Money Management

When money speaks, the truth keeps silent.
– Russian Proverb

MONEY – The one word around which our lives revolve. Barring a few years of childhood, money remains the focus of our lives. As a child of 2/3 years, money means nothing to us. A currency note is just another chit of paper. But as the child grows, he or she begins to understand basic facts about the economic class in which he is born. By the age of 13/14, the child is quite aware how money affects life. Since that age money occupies a major part of his thoughts till the end of his days.

What is it that makes money so special?

Money could be simply defined as “Money is a token or item which acts as a medium of exchange that has both legal and social acceptance with regards to making payment for buying commodities or receiving services, as well as repayment of loans”.

Part of the answer lies in the fact that money is the common denominator of all material things in the world. So things as diverse as a car and a chocolate are both expressed in the same medium of money. It is this simple feature that lends power to money that is both awesome and terrifying.

The other part of the answer lies in the importance a person gives to money. Those who see money as a means of getting all happiness put themselves in an endless race to gather more and more money. In the legendary film ‘Deewar”, Amithabh Bacchan tells his brother, Shashi Kapoor that he has everything that money can buy, to which Shashi Kapoor retorts – “Mere pass maa hai!” The very fact that money and mother were juxtaposed in this dialogue should be enough to show it’s significance in our lives.

On the other hand, those who show contempt for money put themselves in hardships. Tales are floating around us of people who after a life of earning and spending money, find themselves penniless in old age. A recent report in newspapers is about the editor of “Sholay” and many other hits of his times, who is now around 80 and forced to live in poverty in a Mumbai slum after the old building where he lived in a rented house collapsed.

Since it is obvious that money means much more than a mere “medium of exchange”, it is necessary for us to understand that money management is important for an individual to ensure a steady and desired income, manage costs of living and a source of income even after we cease to work for money.

Money management has two aspects, inflow and outflow. The result is either savings [when inflow exceeds outflow] or borrowings[when outflow exceeds inflow]. Evidently, an individual has more control over costs than income. A change in income level shall need a fundamental change such as change of job or business line.

In contrast to income management, control over costs appears deceptively simple. One might say that why is it so difficult to limit or eliminate a particular expense that looks high and is dispensable? The answer lies in the fact that costs management assumes psychological and social aspects that makes it very difficult to implement. A person may continue to use a car long after he affords it because of a longing and fear of loss of social status if he junks his car owing to a drop in his income level.

So, money management needs that we look at things in an objective and detached manner. Once we manage this basic thing, money management becomes less tedious and complex.

More of that in the next article.

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