Four Silos of Savings: A Simple Strategy for Financial Freedom

As a kid, whenever I longed for aspirational clothes or accessories, my mother would gently remind me, "Son, we come from humble background. We can't afford those things now, but we are ensuring you get a good education so that one day, you can fulfill your desires with your own money."

This wisdom stayed with me, and the moment I started earning, it felt like I had a license to fulfill all my dreams. I adopted a personal philosophy of "what comes in, needs to go out," leading to a complete spending spree.

I began working in 2003 after my MBA, but it wasn't until the recession hit hard in 2008 that I realized the flaw in my theory. The inflow of money is never guaranteed and can stop at any moment. Thanks to the advice and guidance of my now late father-in-law, I embarked on a planned saving journey. He helped me figure out the right proportion to save through debt and equity, and what my equity portfolio should comprise of.

During this period, my aspirations took a temporary backseat but soon re-emerged in wilder forms. I became a tech addict, and my passion for travel grew. I wanted to travel like a king but live frugally day-to-day. Realizing this wasn't sustainable, I devised a strategy: creating four savings silos, each with a specific purpose.

1. First account - Monthly expenditure for family and personal sustenance.

2. Second account - Savings for capital and tech investments (phones, cameras, car, gadgets).

3. Third account - Travel expenses.

4. Fourth account - Emergency fund for periods of unemployment due to external factors like recession or pandemics.

Each account had a minimum threshold. Until I achieved a certain savings in each account, I controlled my spending across the silos. This approach helped me curb irrational expenditures.

It's been over 15 years since I started following this principle, and it has yielded great results, helping me plan my savings while aligning my desires and aspirations.

To all my friends and younger peers facing similar challenges, consider designing a savings strategy like this for yourself. You can also suggest something you all follow so that I can also learn new techniques.