How to make your money count
An excerpt from Monika Halan's new book 'Let's Talk MoneyYou've Worked Hard For It, Now Make It Work For You'
Let’s talk money. When was the last time you said this to anybody other than while finalizing a deal? But money, and our relationship with it—our fears, greed, insecurities and over-confidence—define who we are and what we do. Paradoxically, talking about money has been frowned upon as gross in families and social situations. The rich are called “filthy rich". “Being above money" has been an aspirational moral position for most of middle India.
Much of this attitude has roots in a deeply poor country with limited avenues for honest wealth creation. The Bollywood smuggler of the 1970s had his bungla, gaadi and daulat, but not his mum. Today, the mum has her own life along with her own bungalow, car and wealth. And no, she does not want to play nanny to your leaking kids.
When we think of a book on money and its management, we think of pie charts and bar charts. We think of boring jargon-filled text. Let’s Talk Money tries to smash all these notions and brings the reader a book that is a slice of their lives. It aims to help the reader build financial security without the usual fear-mongering or guilt-tripping about enjoying a Starbucks at work every day. Edited excerpts:
Cycle of worries
We feel guilty about the mess in our money lives. Almost like a sound playing constantly in the background that becomes louder in moments of silence, a cold dread that lingers just at the back of everyday life. We worry about not doing enough, about not making the ‘smart’ decisions, about missing the moneymaking train as it zips past, about not having enough for our kids and ourselves in future years.
We worry about ageing parents and their long-term care. But most of all we worry about emergencies and hoard cash. The cash accumulates, and then some sharpshooter comes along and offers this fantastic deal. He’s persistent; pushy; throws numbers; works on your fears, emotions, guilt. And gets your money. This ends in several ways. In a total loss, a partial loss or simply a bad investment that gives you returns worse than a bank FD (fixed deposit).
This book is a conversation about money. At the end of reading it, you will be able to organize your finances in a manner that allows you to get on with your life, with all its complications, rather than stay worried about the ‘right’ investment. We’ll build a system rather than a single-shot solution.
Think of your financial life as a money box. The money box fills in your working—earning years with income; you use the money to pay for living costs, fees, rent, EMIs (equated monthly instalments), taxes, insurances and vacations, and a whole long list of what it takes to live the Indian urban mass affluent life. Usually the box shows a surplus left behind at the bottom each month.
This gets invested for future use. Along the way you dip into your money box to pay for your kids’ higher education, their marriages, and then finally when you get too old to earn..., the box begins to fill with pensions and other investment income like interest, dividend and profit.
Plan your money
Anupama Gajwani is not the usual Indian woman you run into. Growing up with an artist dad in a house filled with paintings and the smell of turpentine, my childhood friend Anu and I are as different as it comes.
My steady boring planned ant-like world contrasts with her ‘let’s-eat-that-goddam-lemon-tart-now!’ life. Freelance designer Anu is a single mom and lives from assignment to assignment, thinks nothing of taking off to Toronto to see her son cleaning out her bank account.
I’ve never bothered to talk money with her because planning is not what she does and sounds boring when you have so many cool stories to hear! It must be age, or stage, or a bolt from the sky above that got her; but early January last year when we met for one of our Sunday lunch sessions, her new passion was getting her money life in order.
‘Hey! Hey! Hey! You have to help me. I will do this. Now. Now. Now!’ Not your usual mid-forties person for sure. ‘I have no idea where my money goes. I know when it comes into the bank, but after that it is a blur,’ she says.
Not knowing where our money goes is not a problem peculiar to a certain personality. Think back: Don’t you remember saying, ‘I have no idea where my money goes?’ Or, ‘I have nothing left to save.’ Or the worst one: ‘What investing plan—where is the money?’
One of the key reasons we make these statements is that we don’t have an effective cash flow system. Everybody has money to save—from the poor woman who sells veggies to you on the roadside, to the tycoon driving by in his Bimmer—we just don’t know how to look for it.
The key to finding the money to save and invest is to have a good cash flow system.... Think of a cash flow system as simply a way to demarcate your money between spending and saving. Chances are that you do have a system in place but it is rough and not well-defined. Your system keeps your income and expenditure largely in sync, but you’ve not given it a defined form.
Get to the basics
There was a time a few years back when my (then) teenager was sick of me. Nothing new in the history of teenage issues with parents, but she had (still has) a unique problem.... She’s fed up of me ‘talking money’ wherever I go. Any amount of telling her that I do not initiate such conversations cuts no ice. Things got dangerous when the hair-cutting lady began discussing her financial life. While my daughter made retching, gagging noises, I tried to hear what the lady with the scissors said over the whine of the hairdryer. I learnt my lesson from Calvin (brother to Hobbes), who advises that it is always good to be nice to the person who holds something sharp near your neck. So I chose to answer hairdresser questions and dealt with the mutant teenager later.
The hair-cutting lady’s worries were about not doing anything much with her money—the nagging feeling that she was standing still while everybody else was zipping past on fantastic money moves. She ended with a statement that I hear all the time: ‘Anyway I don’t understand all this stuff. Goes over my head. I see numbers and my eyes glaze. I’m too stupid to understand finance.’ She, by the way, is smart enough to raise kids as a single mom, look after her old mother and run a small parlour all on her own. Not stupid at all.
You keep hearing the Suits on TV talk about asset classes, portfolios, underlying, deficit, interest rate corridors and get really intimidated. Get this straight. It is in the interest of the financial sector to keep things tough for you. The less you understand, the more you can be cheated. The more complicated you think the world is, the more they can obfuscate. But I just said, earlier in the book, that you need a financial planner because of the large number of choices and decisions. Well, I’m saying both. Basic finance is not tough to understand, choosing products is. But if you understand basics, you can ask the right questions of the person selling you a product or even of your financial planner.
Monika Halan is consulting editor at Mint.
Edited excerpts from Let’s Talk Money: You’ve Worked Hard For It, Now Make It Work For You, with permission from HarperCollins Publishers India. The book is out on 25 June.