Enjoy your Money

Earn more, save better, invest smarter, and spend wiser. In this month of paying taxes and thinking of investments, decide to earn and spend, but also save, for physical, mental and spiritual health

CoinsBilly Graham once said, "If a person gets his attitude toward money straight, it will help straighten out almost every other area in his life."

Money-minded, kanjoos - these are derogatory words, which give a guilty feeling when one thinks or talks about money. Of course, things are changing with the share markets entering every urban kitchen and village chowk. It is evident — we can't live without electricity, phones, groceries, medicines, shoes. And we get them with money.

Life would be desolate without the occasional party with loved ones, the planned outing, the festive treat, the trip to meet friends, the gift to charity, wouldn't it? A weekend movie, a new television, a more efficient washing machine, a cruise on a ship maybe. All these need money too. It's strange that we live in such contradiction: a nation that actually worships Laxmi, the goddess of wealth, also belittles [or maybe it's just superficially so] anyone who is open about money matters. We like to keep our incomes and money matters under wraps. Our ancestors were different.

A childhood prayer that was addressed to the lamp lit at dusk went thus: shubham karoti kalyanam, arogyam, dhanasampada, shatrubudhhi vinaashaaya, deepakjyoti namastutay. If that was Eastern philosophy that requested the celestial caretaker to provide money, along with progress, light, respect, and to destroy evil thoughts, then the wise men of the West clearly spelt out the priorities in wishing their brethren health, wealth and happiness.

Anyone who "doesn't care for money" has either inherited enough to last for three generations, or is silly enough to catapult himself into deep trouble, or is an empty-headed show-off. For the large majority that must earn a living and then, at some stage, live off it, some thought must go into getting it into the house, saving it, making it grow, and knowing how to spend it to make one's life comfortable and exciting. It is important for peace of mind, sound sleep, physical health and spiritual wellbeing.

Make money work

In today's world of loans and credit cards, chances are high that you start cutting the cloth before realising it isn't enough for the coat you had in mind. Extravagance knows no boundaries of age or social strata. An 80-year-old grandmother can be as impulsive a spender as a teenager and a slum-dweller as careless with his money as a corporate czar. I know women who wear salwar kameezes but buy saris, and don't have place to store the stuff. I know men who drool over advertisements of pen-knives and ipods and make sure they go right to the shop and buy the stuff. Here, though, we're not talking about irresponsible over-spending.

There is a difference in keeping up with the Joneses, ostentatious expenditure, and the spending that we do on ourselves because we like or want to. We're talking about using money to make life more fun, to add quality and good health to each sunrise, every birthday. Whether it is a comprehensive health check-up in a good hospital, a dream trek or cruise, adopting a pet you've always wanted, enrolling for an MBA at a good university, taking up digital photography as a hobby, it all takes money. Once we have enough of it, it's time for our dream to come true.

We've agreed that money is important and that it must be cared for if we are to retain our dignity, independence and sleep, so we naturally agree that it's essential to keep pain away. Unpaid rents can give rise to nocturnal tossing and turning that can, in turn, lead to huge medical bills. The wearing out of mattresses means more expenditure.getting new mattresses means paying the cabbie and the coolie apart for the product.it never ends.

Nine to five in the day, maybe longer, and 11 months a year, through the decades of youth and middle age, one slogs. What's the point? We're not taking our bank balances with us to the grave. Money, dear, must be used, for our benefit and happiness. We're the masters, never forget that. We have to make money work, we have to use it and enjoy it.

Spend and save

Lesson number one is simple. If you bring home a salary of Rs 99, spend Rs 33 on essentials, save Rs 33 in non-risky, staid stuff, and splurge the rest on comforts and luxuries. The last bit could be put in shares or you could indulge in a rare gamble at the races, or you could just hoard it for a while to pay for that Swarovski duckling you've been eyeing in that fancy shop on M G Road [doesn't matter where you live, every place in India has an M G Road].

Lesson number two is complex: you have to make sure you have enough to buy your groceries and underwear, plus some to "settle" your children when they're young, plus a solid insurance policy in place, a house of your own, a bit stashed away to paint it when it looks shabby, a really grand anniversary party, a regular income when your final farewell [from your last job, not from the planet] is over. Make sure you will be looked after as you want until the end of your living days. It might mean that you'll leave a pile behind to your favourite charities [possibly your grandchildren.lucky them]. If you don't have the aptitude for finance, worry not, there's a lot of help you can get. Go to the neighbourhood "finance portfolio" chap through a reliable reference.

There are specialists who will look after your money, help it multiply, and allow you to reap the benefits for a small fee. But don't follow them blindly. Be alert, be prudent, take their advice, use your brains and your instinct to protect what you've invested so much time and energy in. If you want to live well, your passbook must show a healthy figure.

You can't always beat inflation by cutting down costs and expenditure. For example, if the price of milk rises, you may reduce your consumption. If it continues to rise, would you give it up altogether? If you tighten your belt too much, you'll choke. Would it not be wiser to increase your income alongside?

