Making Money V/s Managing Money

Money with same value and same denomination handed over to two different individuals will get different treatment, in terms of saving and spending, only because two individuals would have different outlook for the same value and same denomination If we take a close understanding about our outlook for money, we would realize that as a child, most of us understood money as a factor, that has only one option i.e. spending. We were never exposed to other option i.e. savings, nor do we expose our children towards the same.

Truly speaking there are only 2 options with money that one can exercise

1) SAVE 2) SPEND

However hard we try, it is difficult to find the 3^rd option. Once we complete our academical carrier and start to earn we get exposed to the other option of money i.e. savings. I would here use a different word which is managing. In-fact saving and spending gives every individual a very satisfactory feeling, but what happens in actual terms is the order changes. People spend first and try to save with the left over. It should be vice-versa.

It’s a known fact that making money after certain stage in your life cycle is easier than managing money. Majority of the Indian population a decade before had a myth that if Tax saving is done you are done with your investments and hence there was no need to look for any investment options which would be available. This thinking pattern has changed a bit over last few years, one really looks for option beyond saving taxes but is clueless with the kind of options that he or she should go ahead with. As you are in the process of making money there is a graving need to MANAGE that money, where you have put your sweat and blood to MAKE it.

Saving money or Investing money is a process and has to be followed and done on regular basis and with great discipline, the working is very simple, we earn every month, we spend every month, hence we have to save every month. I am amazed how even today people run during the last quarter of the financial year to complete their investments for Tax saving purpose and happily think that the moment they have saved the tax their investment is done for the year. The rush only results in saving tax and not selecting a proper investment instrument.

Not defining your destination while travelling will make it more complicated to you as well as for the person who is assisting you to travel. Most of the time I get client’s who wants to invest money to get good handsome return (what is good and handsome return is never defined and understood). I have also come across people who really wants to make a beginning but are confused with the kind of options that are available and hence end up doing nothing but parking the funds in bank savings account.

Here are few points that I would recommend to keep in mind while managing money.

1. Have your financial Goals set very clearly – choosing a financial instrument without understanding your financial goal, is like travelling in a vehicle without knowing the destination, the journey is surely, not going to be memorable.

2. Define your risk taking capacity with the investments and thoroughly understand what is the maximum risk involved, while investing in any instrument.

3. Have your asset allocation done as per your financial goals and risk taking capacity, and keep on re-visiting your financial goals and asset allocation plan, once in a year.

4. Replace your non performing investment tools. Investment decisions are tough and you need to replace if they are not performing or meeting your financial goals.

5. Plan for your contingencies, always have a back up plan. Re-visit your Insurance needs with change in your life style and your income structure. Protect yourself and your family from loss of income.

6. Do not go over board in your borrowings. Borrow only for basic needs and not for luxuries.

7. Start Investing your money and not saving your money, there is a huge difference in saving and investing. Savings would just safe guard your capital while investing would multiply your capital.

While selecting a Financial instrument, have a clear understanding as to how does it meet your financial goal, understand the type of markets the instrument would invest your money i.e. Debt or Equity. Also look at the percentage returns that the instrument would fetch you during your period of investments. Invest in equities for your long term financial goals and use debt funds to address your short term investment needs and always keep on reviewing your asset allocation plan. Always remember invest in financial instrument for your financial GOALS & TARGETS and not to meet someone elses TARGET.

YOU CAN BECOME RICH BY EARNING MONEY BUT YOU CAN BE WEALTHY BY MANAGING THAT MONEY.

HAPPY EARNING AND MANAGING !!!!