This blog was posted by Dr. Prema Chandran, MBA, Ph.D on LinkedIn. She is a Management Education and Research Professional based in Canada. Dr. Prema Chandran was also a faculty member at Karunya School of Management where I pursued by MBA. I am happy that I had an opportunity to be associated with her.
This blog talks about how we individuals often miss on small things when managing our finances. We end up reading and following n number of books, advisory notes, sometimes we even end up paying for such services rendered through a broker or financial consultant. This blog throws light on some very basic steps on how can efficiently manage our finances. I absolutely loved reading this blog. Few principles of managing money are taken from the Holy Bible and I felt that irrespective of one’s religious background they are quite applicable in today’s times. Hope you all like it.
Are you in a dilemma, thinking about how to manage your personal finances? Are you looking for some tips on money management? Have you started employment recently? If you answered yes to any of these questions, this article is for you.
Everyone wants financial freedom to take those important life decisions. Money is a necessity at all times. Money brings happiness and security. It is important to work hard, earn money and save some for the future. Many people find this task very daunting and have lost track of their financial well being.
Here you will come across some steps to keep practicing to be financially healthy. As you read on you will find quotes inserted in the passage. These are taken from my favorite book, ‘The Bible’, – the most authentic and authoritative book on a wide range of topics including money and finance. You can see that the Bible, as old as it has been, has a word or two about almost all the areas of money management much ahead of the time in which we are living. The principles related to managing money and finances are many. Let’s get started with a few that are universally applicable irrespective of your circumstances.
1.Save before you spend
Proverbs 21:20 (NIV) The wise store up choice food and olive oil, but fools gulp theirs down.
Proverbs 27:12 (NIV) The prudent see danger and take refuge, but the simple keep going and pay the penalty.
Many of us are used to saving the ‘leftovers’ after spending. However the right thing you should do is to set aside a small percentage of your income towards savings. It could be as low as five to ten percent of your earnings to start with. Once your savings for every month is defined, it is important now, to show consistency in putting this money aside. The money thus saved little by little, grows slowly and significantly to work for you for an emergency situation or to meet a future need, or even to live a contentious retirement life.
2.Put your money to use
Matthew 25:14-27 (NIV) 14 “Again, it will be like a man going on a journey, who called his servants and entrusted his wealth to them. 15 To one he gave five bags of gold, to another two bags, and to another one bag, each according to his ability. Then he went on his journey. 16 The man who had received five bags of gold went at once and put his money to work and gained five bags more. 17 So also, the one with two bags of gold gained two more. 18 But the man who had received one bag went off, dug a hole in the ground and hid his master’s money.19 “After a long time the master of those servants returned and settled accounts with them. 20 The man who had received five bags of gold brought the other five. ‘Master,’ he said, ‘you entrusted me with five bags of gold. See, I have gained five more.’21 “His master replied, ‘Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master’s happiness!’22 “The man with two bags of gold also came. ‘Master,’ he said, ‘you entrusted me with two bags of gold; see, I have gained two more.’ 23 “His master replied, ‘Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master’s happiness!’24 “Then the man who had received one bag of gold came. ‘Master,’ he said, ‘I knew that you are a hard man, harvesting where you have not sown and gathering where you have not scattered seed. 25 So I was afraid and went out and hid your gold in the ground. See, here is what belongs to you.’26 “His master replied, ‘You wicked, lazy servant! So you knew that I harvest where I have not sown and gather where I have not scattered seed? 27 Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.
Money kept aside does not just work by itself. You need to understand first, that the money you have saved needs to be invested in order to multiply and grow. There are many ways to put your money to work. A simple savings account, fixed deposit or recurring account with a bank is a good start. As you continue to increase your savings, you will find more intermediate to complex investment avenues like mutual funds, equity shares and debt instruments, all of which have varied levels of returns and risk to satiate your financial appetite. The bottom line is to get your money to start working for you.
3.Diversify your investments
Ecclesiastes 11:2 (NIV) Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land.
In finance there is a concept called ‘risk-return’ relationship. This basically means that the more risk you are willing to take with your money, the more returns you could earn. Your savings may not be as ‘safe’ as you think when all of it is invested in one place. It becomes imperative therefore that you diversify and build what in financial terms is called a ‘portfolio’ of your investment that comprises a right mix of risk and return. So you can choose to invest a portion of your investment in equity shares that are considered very risky, another portion in government bonds that are secure, and also maintain a small ‘cash’ portion as a reserve for contingencies. Every individual’s situation is unique and therefore each person requires a personalized investment portfolio.
4.Plan your finances ahead
Proverbs 6:6-8 (NIV) 6 Go to the ant, you sluggard; consider its ways and be wise! 7 It has no commander, no overseer or ruler, 8 yet it stores its provisions in summer and gathers its food at harvest.
Luke 14:28-30 (NIV) 28 “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?29 For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you, 30 saying, ‘This person began to build and wasn’t able to finish.’
Plans help you succeed financially. To start making plans, you could initially record weekly or monthly income and keep track of your daily expenses. This will help you over time to get a fair idea of where most of your money is being spent on. Once you have identified a regularity or a pattern, it becomes very easy to plan better. Remember, when you make your plan, the first item on the list should be your savings. All other spending should be from what remains in your income after saving.
1 Timothy 6:17-19 (NIV) 17 Command those who are rich in this present world not to be arrogant nor to put their hope in wealth, which is so uncertain, but to put their hope in God, who richly provides us with everything for our enjoyment 18 Command them to do good, to be rich in good deed, and to be generous and willing to share. 19 In this way they will lay up treasure for themselves as a firm foundation for the coming age, so that they may take hold of the life that is truly life.
Your blessing is for you to share. I believe God is the giver of everything good and that includes money also. God entrusts you with riches because of His supreme knowledge that you are sincere with small things. While this principle may not seem to be increasing your worldly wealth, it does certainly perpetuate your heavenly wealth.
6.Start saving now
Proverbs 10:4-5 (NIV) 4 Lazy hands make for poverty, but diligent hands bring wealth. 5 He who gathers crops in summer is a prudent son,but he who sleeps during harvest is a disgraceful son.
You stand a definite advantage if you start diligently saving at a younger age because of the length of time that you put your money to work as well as the power of Compounding. Nevertheless, it is never too late to start. NOW is the time you decide to start if you have not started already.
Proverbs 22:7 (NIV) 7 The rich rule over the poor, and the borrower is slave to the lender.
One of the best things you could do for better money management is trying to avoid borrowing as much as possible. Many people get carried away with the overflowing offers for credit cards and loans, that over a period, debt suddenly becomes a burden too heavy to carry. The interest rates on loans could be ridiculously high if unnoticed. If you are already in debt, the wisest thing that do is to pay it all back as soon as you can little by little.
Every good habit requires a lot of perseverance and patience. If you keep in mind these simple steps and meticulously take an effort in this direction, I am sure financial success is yours to keep. Wishes for a healthy financial future!