As far as my memory goes, money has always been a very precious and scarce resource. The blood in my veins is as middle-class Indian as dal-roti, hence my instinctive reaction towards money is to save it. And spend only on the essentials. But overtime, this habit has changed somewhat, as I realized that money is only a means, and not an end in itself.
"I now look at money as a tool that enables me to live life the way I want, and to do the things that are most important to me"
I now look at money as a tool that enables me to live life the way I want, and to do the things that are most important to me. It helps make my life more convenient, and safe by insulating me from some of life’s uncertainties. This mindset does not dilute the importance of money. Money is an immensely important resource. However, we need to view it with the right perspective to leverage all of its power for our benefit.
"Money is only a means, and not an end in itself"
Over the 40+ years of my life, here are four key lessons I have learned about money:
- Saving – If you’re not born with a silver spoon in your mouth, then saving is a smart decision. I continue to save, though the percentage of saving has reduced from what it was when I was in my 20s, just starting a career and saving to achieve my financial goals. I always bear in mind that one can earn only up to a certain age, and after that we have to manage from whatever we have saved up in our earlier years. We need to define our financial goals, and then work backwards to ascertain the percentage we need to save over the years to achieve those goals. It’s important to strike a balance between using money for today’s needs and sunny pleasures, and marking some amount for a rainy day in the future.
- Create an alternate source of income – If you have been saving diligently, you will soon be in a position to invest in assets yielding returns – property / stock markets / saving instruments etc. An alternate source of income protects you in times when you could be out of a job (for any reason). It also bestows great freedom in terms of being able to change your career track, when you wish to do so. If you value your freedom, then an alternate source of income will prevent anyone from holding you hostage, making you do their bidding since they provide for you.
It’s possible that over time, you may wish to pursue a different career or take the entrepreneurial route. There is usually a long gestation period during such career switches, when you may not earn enough to cover your living expenses. That’s when your alternate source of income is a Godsend. It’s what fills you up with the courage to kick away a boring job, or kiss good-bye to a terrible boss, and take a risk.
An alternate source of income is the scaffolding that helps keep your spine erect, and your self-respect intact in trying times.
3. Learn, Learn and Learn about how to manage money – Learn how to make your money work harder for you. Learn about the best ways to save – not only Fixed Deposits, but also learn and understand your appetite for risk, learn about the stock markets, learn about mutual funds. Learn about taxes and tax benefits. Learn about advantages of government schemes like PPF, PF and NPS. Learn from books, websites, online courses, friends and experts. There is no dearth of learning methods in the Information Age – you just have to develop a desire for learning.
"If you value your freedom, then an alternate source of income will prevent anyone from holding you hostage, making you do their bidding since they provide for you"
For some of us, including me, learning how to manage money or filing taxes is not the most exciting thing on the planet. I would rather curl up with an interesting book, than pore down into heavy, complicated and busy Excel sheets doing taxes. But, believe me, I have learned the hard way that it pays to be educated and savvy about managing money. Just do it as a “to-do”.
One hack that I use to make things easier for myself is to spread out money management tasks (tax filing / learning about stocks / mutual funds etc.) over many days. So on each day, I commit to spending only about 20-30 minutes on it. Of course, it also means that I need to start well in advance. But, the biggest advantage is that you don’t get overwhelmed with the task, and can assimilate things at your pace.
4. Be crystal clear about what money CAN buy, and what money CANNOT buy. Many of us don’t understand this difference, and use money to purchase what it cannot buy – that’s a big reason behind our discontent and happiness. Money cannot purchase health, meaningful relationships, love, achievements, etc. Spend time and energy on things that money cannot buy. Spend your physical, mental and emotional energy on these key areas of life. Learn to purchase time with money. The time you spend with your loved ones is far more valuable than the money you pay to have some help with household chores. Don’t be penny-wise and pound foolish. Purchase time to follow your passion for dancing, painting, theatre, or whatever else recharges you – and pay money to have someone run errands for you. There are many time consuming, but low complexity tasks (chores, errands etc.), that you can have someone do for you on a payment basis, and free up your precious time.
Now just go ahead, create an action plan for managing your finances, and ensure that you utilize the full potential of money to make your life convenient, secure, joyful and fulfilling.
The views are the contributor's own