Some time back I wrote about accounting and its importance. Accounting in simple terms means observing.When you write down accounts for your family finance you become aware and start observing what happens to the money you earn. This accounting or observation can and should be applied not only to your money matters but also to your thoughts, words, and deeds as well. When we sit down and decide what is our goal in life it is also our duty to regulate our thoughts to achieving that goal.We normally get so many thoughts in a day and without our knowing we are dragged into those thoughts.All unwanted thoughts which are not in sync with our goal should be nipped in the bud and should not be nurtured.So also the words we speak and the actions we perform.The unified focus of our thoughts ,words, and action only can take us further towards our reaching the goal. So I reiterate that we should not only exercise control over our finances but also on our thoughts and actions to be truly successful in our financial life.
When we talk about earning money the growing tendency is to earn as much as possible and as quickly as possible. Thos of us who embark on such greedy ventures invariably fail miserably and end up on the losing side. The reasons are not far to seek. When we plan sincerely as we have discussed early on and decide how much money we need and when we need then our journey towards the goal is steady and safe.Even if we fail here and there we reach the goal with determination and smart work. But when we tend to deviate and want to become rich in a very impracticable time span then we tend to look out for advice from the so called self- proclaimed experts. We should always remember that what others dish out is their story of success or failure under may be a different set of conditions.In our anxiety to run a faster race, we follow these paid advise very religiously and incur huge losses. Financial decisions should be based on our conditions, capacities and needbased.
I have been talking to you about money, savings , and planning in my previous posts. Now earning is a very important part and the earlier it starts in our life the smoother, easier will our life sail through as we progress. Now earning money is not that difficult as it is imagined by many of us.With the services sector growing much faster than the labor intensive areas like agriculture , textiles and other industries there are plenty of opportunities to make money even at an early stage. But there is a stumbling block which prevents us from venturing into any activity which can bring money into our life. Every one irrespective of our education, capability want white collar 10-5 jobs and feel inferior if we have to do something less than that though many a time those ordinary small time ventures fetch you much more money than your salary and over a period of time they become crorepatis whereas you the salary earner struggle to become even a millionaire.In the area where I live there are about a dozen housing projects coming up within a radius of 2 kilometers. There are at least a dozen workers in each of these building sites. I notice a boy supplies tea both in the morning and evening to all these sites.gradually he has expanded his supply to include morning breakfast and evening snacks.All these are supplied at a very competitive price which the workforce can afford.No wonder that this boy must be making a decent profit to take care of his livelihood. The most important point is that the seed of entrepreneurship has been sown in him and who knows he may grow into a very large hotelier in the future providing employment to much more. Many of us have domestic help in our houses.These poor ladies come to work may be there is no menfolk to take care of them or those available while away their time. We can take the initiative to call these people , tell them about what is happening in the outside world and ignite a spark which will catch up and make them useful earning members.If need be we can also contribute a small starting capital which we can get back in small installments once they catch up.LET US BE THE CATALYST in lighting a small lamp in the society.
In my last post, I made a sample accounting and ended with showing income-expenses as savings.(income minus expenses to savings). Seemingly correct process but if you look a little deeper there is a potential flaw in this process.In our early days, we have seen our parents handing over the income to the womenfolk in the houses be it our grandmother or our mother and the first thing the woman will do was to drop some money in the small mud pot or any other vessel and then keep the money in the pooja room before taking out for expenses.The small amount of money that she dropped in the mud pot was not to be taken lightly as many a time we have seen whenever the menfolk ran out of money the lady used to break the pot and give the amount saved in that to him.mind you it was always substantial and saved the blushes for the man. Coming to our modern life it is equally important that the first expenditure we make from the salary is also towards savings. As a rule of thumb, they say at least ten percent of the salary goes towards savings.Be it a bank RD or rmutual fund SIPor any other form of savings one is comfortable with. The family should resolve that there is no compromise on this. Now rewrite the equation
Salary-savings =expenses. This is a very simple but important equation based on which our journey will continue.
In the last post, I wrote about maintaining proper accounts for our income and expenses and to treat this process with all sincerity. The reason being when we talk to people about this process of account writing the response we find is very disturbing. Some of us resolve to start account writing as a new year pledge and continue this till 31st March..thereafter the interest fades and gradually in the second quarter it is fully discontinued.So also many others have started the process just continue in a haphazard manner and for some months and give the process a decent burial. We should avoid such kind of half hearted attempts and once started should continue this for ever.
First of all the process of account writing must be enjoyed and done willingly. All the members of the family can join this and make it a fun filled exercise. For example, the children can be asked to total the day”s expenses, the spouse can suggest areas where the avoidable expenses can be reduced . There should not be any obsession with the process of writing accounts.If on any day a small amount could not be accounted for due to forgetfulness or any other factor such amount can be treated as sundry expenses and forget then and there instead of harping on the same and irritating the concerned family member. The expenses can be broadly classified under 5/6 important groups like groceries, vegetables, Education, Power, and communication etc and small expenses not falling under any of the bigger groups may be treated as sundry expenses.At the end of the month, both income and expenses must be tallied. This process will let you know where the goes and whether income is spent in productive ways.
