Saturday, 27 April 2019

The Art of Spending Money

For those who have been fed up reading about the importance of saving money, the heading of this article would have come across as a whiff of fresh air. After all, spending money is fun; earning it is not. People have to learn how to earn their living; nobody needs to teach them how to spend. They are intuitively good at it.

Sure, we are all different and hence our priorities can vary. But there are good and bad expenditures. For instance, an expenditure that makes your life more comfortable, reduces the risk, or cuts some pain is generally a good expenditure. On the other hand, an expenditure that solely satisfies your desire may be a bad one. 

Let’s try to understand it with an example. Most of us have to commute to work on a daily basis. This commute can be enervating. Not many of us would say that they like to commute to work. Now if you can make your daily commute comfortable by spending some extra money, it can go a long way in improving the quality of living, yet many of us try to save money there so that it can be spent elsewhere.  

Similarly, if I have to travel a long distance, I prefer a flight rather than a train, even if the differential in the fares is substantial. To me (and I am sure, for many others), sitting in a train for a long time can be absolutely tiring. By paying some money, you can avoid that trouble.

Many of us are in the bad habit of saving money at just the wrong place. But when it comes to other negotiable and even potentially harmful expenses (smoking and drinking for example), we don’t mind. That’s stupid. The real value of money is unlocked when it is used to improve the quality of living, not when you buy the latest smartphone available in the market.

Amassing money for its own sake is foolish as well. While you do need to save for the future, hoarding more money than needed because that’s what pleases you also leads to misery. Strike a good balance between saving for the future and enjoying the present. Similarly, strike a sensible balance between good and bad expenditures. That’s the art of spending money.

Sunday, 14 April 2019

Silly Things People Say about Money # 3

Carpe diem seems to be the order of the day, especially for the youth. Our disillusioned youngster, who has gone crazy about music and considers an undisciplined life style a badge of honor, takes immense pleasure in saying that saving isn’t worthwhile. He (or, of course, she) wonders that since the future is uncertain, what anyone would want to save all that money for. Getting into a philosophical realm, he argues that all we have is the present, so why not enjoy it to the fullest?

Overindulgence in the present is a shortcut to financial misery in the future. To the bewilderment of many, the future will indeed arrive. If the hunter-gatherer talked of carpe diem, it would have made sense, given his highly uncertain life. But when a 21st century person talks of an uncertain life, he is doing nothing more than fooling himself. Some will say that compromising on the present makes one’s life small and hence it shouldn’t be done. But again that’s immature thinking at best.

In most aspects of life, including saving and investing, what matters is balance. One must look for balance in all aspects and avoid the extremes. If that sounds like some sermon, be it. An intelligent person is he who balances the present and the future. He enjoys the present but also saves enough for the future. 

Marketers are doing their best to make consuming look cool so that you spend profusely. They create needs where they don’t exist (for instance, smart watches, smart ACs, smart TVs and what not; just use the word “smart” and you have something which is not needed per se but someone is trying hard to push it into your life). No marketer talks about saving money (unless that means handing your money to them; for instance, wealth-management firms). It’s your responsibility to act prudently. 

Media also promotes a culture of consumption. Consuming is made to look “cool.” The human need to feel appreciated and accepted makes you do stupid things with your money. Moreover, people look at those who make just the wrong role models (movie stars, fashion models, sportspeople). Such role models have a flashy lifestyle that is highly deceptory.

What to do then? Seek wisdom. It’s not readily available. You will have to look for it. Read books from successful people. Almost always, they have endured hardship to reach where they are. In investing, it’s discipline and simplicity that make you rich. Stop paying attention to marketers and media. 

Finally, you always have the luxury to decide what you are going to do with all that money. That’s not a problem. The real problem is not having the money to be able to ask that question.

Read the earlier stories in this series:

Silly Things People Say about Money # 1
Silly Things People Say about Money # 2