Let’s Talk About Money

Taxing times test everyone.

Money, as we know, turns the keys and moves the levers. It is an important and a necessary tool to have things that give us comfort, pleasure, and pride. Money helps us to get the best education and healthcare. A secure and safe living environment. Allows us to throw parties and have vacations with family and friends.

It is central to everything we do. And no surprise, it is the reason that you chose a professional course over the traditional ones. So, let's be clear:

"it is better to suffer with lots of cash in hand than without it."

Money matters involve many things - Spending Habits, Earnings Sources, Savings & Investments, Loans and Credit, Cash Flow, Taxes, Insurance. For those not from commerce or management backgrounds these may seem daunting. But they are not! All you need is patience, guidance and little effort.

What is THE NEED to Learn About IT?

If we know about it:

  • We will become comfortable in its presence, or even in its absence;
  • We will neither run from it nor run after it;
  • We will not get intimidated by someone who has more of it;
  • We will find better ways to use it, earn it, and spend it; and finally
  • We will MAKE IT WORK FOR US and not the other way around.

Golden Rules for Money Management

The Money Equation:

Income = Expenses + Savings

The equation of money is quite simple, but not too simple. It is because of the emotions we attach to the money. Always remember that, you cannot spend more than you earn. You mean you and your family.

Never Lose It:

Many researchers have shown that the pain of losing Rs. 100 is more than the joy of earning Rs. 200. So the golden rule is Never lose It! Isn’t it simple.

Check your Spending Habits

Dropping a 100 rupee note on the street is not the only way to lose money. Ordering that Pizza and not having the home-cooked food your mom sent. Having that extra soft drink. Buying the new hip T-Shirt just because everyone has and you want to show-off. Our usual Money Equation reads as:

Income - Expenses = Savings

Meaning, first all expenses are made and then IF there is something left then, that is saved. The small hole in the pocket, if not stitched in time, will let your gold dust trickle into the grounds. And once you become a spendthrift you’ll never know when floodgates of control will open, and all money will flow out.

Never put all the eggs in one basket

Some expenses are unavoidable. Neither should you suppress your desires and feelings. Don’t be a miser. So what to do to balance the equation. Check out the other side and raise the income. Always find more than one source of income. If all the eggs are in one basket and it topples, just like during the Covid-19 lockdown, you may have nothing to eat.

Monitor Cash Flow

Having cash (or bank balance) does not mean you can rest assured. There can be a sudden expense or a sudden drop in income. Cash flow is anticipating where you are going to spend, when and how much.

A Budget is telling your money where to go, instead of wondering where it went. ~ Dave Ramsey

Cash flow also means having an idea where you’ll get money from, how and how much. It looks at the future and past. Track your incomes & expenses. Set aside some amount to handle a price rise or contingencies.

Savings & Investments

Start saving. As the wise have said - A penny saved is a penny earned. And start investing. Because your Rs. 100 today won’t be able to buy the same amount of things tomorrow as they can today. That’s inflation for you, where the money loses its value over time. Only investing it can help you recover this silent tax. And even surpass it. Make your Money Equation like:

Income - Savings = Expenses

Remember the two golden rules of investing:

Start simple with a Savings account or a Fixed Deposit. Graduate it to a Recurring Deposit. Include Mutual funds and direct stocks gradually after you have studies about them.

Loans & Credit

The soft drink that you buy from the local grocery store and ask him to put it in your account. The mess bill you request the Hotel manager that you’ll settle after returning from vacations. These are loans or credits. Most likely, these are in addition to the Education Loan you have taken for this degree. So, avoid giving loans and avoid taking them either, unless very, very necessary.

Never loan any money to family or friends that you are unable to write-off entirely. ~ Emily Yoffe

Every loan must be repaid, with interest. Those who don’t lose their goodwill. And even lose the property they put as collateral. The more you delay repayments, the more interest you’ll have to pay. The interest is charged on accumulated interest as well - it’s called compounding. Understand it and make a repayment plan for all your loans.

Always remember, Compound Interest is the eighth wonder of the world. He who understands it, earns it. He who doesn't, pays it. ~ Albert Einstein.

Emergencies & Contingencies

Anyone can have emergencies. Even you or your loved ones. What is the most important thing in an emergency - a cool, calm and rationally thinking head. What is the second most important thing in an emergency - a rainy day fund.

A squirrel does not eat all the nuts it collects. It saves most of them for a rainy day. Make a hidden stash of cash out of your savings. Never touch it unless it is kind of a matter of life and death. Keep it increasing gradually. Tell about it to your emergency contacts - whom you have trusted for your life and death decision.

Money has importance in our lives. It is up to us to understand our most obedient servant and our most vile master - money. We use it every day, and yet its ways are alien to us. We need it but don’t want to understand it.

Keeping a tab of expenses is boring. Running budgets is difficult. Controlling credit card use is stressful. Investments are not giving super-returns in a month. Insurance is the money I won’t be around to enjoy. These are only some of the misgivings about money matter.

The best way to dispel them is education. Learn yourself. Start with some great blogs like SafatNiveshak.com that describe each concept with graphs, diagrams and cartoons. Take charge of the money. Don’t let it put you on a leash! Then you can make money work for you, instead of you working for money.