There are so many dependable publications, television channels and websites to help these days. Wisely-invested money ensures sustainable quality of life. You won't worry about using the fan or the air conditioner, or about making a dozen phone calls per day, or taking a taxi instead of a bus, or travelling by air instead of by train, or hiring extra domestic help. Peace of mind comes in many ways, almost always connected with currency. Have a sound financial plan, and follow it. Keep aside a reasonable sum for emergencies. Borrowing from friends or relatives is embarrassing and not always possible and quite often leads to relationship hassles. So, be prepared.

Just think. When did you last run out of money? Was there anything else you could think of? Did you feel like eating? Did you feel like talking? Didn't it lead to stress? It's all so easily avoidable. Take precautions, and you needn't feel out of place again. Bad times are possible, cater for them. You could be a peon or a CEO, the focus mustn't shift. Poverty is terrible, great riches are out of reach, but having just enough to lead the kind of life you're used to living needs consideration, planning, and action. A regular income, a little something tucked away for the rainy days.

Once you've worked hard and sensibly invested your earnings, it's time to spend. Be definite about what you want to withdraw from: the mutual funds, the fixed deposits or your pension plans? You want to travel abroad to meet your grandchild; you want to buy your spouse a diamond ring [got this idea from a TV ad]; you want to buy all of M S Subbulakshmi's CDs and a player with good speakers; you want to become a member of that fancy club to play golf or swim; you want to donate a golden chariot to a goddess you're devoted to; come on..just do it. You may be the kind who has been particular about your visits to the gymnasium or the beauty parlour. You won't want to put a halt to those. Then you know what? Dispel any feelings of "I shouldn't". It's your money, yours alone, you have every right to do what you want with it and no one can tell you otherwise. Freedom is a great feeling.

Know your purse

But, everything comes at a price, they say. That's true about spending money too. When you spend, at the mall, at the grocers, jeweller's, travel agent's, make sure you know your budget. A one-off whimsical buy might make you squirm. That's ok. If you must overspend, keep track and pay off at the earliest. Pending bills are great sources of headaches and non-ulcerative dyspepsia. Whims are ok, provided you keep the limit. If it's bungee-jumping you're addicted to, give up a five-star dinner. If that lovely gold visiting-card case is what you're craving for, never mind about not going for a live Bipasha Basu show if both costs nearly the same. Of course, if you can afford both and a cruise too, go right ahead.

Wherever you go, whatever you use, you pay for quality. Nothing comes for free. Good schools cost money, good hospitals cost money, good nutrition costs money, good fun, good times, good shoes, new gadgets, fancy cars, all cost money. It goes without saying that your financial health, whatever your income, will be reflected in your physical health. It will show in your posture, your laughter, the tone of your voice, the expression on your face. Your family will feel it, and strangers will respect your confidence automatically.

Success breeds success just like happiness increases when multiplied and shared. Set standards for yourself. If you allow yourself to slide, people's respect for you will also slide. If you are prim and trim, well-attired and well-informed about what's happening in the world around you, you will always be a respected part of your community. There's a lot of give-and-take involved. Accept an invitation, also extend one. One thing leads to another and life becomes more interesting. You need to know how much you need per month, per year, and take steps to make sure you have that much. The market will never pay you more than you think you are worth. Think small, and you begin to shrink. Psychologically, socially, and eventually, the body suffers.

Another point is, the cycle of earning and spending benefits many people. The shopkeepers, the suppliers, the manufacturers, transporters, and other links in the chain. Feeling guilty about spending? You'd feel worse about hoarding if you knew how much good you might have done had you gone for a make-over to the beauty parlour.

What was it you wish you owned? Go ahead, buy that flat-screen plasma beauty you saw at that store that day. And the next time there's a live cricket match on, take that bottle of wine out, order some biryani, make a few calls to have friends over, sit back. Money Maketh Merry.

Planning your Investments

By UTKARSH Koregaonkar

We often observe that good health, delicious food, higher education, successful career, money, friends and family which lead to a feeling of overall happiness, prosperity and peace of mind are all delicately interlinked to each another. Therefore, it is difficult to pinpoint any single most important factor as an absolute element for the overall wellbeing of an individual or family.

However the currency, which is a means for leading a good life, is money. Therefore, financial wellbeing is an important aspect in every individual's life.

Nature says it all, it rains four months in a year, the remainder of the year every farmer has to conserve water and use it prudently to get a good harvest. This applies to all of us who work, earn, spend and invest during your employment period. And then hope our investments have given a good harvest to ensure our retirements are also financially secure.

Our parents in their youth managed monthly expenses in a few hundred rupees, whereas today, even an amount as high as Rs 25,000 is not sufficient in most cases.

Yes, with time our incomes rise, so do our expenses as our standard of living may go up, goods and services can become expensive and we may need to replace old things.

So how do we manage our investments to keep pace with the increasing standard and cost of living and also manage any risk that may lead to an earnings loss?

Let us begin by understanding investments as a process of keeping aside some money invested in various asset classes over a period of time. The money thus invested grows and will provide a regular income to you and your family post-retirement.

