We as common man are always worried about money. It is among the most important requirements of life just similar to relationships and health. What I realize is that it all revolves around the 5 pointers which I like to say them as “Facets of money”
1. Earn money to build your identity
2. Spend money to be happy in life
3. Save money for bigger needs
4. Invest money to fulfill your dreams
5. Be ready for the time when you need money the most and you don’t have it.
Let us understand them better
1. Earn money to build your identity
We work and work really hard to earn money, from morning to evening, every day, every week, every month and for so many years. So what we will earn, will help us building our corpus of funds. The earnings may be in the form of salary or business income, full time or part time, certain or uncertain, but it is the source of money. The income amount and earning period defines your standard of living and capability to covert your dreams into reality.
2. Spend money to be happy in life
We spend on necessities and luxuries, we spend in a routine on some items or once in a while on some, we spend in country or abroad, and so on. So, their is an amount which you spend on yourself, you spend some amount on your family, you spend some amount to pay your society maintenance in order to keep your surroundings clean and build community living and in the last but definitely not the least, you pay taxes to your country for governance and infrastructure.
3. Save money for bigger needs
What we don’t spend, is what we save. We save from regular income for future needs which may be necessary or just our wish, it may be bound by time or not. Say, saving for child education is necessity as well as time bound however saving for buying a house is a necessity but may not be time bound. Saving for buying a farm villa is neither necessary nor time bound.
4. Invest money to fulfill your dreams
Basis the purpose of saving, we invest in assets which may be less risky or more risky. Now, if the need is essential and time bound, it requires a compulsory saving, which may reduce the amount from current spend budget and is required be invested in less risky asset class just to overcome inflation. Whereas, savings that are meant for wishes or dreams like farm villa or trip abroad, it may be invested in high risk – high return assets class like Equity etc. While people also make a negative investment, in the form of loan to fulfill their need immediately and repay gradually thus getting negative returns in the form of payment off interest.
5. Be ready for the time when you need money the most and you don’t have it.
Now what if we need money and we don’t have it….. like in case of Hospitalization, death, etc. These time may not wait for your savings and may occur anytime. To fulfill such needs, one should buy insurance. Their are Life Insurance to cover in case of death, Health Insurance in case of hospitalization, Motor Insurance in case of car accident and so on…
This is the brief of money and the role that it plays in a life of a common man. It keeps changing faces and always rotates with life cycle. So one should try to move money according to ones need instead of himself dancing to its tunes.
