay yourself first. Basically what it means is that as soon as you get your salary or other income, you need to save up for your goals first and then only spend what is remaining. Save up for your goals basically entails paying SIPs for each of your goals according to your plan. The advice is sound indeed. Otherwise some people may not be able to save enough to reach their goals. If they spend first and invest last then their expenses might eat up into the savings.


Of course it does not apply to everyone, but for those people who like to spend, this strategy might help control their behavior. Because after saving, whatever is left can be spent and you cannot overspend if there is no money in bank. Well if you have a credit card, you can certainly overspend. You could also take money out of your investments and spend. You could even take a personal loan and spend.


Where this strategy works brilliantly is if you are not a habitual over spender, but you are tempted to spend if you see money lying in the bank. Say for example I am pondering over buying this nice laptop. Then I look at my bank balance and there is enough to buy the laptop because I got my salary just yesterday. I may be tempted to buy it. But if the money is already gone for my retirement goal, then I may not have enough to splurge. I may even have to cut down on regular expenses if there is not enough bank balance. So that is one way to think about it.


Anyway, the point I am trying to make is that no strategy works for everyone. So I am not here to give any advice. What ever the reason for the advice, I diligently followed it because that is the advice most books and blogs on the topic of financial planning advised me. However, I changed my investing strategy after I turned a minimalist.


For me as a minimalist, the other way around works out better. That is, first spend my income on the needs. Then, whatever is left over is invested. It is quite strange that I started doing the reverse of general advice, but it worked out well for me. The reason is that my budget was fixed and I try and stay with in my budget. So my expenses are more uniform than what they used to be. Once all the expenses are done and dusted, I would invest whatever is left over. My salary was not uniform because of annual bonus, or product launch bonuses or because of employee stock option etc.


I think for other minimalists a hybrid approach may also work. Basically, first you save up for all your goals based on your SIP calculations. Then spend according to your budget. Whatever is left over can then be invested in your retirement fund. Whether you want to retire early or not, you need a retirement fund :). In my case since I did not have any goals other than early retirement, I just invested everything into it.