How to get rich. These four words tickle the aspirations of anybody who is not living in a cave having given up on maya or this world of illusion! The usual answers to this question deal with tips, some stocks, some real estate that is changing from agri to commercial very soon, some new crypto sure-shot deals. It is usually better to buy a lottery ticket than go down the path of somebody who is promising to make you rich in a very short time by doing very little work. A more mundane but possibly more useful question is this: how do I get financially fit? The answer is more boring than the exciting deals and just-in-time investing in a project that is closing soon. Financial fitness is about earning more, saving more, spending less and investing better. But we all struggle with living life today while planning for a future that we cannot experience. It is really difficult to resist instant gratification, especially for a generation that has grown up with relative plenty rather than the socialist supply and choice-starved regime of India in the 1970s and ’80s. How should we then think about getting financially fit without compromising on our todays that much? Let’s work with some rules that have survived the test of time.
Money with Monika
The Corona Conversations
Season 4 Episode 23: 6 ratios for your financial life
The Covid-19 pandemic has forced people to ask some tough questions about their money life. How much should one be spending and saving? How much should one spend on EMIs? How much life insurance should one have? In this episode of the special series of Money with Monika, personal finance expert Monika Halan talks about 6 Money Ratios which give a broad direction in which one should move. Watch the full video for more. Monika Halan is consulting editor, Mint, and author of the book, Let’s Talk Money. Note: These are rough ratios. Please speak to your financial planner for a bespoke plan.
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Striking a balance between not doing enough and doing too much is tough for money, as it is with relationships. Do too little and a guilt nags at you each time you have a moment. Do too much and you sacrifice your today for limited future gains and life becomes about not living. I’ll leave the relationship bit for you to sort, but let’s at least put the money issue in perspective. While each situation is different and each family needs its own unique financial plan, it is good to at least have some basic rules of the road to know if you are at least going in the right direction. Remember these ratios are just very rough rules that point you in a direction rather than a detailed Google map. For that, find a planner, pay his fees and get your bespoke plan made.
We are now lockdown veterans. We quickly learnt to survive a new situation and most people made the best of it—that is the human spirit, we are determined to live, despite saying otherwise. There are six lessons from the way the pandemic has affected our health, income, wealth and prospects that I want to share. I must admit that in all the years of writing about, planning for and going through rough events, this is something that I never took into my own calculations. So while the big broad rules remain firmly in place, there are finer nuances and learnings. Here are the six things I learnt while still a quarter of the way through this pandemic.
One, it costs very little to live. When the first full cycle credit card bill came, it was a fraction of earlier bills and I am not a spendthrift. But travel and work seem to add to the bills. Petrol costs were down to zero, bills around eating out, clothes and entertainment were all zero. When just the basics are being bought, I found that the month costs very little. Of course, you need to be debt-free for that to happen. Our saving capacity is much higher than we thought. This is especially true for people who had earlier thought that they had no capacity to save. The rising bank FDs tell their own story as more and more people salted away their savings into FDs over the past two months. Once we are out of this, remember that the lockdown mode is there to target a higher saving rate whenever you desire.
Expense Account, Mint
I’m talking to an old friend. The conversation veers around to ageing parents and he speaks of the difficulty in talking to his 80-year-old father about end-of-life choices, putting his assets in order and writing a will. Over the past decade-and-a-half he says he’s been through various stages—indifference (this will sort itself out), denial (my old man won’t cop it so soon—we come from healthy stock), guilt (what am I doing thinking about the death of my own folk?), worry (gosh, the run-around XYZ went through to get basic bank accounts unfrozen and don’t even talk about the real estate mess) and then courage (I’m going to nail this talk next time we meet) and finally to despair (dad doesn’t want to discuss it!).
Expense Account, Mint
The Reserve Bank of India’s (RBI) long overdue guidelines on wealth management and distribution of financial products such as insurance policies and mutual funds by banks were uploaded on its website on 28 June. The guidelines can be accessed here:http://bit.ly/11xD6DZ and comments sent to the RBI till the end of July. The final guidelines will be released thereafter. Although RBI already has rules in place to regulate the sale of third-party products and wealth management services, these are more than 20 years old and out of sync with ground realities of how banks actually advise clients, refer and sell financial products. The new guidelines seem to be triggered by the large-scale violation of know-your-customer (KYC) and anti-money-laundering (AML) regulations by banks as exposed by Cobrapost.com in a nationwide sting (http://bit.ly/1aULAIv) that covered more than 20 banks. RBI’s internal audit showed that such violations were rampant as was mis-selling of financial products.
Expense Account, Mint
I’m watching Jolly LLB (and if you write columns as a profession, you can’t just watch anything without the brain firing away and looking for raw material to chew on for future work) and as the movie me-lords its way to the end, where the small town guy wins against the corrupt five-star lawyer and against his own initial lower morality, I thought I saw a pattern. The last few years have seen several movies with this theme—the moral choices faced by an average guy in a country where the elite are complicit in a deeply corrupt nation—of choosing between staying with middle class values or joining the system of corruption. Rocket Singh: Salesman of the Year was about doing business the right way against the established system of cheating the customer and bribing to get corporate business. Do Dooni Chaar was about a lower middle-class teacher overcoming temptation to do the right thing.
Expense Account, Mint
Growing up in the 70s and 80s in urban middle India was to know what shortages are. The state strangled enterprise and everything from a scooter to a phone to butter, milk and grain was scarce. The civics and history textbooks stank of double standards as they spoke about an India that was far away from the life of the person for whom that English textbook was written. I call it the Manoj (Bharat) Kumar movies phase of India—we were losers but were brainwashed into looking back at a glorious past. A past that was distant enough in its historical dividend not to matter to people struggling to find an average “service class” livelihood. Of course, “business class” then meant not an airline seat but something totally different.