Today’s sacrifice secures your tomorrow!
When my first chapter hit the mail boxes the one common response that I got was why this topic and why not some thing more in depth and technical in finance and investment? These will eventually come but lets get the basic things right. It is always said get your basics correct the rest will take care of itself. Just as the baby learns to crawl, then few faltering steps before he can walk and run lets learn to take the first steps correctly. If you don’t get your first steps correct the next would be just useless. Let me clear this. When one does not have the fall back money and goes directly to the next step of investing, for longer duration in viz. equity or equity related instruments, then if there is a problem and a need arises, then this person would get away from such investments even if the market conditions are not good thus resulting into losses. Hence once the money is available in the right places there is no need to break into those investments which would be kept for the long haul. These investments have the potential to give you higher return in the times come.
Many people lack the acumen and foresight; hence they are not able to fathom the perils of mismanagement of money. Equally true is the fact that many people don’t have the discipline while they manage their money on regular basis. There would be even less number of people who have a budget of some sorts for their monthly expenses. This results into no saving and thus there are no kitties to fall back on. How so ever small the money saved is money earned. If only one can put to practice this concept the entire personal loan business would go bankrupt. Put it in other words the most profitable business proposal to any bank or financial institution is the personal loan business. But the sad fact is that people manage money so badly that by the end of the month the bank balances are almost touching the lower most limits. If there is a sudden need people like these would have to depend on borrowing. If one borrows from friends and relatives then it is ok, but the problem arises if you swap your credit card or borrow from some financial institution by paying a high rate of interest.
The one practice which I follow is to decide a sum that can be left behind in the bank from a given month's earning. Then progressively every month leave the same amount thus if you start saving Rs. 1000/- every month at the end of the year you would have Rs. 12000/-. Just 2 years you could solve the problems for ever and never take a personal loan ( am considering that the sum of Rs 25000/- being the most common loan size in most of the personal loan cases.). Even the Rs 1000/- saving is the easiest amount even for a below average family.
If the above situation needs (money at all times) to be achieved then one should learn to manage money more efficiently. This in turn will over a period of time develop situations which will prove the power of your own money is just infinite. Small savings it can be done in a number of ways, like less eating out, using resources like telephone, power water more sparingly, saving on fuel etc, go a long way in creating those very important small savings that go on to make bigger and bigger kitties and in turn investments that have the potential to elevate you from the darkest depths of debts and poverty.
The normal people first spend and then try to save and invest, but, exactly opposite is the case of affluent people they save and invest first and then spend. That is why they have lower incidents of situations where they don’t have enough money to spend on for a certain want or have to borrow to meet a certain requirement.
For this, what is required now are the small sacrifices for some years then once things settle down you can then ease out slowly. Next, whenever there is a large inflow of cash by way of bonuses etc resist the temptation of buying high budget items like cars, bikes, televisions or air conditioners etc contemplate the decision may be you could postpone the decision and invest the money for now and once you are better off you could afford much better things in life. One may also learn that one may be able to buy the same gadget at a fraction of the cost by just postponing the decision of buying it immediately on the launch of the product.
One example which I always quote is that of DVD Players. Not very far away in 2003 these sets were available in the market for Rs 25000/- and above. Today a better set could be brought for less then half of the price. The same amount if it was invested would have doubled in minimum today. What about the prices of DVDs itself they have dropped to less then 10% of the cost of the DVDs sold in 2003. Same goes for a number of things Televisions, mobiles, computers etc. It is not to say don't buy , but buy when the prices are affordable and it gets easy on your pockets.
Lessons to learn here are simple
1) Learn to live within the current mean of income.
2) Strive to keep aside as much as possible these become your lifebuoys in the difficult times. What more security does one require than an assurance that there are enough resources kept if the need arises.
3) Stop competing with your friends and neighbors, as, more resources would just get drained in the one -man- up-ship.
I am yet to come across a really affluent person who has to beat his drums to show he has arrived. The fact is you don’t have to exhibit your affluence it just happens you are able to do the most difficult things in monetary terms more easily that is the true riches.
Many people lack the acumen and foresight; hence they are not able to fathom the perils of mismanagement of money. Equally true is the fact that many people don’t have the discipline while they manage their money on regular basis. There would be even less number of people who have a budget of some sorts for their monthly expenses. This results into no saving and thus there are no kitties to fall back on. How so ever small the money saved is money earned. If only one can put to practice this concept the entire personal loan business would go bankrupt. Put it in other words the most profitable business proposal to any bank or financial institution is the personal loan business. But the sad fact is that people manage money so badly that by the end of the month the bank balances are almost touching the lower most limits. If there is a sudden need people like these would have to depend on borrowing. If one borrows from friends and relatives then it is ok, but the problem arises if you swap your credit card or borrow from some financial institution by paying a high rate of interest.
The one practice which I follow is to decide a sum that can be left behind in the bank from a given month's earning. Then progressively every month leave the same amount thus if you start saving Rs. 1000/- every month at the end of the year you would have Rs. 12000/-. Just 2 years you could solve the problems for ever and never take a personal loan ( am considering that the sum of Rs 25000/- being the most common loan size in most of the personal loan cases.). Even the Rs 1000/- saving is the easiest amount even for a below average family.
If the above situation needs (money at all times) to be achieved then one should learn to manage money more efficiently. This in turn will over a period of time develop situations which will prove the power of your own money is just infinite. Small savings it can be done in a number of ways, like less eating out, using resources like telephone, power water more sparingly, saving on fuel etc, go a long way in creating those very important small savings that go on to make bigger and bigger kitties and in turn investments that have the potential to elevate you from the darkest depths of debts and poverty.
The normal people first spend and then try to save and invest, but, exactly opposite is the case of affluent people they save and invest first and then spend. That is why they have lower incidents of situations where they don’t have enough money to spend on for a certain want or have to borrow to meet a certain requirement.
For this, what is required now are the small sacrifices for some years then once things settle down you can then ease out slowly. Next, whenever there is a large inflow of cash by way of bonuses etc resist the temptation of buying high budget items like cars, bikes, televisions or air conditioners etc contemplate the decision may be you could postpone the decision and invest the money for now and once you are better off you could afford much better things in life. One may also learn that one may be able to buy the same gadget at a fraction of the cost by just postponing the decision of buying it immediately on the launch of the product.
One example which I always quote is that of DVD Players. Not very far away in 2003 these sets were available in the market for Rs 25000/- and above. Today a better set could be brought for less then half of the price. The same amount if it was invested would have doubled in minimum today. What about the prices of DVDs itself they have dropped to less then 10% of the cost of the DVDs sold in 2003. Same goes for a number of things Televisions, mobiles, computers etc. It is not to say don't buy , but buy when the prices are affordable and it gets easy on your pockets.
Lessons to learn here are simple
1) Learn to live within the current mean of income.
2) Strive to keep aside as much as possible these become your lifebuoys in the difficult times. What more security does one require than an assurance that there are enough resources kept if the need arises.
3) Stop competing with your friends and neighbors, as, more resources would just get drained in the one -man- up-ship.
I am yet to come across a really affluent person who has to beat his drums to show he has arrived. The fact is you don’t have to exhibit your affluence it just happens you are able to do the most difficult things in monetary terms more easily that is the true riches.
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