How to grow money on trees! (1/5)
⏲ 5 - 7 Min Read
This quarantine period has left us bored already, so I’ll come directly to the point without wasting any more of your ti..... Well, I think right now, it’s a touchy topic, this analysis of how much time we’re wasting and that’s exactly why you should read this, because the next most important thing to save, after time is... not money, it’s relations. But you’re already spending too much time on that staying in, so I’ll come to the third most important thing.. Money!
This quarantine period has left us bored already, so I’ll come directly to the point without wasting any more of your ti..... Well, I think right now, it’s a touchy topic, this analysis of how much time we’re wasting and that’s exactly why you should read this, because the next most important thing to save, after time is... not money, it’s relations. But you’re already spending too much time on that staying in, so I’ll come to the third most important thing.. Money!
If the current scenario has taught us something, it’s that nothing is permanent.
And for a lot of us, working on project basis, not even our jobs and flow of income is permanent. Even if you have job security, the economies are so affected right now that it isn’t something you can rely on. So, why not take our finances in our hands. Ab nahi to kab?
This post isn’t about investments, stock markets and all those scary places. All that we’ll try right now, is to generate the will to do something about this 'Money Business'.
Here’s a step by step guide for that! And yes, while I am not a financial expert, I am someone just like you, who has undergone this never ending journey. So, take notes!
Step 1: Acceptance
Repeat after me. I, <insert your name>
Step 2: Busting Myths
No! Keeping money aside for monthly savings doesn’t stop you from buying or consuming your favourite things. Rather a proper financial planning tells you what you like to spend on and how can you accumulate more money for that.
Step 3: Learn a few jargons
From now on, we are not going to say, ‘Paise nahi hain, savings nahi hain.’. We will say, ‘Funds nahi hain!’
Whatever money you own, in the form of cash, bank balance, investments or goods, we’ll be calling them 'Assets'. In fact, everything you own can be called an asset. Wo baat aur hai ki unme kaam ki cheezein aadhi bhi nahi hongi. But that's a problem for a different blog post.
Any money that’s just sitting in your savings or current account, or in your wallet etc is your ‘Liquid Asset / Liquidity’.
Step 4: Why Today?
For this you need to understand the difference between a financial year and an assessment year.
A financial year is the year for which you calculate your income and payable tax. It starts on 1st April every year and ends on the 31st March of the following year. So the income tax details that you will submit now, in a few weeks/months, will be calculated for the financial year 19-20, because it began on 1st April 2019 and ended on 31st March 2020.
These details will be processed by the income tax department after the financial year ends, that is, in an assessment year. So the details you will submit for Financial Year 19-20 i.e. FY19-20, will be processed in assessment year 20-21 i.e. AY 20-21.
Financial year is the year you earn money and assessment year is the year it gets evaluated for payable tax. And Assessment year number is always one ahead, i.e. FY19-20 will correspond to AY 20-21.
Starting this April Fool’s day, a new financial year is starting, i.e. FY 20-21, so tracking your expenses, planning your investments, saving up on tax etc will all line up together and will be easier to manage, hence don’t be an April fool by delaying this process.
Another major reason is your expenditure. Staying in these days we are hardly spending any money, so not only will it be easier to track and make a habit out of it, you will also notice, what usual expenses you can do away with.
Step 5: Main Article yahan se shuru hota hai.
Aka. Get hold of your finances. This is the gist, an abridged version if I may say, of all the books on personal finance you will ever read, combined with my personal experiences.
Chapter 1: What is financial planning?
All it means is that you know..
- How much money is flowing in?
- How much of it is flowing out?
- Where is it flowing to?
- How much you need?
- How much you want?
And of course working towards it!
Chapter 2: How to get these answers?
Take a pen and paper, chalk and board, marker and whiteboard, e-pencil and tablets or thumb and phone. Do whatever but write these down!
A. Make a note of each and every category where your money goes, aka, your expenses and a rough estimate of how much you spend on it. Trust me. Your estimate is going to be terribly wrong but nevertheless, do it.
A. Make a note of each and every category where your money goes, aka, your expenses and a rough estimate of how much you spend on it. Trust me. Your estimate is going to be terribly wrong but nevertheless, do it.
B. Make a note of all your incomes, i.e. from jobs, extra work, investments if any, you can also include any ashirwaad envelopes you get from your relatives.
C. Apart from expenses, also note how much money you wish to save in a year (try to be realistic while wishing).
D. Do not forget to make a note of the amount you send to your parents for their welfare, if that is the case and some of you can note, how much money your parents send you. (It’s okay, don’t be ashamed or guilty, they are your parents, if they are able to send, they will send. It’s their blessing.)
*Note. In this process, there will be times when panic will seep in. Don’t start introspecting about your life, earnings and achievements. Think of yourself as the tortoise from the fable. You might get there slow, but you will get there and that is why you are still reading this article.
The data you noted above will help you to see where your money flows from and flows to; and also the approximate corresponding amount.
E. Analyse if these basic requirements are getting fulfilled in your earnings or not.
*Do not panic if it isn’t. You are doing this process to face your fears and be more connected to the truth. Escaping never helped anyone anyway.
F. So.... analyse how much money you need by calculating all your current expenses and adjust it if you see any category where you are spending way too much.
This will tell you how much money you need.
Now, it’s time to be optimistic.
G. Write down all your goals in life, your dreams, your wish lists of things you want to buy. List them.
H. Now assign a timeline to these goals, like listing them priority wise or the time by when you will need/want those things. Again, be realistic but not a pessimist.
This will tell you how much money you want.
Once you have everything right in front of you, you can proceed to the actual planning.
Soon I'll be uploading how I did my detailed analysis. Come Back and Click Here.
Here's a quick recap:
Chapter 3: Mehnat
This is the simplest but the hardest process.
To plan your finances you need to know exactly how your expenses are distributed.
To get this answer you need to track your expenses. And that is something that sounds like too much of an effort. Yes, tracking your expense will need some sincerity. But with a little trial and error you can form your own method to minimise the efforts.
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Have you observed those Mutual Fund Commercials on television, where they say, that you don't need to start with huge funds and can build small? We are going to use that same philosophy and not skip ahead to the details of chapter 3. For now we will just work on our plans, analyse our current expenses and take life one day at a time.
.
.
.
Have you observed those Mutual Fund Commercials on television, where they say, that you don't need to start with huge funds and can build small? We are going to use that same philosophy and not skip ahead to the details of chapter 3. For now we will just work on our plans, analyse our current expenses and take life one day at a time.
Remember : Don’t start introspecting about your life, earnings and achievements. Think of yourself as the tortoise from the fable. You might get there slow, but you will get there and that is why you are still reading this article.
To Be Continued. . .
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