Bagavad Gita

“Bound by your own Karma, born out of your nature, deeds which out of delusion you wish not to do, you shall do helplessly against your will” O Kaunteya --Bhagavad Gita - Chap: 18 ; Verse: 60

Sunday, October 31, 2010

The Art Of Money Management For A Novice

Chapter2 .Ways To Find The Extra Money

The wealth of a man who does not know to live in bounds
Appears to exist, then disappears without a trace. 
                                                            Thirukkural - Verse 479

Judicious spending:
Every day we spend money. On some days, when you happen to visit a new shop with self service counters, you tend to do some ‘on the spot emotional spending’ which was not in your daily budget. After few months if you look back, majority of such expenditures can be classified as total waste.  If you can impose self restraint on your spending you can definitely save some money.

Your Expenditure:
 General expenditure in a household can be classified in to two categories-
a. Essential & b. Nonessential.
Food, Shelter, Medicine, Children’s education, Travel to work place and to some extent Clothing can be classified as essential expenditure. Gadgets, Entertainment, Holidaying, Premium luxury clothing etc, can be considered as non essential.
Essential expenditures cannot wait. But non essential expenditure can be made to wait. By postponing it for the time being (I call it as pickling) you can save money. For example, if it is an electronic gadget which you want to buy, by postponing it for a few months you may get a better stuff with more options for a lesser price.

  Do remember newer and newer products are entering into the market only to pickpocket your wallet.

Points to Ponder:
Few years back I wanted to buy a Hero pen. I was searching the stationary shops in Adyar area (Chennai – Tamil Nadu, India). They were selling it for 40 Rupees. One day I happened to visit Kasi Chetti Street in Paris Corner (Chennai) where I got the same pen for 16 Rupees. What a price difference for the same product! From that day onwards I have made it a point to locate shops which has a lesser price tag for any purchase.
In the year 2005 my son purchased a Nokia cell phone for Rs.13, 000. In 2007 it became a Junk and can only be used as a paper weight. I bought a Nokia in the same year for 2000 Rupees, which can be used only for talking. It is still in use and working fine. Hence think before buying costly gadgets. Opting for a cheaper less sophisticated version of the product, which is enough for serving the purpose and saving the extra money in some specific instruments, you can build an asset, and from its earnings you can buy newer products later.
Many electrical appliances consume lot of energy such as  frost-free refrigerators, Water heaters etc. Always check the power consumption before you buy any appliance. Otherwise electricity bills will eat away your wealth without your knowledge in the long run. I can give many more examples like these which will only reiterate the concept of judicious spending.

Bargain Hunting: 
Even while buying essential food items you can save money by making a survey of prices in different nearby shops.  Big shops with AC, charges more and usually charges the MRP rate for all products sold, than small provision stores. If available, check the price in co-operative society stores where you will be charged less price for the same product. By doing this simple exercise you can save at least few hundred rupees every month and this can fill your NanoKazhana. If you apply the same yardstick to all purchases (from grocery to gadgets) you can definitely save a sizeable amount every month. Another good quality you have to imbibe is bargaining. Do not feel shy to bargain. Womenfolk are definitely good at that. This quality can add few more rupees into your NanoKazhana.

Invest in Your Health:
Investing in personal health is very important. If you look at the root cause of majority of ailments, it will point at stomach and the food ingested into it. By controlling the tongue you can prevent many ailments. Try to eat healthy balanced food. Avoid eating out. Do not drink unprotected water. Avoid bad addictions. Good habits will take you in the path of healthy living and also save lots of money. Get vaccinated against dreadful diseases. Use mosquito nets while sleeping.

Do Not Live in Tomorrow’s Earnings:
Whenever you go for shopping, try to make cash purchases only. Do not buy on credit cards. Better not to have any credit card. If you cannot avoid plastic money then go only for debit cards. Before spending money think twice whether the purchase is absolutely essential.

Let Savings be Your Addiction:
Even while buying try to save as much money as possible by choosing the right shop and by bargaining. You are living for yourself. Save money for the rainy days. Try to develop the habit of savings as an addiction. Have a goal of becomining a Multi Millionaire at the age of sixty.

Investment: Of your Earnings and Savings:

Investments can be classified in to two heads - 1. Highly Secured and 2. High Risk categories.
1. At least 20 percent of your earnings should be invested in highly secured instruments.
2. All the money filled in your NanoKazhana can be invested into High Risk instruments.

What are the different kinds of investment options available? We will explore in the forthcoming chapter.