A typical account properly written may look like this:
Total income : Rs 37,000.
Total expenses Rs.33,800.
Savings :Rs 3,200.
If any of you can notice a very important correction to be made in the spending process of this account writer please comment.
The grand daughter of our domestic help completed her graduation recently.The lady took a lot of pains to bring this girl to graduation level.She toiled day and night and was very happy when this girl passed out with good marks. The girl soon got employed in a company with a good starting salary of around 16000 rupees a month. The Grandma was naturally very happy.But this didn’t last long as the girl started feeling that the salary was low and started telling her grandma that she wanted to look for a better option. The grand ma started telling me again to help her again as I had given a lot of leads earlier about job openings. I wanted to talk to the girl and so I called her. After the initial queries , I asked her about her present salary structure and honestly, I felt for a graduate beginner the compensation was good.Then I asked her what she was doing with the money hoping that she would have faithfully given it to her grandma .But she replied that in the 5 months since she started to earn she has given around 25000 to her. I continued to question her what happened to the remaining amount which was quite substantial she was unable to account for the same but for some stitchings here and there.Out of the remaining amount of Rs 60,000 she could recollect expenses of only 20,000 and the remaining though she was sure that she had spent but was unable to recollect.This is the case of a young girl who has just started to earn.
Why I am narrating this incident here is money will come into our lives sooner or later but we should be aware of the arrival.We should make use of every rupee in an appropriate manner in tune with our goals we set in our life. Here the process of account keeping for our income and expenses becomes very vital. All inflows like salary, bonus, contributions by other family members etc to be properly accounted as also every payment leaving us should be recorded. At the end of the month, the inflow and outflow must be totaled and tallied. Here I would like to highlight that the practice of account writing should be enjoyed realizing its importance and not as an unpleasant exercise. All amounts spent beyond a cut off amount say Rs1000 should be focussed upon and we should be satisfied that such expenses have been incurred fruitfully.
Benefits of account keeping and how to go about it, how to plan for saving? All these and much more…soon.
So far I have been writing about some of the important aspects about how we treat money, low awareness , confused thinking, not taking our children into the circle etc.. These factors though may look trivial assume a very large proportion and distort the money life at a later stage and as such all of us should first introspect whether we are affected any one or all of the above syndromes. If yes try to eliminate them as early as possible.
Now the next stage is stock taking. Even this applies to most of us.Before we wish to earn more money, grow rich and comfortable it is very important to take stock of what we already have, how far we have made use of the existing assets if some of them or lying idle as white elephants what are we going to do with them etc. Equally important is the excercise wherein we try to find out as to how our present income is spent.If we have been earning a salary for the last three years whether we were able to save something out of it?. This excercise will highlight our strong and weak areas in the financial management of our family and will enable us to initiate the necessary corrective measures.
Recently I attended a workshop on digital marketing where during the interactions the faculty put up a question to all of us. How much money do you want to make you comfortable and by when do you want it? Many of us were fumbling some amount and about the timeframe, we were totally uncertain. Now, this is the most basic question one has to ask himself if he/she is sincere in money making. All of us want money without exception.But how much?. If you have a neighbor who has a very big flat, a high-end car, lot of imported furniture etc your immediate desire will naturally be to go a step above him.You got there and by then you meet somebody who is still above you.Again you dream to go above him. This process is never ending and will cloud your thinking about your plans, goals and why not about money itself. You have a family and you know your requirements based on where each member of your family wants to lead.For example, You are young have two kids and yet to own a house. You can simply plan for the education expenses of the children and, alongside for a house.Set a time frame based on your income by when you will have the flat.Around this basic thread, you can weave your first set of financial goals like monthly savings, expenditures, investments and if necessary a housing loan.This way your thought process is clear, goals are clear and you can proceed in a systematic way toward your planned goals.
If we ever observe the farmers just before the onset of monsoon season they perform certain basic activities before the actual sowing starts. They remove all the leftover of the previous crop residues. They remove the unwanted grass.They irrigate the dry land and add natural manures etc so that the land is ready to accept the fresh crop and grow well. So also if we are to accumulate wealth including the money we have to remove all the unwanted inputs and nurture the money thought with fertile good feelings. We should realize that money like any other tool is just an instrument and can’t do anything on its own. The second important thing is while welcoming money into our life Greed should be avoided and nothing should be done borne out of Greed.And finally, the journey you choose to earn money should be honest and legal and should be able to stand scrutiny at a later stage if the situation so demands.
Before we proceed to talk about money and the ways to bring it into our life it is important to remove all the unwanted, negative inputs that have entered our mind and already conditioning our thoughts about money.This cleaning includes cleaning of our mind, thoughts surroundings, workplace etc so that fresh and correct opinion about money is keyed in and the subconscious mind starts to accept the same. If we sit out and make a list of what all we have heard about money in our life so far from our parents, elders, relatives, movies books etc we will a long list of negative remarks about money.But at the same time, everyone wants to have tons and tons of money.Is it not amusing? So it becomes important to have a dispassionate analysis about money and place it in the right place before any serious attempt is made to welcome money into our life.