There are basically two kinds of income instruments, first, fixed income. As the name suggests, any investment where the returns are fixed for a period of time are fixed income investments. Bank fixed deposits, bonds, provident fund, postal savings are some examples of fixed income. Even rent generated from leasing a property can be considered as fixed income. They are considered safe investments as they offer capital safety and have a modest return.

The second kind of investment instrument is variable income. Variable income investments are volatile in nature and their prices vary on a day-to-day basis, hence the income generated from them is variable. Shares, gold, land and property are examples of variable income investments. Variable income investments are considered volatile in the short-term, however, they have good potential to generate long-term capital appreciation.

First things first

We may require some money at a short notice for an unforeseen need. Therefore, we should first put aside some money in fixed income investments such as bank fixed deposits. They can be liquidated for any financial contingency overnight. The amount of money we should invest in such an investment is determined by age, family's financial requirements, occupation and monthly expenses.

Age group Fixed Income Investments
25 - 30 6-month expense money
30 - 40 12-month expense money
40 - 55 24-month expense money
55 and above 36 to 60-month expense money

Monthly expense money is the money required to manage monthly bills for the family. It ideally will not include life insurance and loan amounts or any extraordinary items. It will, however, have a provision for property taxes and general insurance premiums.

Tax wise

Unlike the western countries, India does not have a social security programme for citizens. However, our government has encouraged people to invest in long-term instruments such as public provident fund, tax-saving bonds, postal savings, life insurance plans, tax-saving mutual fund schemes, educational and home loans by promoting various tax incentives for their investments in such products annually.

The working span of a normal individual is approximately 30 years. When a person saves money in such tax-saving instruments for about 30 years, even with a modest rate of return, he or she can expect a good capital appreciation of their investment.

You are an earning asset

If you are an earning member of the family, a lot of the home needs depend on you. In the event of your death or physical disability, your income may stop and you need to insure your family's future. Life insurance is a tool to hedge the risk of any financial loss. There are different kinds of insurance plans, offering pure-term insurance, money-back insurance plans, and even insurance plans with unit-linked investment plans [ULIPS] investing in capital markets.

Investing in life insurance gives tax benefits under section 80 C. The most efficient way of insuring oneself is buy a term life insurance policy which is designed to gives a life maximum possible cover for a given premium. And always select the maximum term which is 30 years in most cases. There are policies which provide insurance cover for physical disability and medical expenses as well.

Home sweet home

You are young, have some surplus money and plan to own your own home. You must do it as quickly as possible because the longer you wait, the more the uncertainty.

You can finance your home from a home loan provider of your choice, depending on the amount of loan, interest rate, nature of interest, tenure and processing charges.

The earlier you finish paying for your home, the better it is for you and your family. It will also enable you to invest more in other investment options and plan for your retirement. You can also focus better on your career as you are no longer worried about paying next month's installment.

It is wise to cover a home loan with a protector insurance policy. Home loans provide generous annual tax savings for principal paid under section 80 C and interest paid under section 24.

Surplus money

Fine you have now provided for some financial emergencies by investing in fixed income instruments like bank deposits, saved taxes efficiently, insured yourself well and even bought a nice home. Now it is time to invest the surplus money and to hold them as long-term investments.

You can do this by spreading your investments in various fixed income and variable income financial products with different risk-return profiles. Mutual funds are an excellent way of saving your surplus money and so are equity funds.

Credit cards

Use them sparingly and only when necessary, and pay-off dues in time. Avoid getting multiple credit cards, as you may forget due dates and have to pay heavy finance charges.

Will

Will is the most important succession planning you should consider. It is important to ensure smooth transfer of assets to a chosen person from a legal perspective. You don't have to be old to make a will, if you have bank balance and a home, and a family depending on you, you better do it now. Why wait, until it's too late.

Money and Health

We feel that money is essential to enjoy life, but the pursuit of money also causes many problems and anxiety. It is important to remember that having money or not having it does not make us good or bad people. When you become stressed, your body reacts negatively. Some people can't help but sleep all the time, others succumb to addictions such as caffeine, overeating and alcohol.

Research has shown that money problems and financial stress is linked to health problems like depression. Anxiety over money can negatively affect health in several ways:

  • Unhealthy coping behaviours: People experiencing financial stress are more likely to numb their anxiety by drinking, smoking, overeating and practising other unhealthy coping behaviours.
  • Less money for self-care: With less money in the budget, people who are already under financial stress tend to cut corners in areas like healthcare to pay for basic necessities such as food. Small problems go unchecked and turn into larger problems. This also results in more stress.
  • Lost sleep: When under financial stress, people often experience trouble sleeping, which can add up to a sleep deficit, impairing immune functioning and cognitive abilities, causing additional moodiness.
  • Unhealthy emotions: Financial problems can cause unhealthy emotions that can take a toll on health. People experience anxiety, frustration and a sense of hopelessness. This causes additional stress, which compounds with the stress from poor coping and self-neglect, to become a menacing amount of stress.

It's no wonder financial problems are one of the leading causes of stress.

ASHWINI Ranade

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