This article is not about how to save money or, invest better; rather it is about enjoying your hard-earned money. There are so many articles and rules on how to achieve balance in your money life. A quick Google check generated 24,30,00,000 results! And those rules are like Elizabeth Warren’s 50/20/30 budget rule, in which one divides net income into buckets of 50 per cent for needs, 30 per cent for wants and 20 per cent towards savings. Then there is the 28/36 rule used by many lenders, which says one should spend a maximum of 28 per cent of total monthly income on housing and 36 per cent on total debt. Then, there are other rules like the 30-day Rule etc. This article is more about “balance”, the word itself has a halo of serenity around it, right?!
Continuing with numbers, I am not so in favour of strict math-based rules. Numbers have an uncanny ability to instill rigidity and can easily cause desperation and depression. If we take Warren’s rule strictly, one can easily end up in: “OMG, I have saved only 19 per cent and spent 21 per cent on wants, I am a loser!” situation. So, do we need to give up all number-based rules? Not quite, rules are useful, but treat them more as guidelines rather than anything that can affect your sleep.
Budgeting is a four-letter word for most. Not a budget-maniac, I would suggest tracking expenses for a few months atleast. This allows getting a good feel of where your money is going and becomes a very good beginning for later budgeting exercises, especially for prioritising expenses. Again don’t fret over some missed entries, there’s that next time.
Life is not about saving alone. You earn so that you can afford things that you love. But, don’t buy stuff to impress someone. In American Beauty, an exasperated Kevin Spacy shouting “this is stuff” to his “stuff”-obsessed wife, makes this point. With Law of Diminishing Returns kicking-in, buying a 40” TV with cash instead of a 55” on EMIs, makes better sense. Research has shown that people treasure experiences far longer than stuff, so much for keeping-up-with-the-neighbors/relatives. And, experiences need not be expensive = no EMIs! Do make it a point to celebrate small things/milestones, they make a big difference to happiness. Splurging once-in-while on stuff that you can afford is not a sin.
Balance in personal finance is a dynamic process. One doesn’t “achieve” balance and sit back. The brain is always working to keep us from falling each time we take a step, likewise with money. Stretches of joyful acceleration with intermittent frustrating traffic jams/bad roads are just incidental in a long drive; likewise, with money matters, there would be periods where there is abundance, and then times where things become tight. The most important in one’s financial (& mental) wellbeing is not how much one earns, spends or, saves; it is how one balances them all … reasonably!
The author writes commentaries on contemporary financial, business, taxation and political issues.