See how you have been losing money, some knowingly and some unknowingly! Some of it could be hereditary and some of it is your own behaviour.
There is now research into this – and you must be familiar with the term ‘Behavioural Finance’. Let us look at some of them:
Refusing to look at the facts! Behavioural Finance calls it ‘Avoidance’. If you realize that your spouse or children are spending too much and you are too polite to talk about it.
For example, if you eat out too often and in a place that is too expensive-you have to say ‘we can’t afford it’. Many men live with the problem instead of confronting the facts. Refusing to ask your boss for a raise is also in this category. You are trying to avoid the discomfort. You are not avoiding the pain. Just postponing it.
Comparing with the Joneses! By constantly comparing yourself with friends, siblings, neighbours, colleagues – you can make your life miserable. Your colleague could be the son/daughter of a rich person, so obviously can afford more expensive stuff – clothes, car, eating out locations, etc. If you make comparison an obsession, you will be poorer by a mile!
Being afraid to invest! Many people let their money sleep in their savings account. No, not that they don’t want to invest, they are just procrastinating!
Can you believe that the cash that is held by the Indians is more than the Assets Under Management of the mutual fund industry? Only this year did the AUM cross the cash. Imagine it took 60 years for this change to happen.
Investing early and making your money work harder.
If you were not privileged enough to get a good and full education – go learn and upgrade your skills. There are many online (free or paid) lessons available for you to learn and ask for a raise or find a side gig to do! I know one typist who learnt stenography and would work part time with a lawyer. Then he upgraded himself to becoming a lawyer and started his own practice. He had come to Mumbai as a typist with just a class X passing certificate!
Not assigning an hourly rate for your services! If you are earning say R60,000 per month, and you are working 25 days a month, it means you are earning R2,400 per day. This is about R300 per hour. Any work that you can outsource for less than R300 an hour you should outsource it – cleaning, cooking, washing clothes, home chores -whatever. You should try a side gig where you are able to earn more than R400 per hour. You should be obsessive about increasing this rate -either by asking your boss for a raise and / or creating a side gig.
Not sitting with your family and creating a financial plan. If you and your family know your goals, understand Asset Allocation, start investing with the help of an advisor (or by learning it yourself), you are on the path to success!
PV Subramanyam
writes at www.subramoney.com and has authored the best seller ‘Retire Rich - Invest C40 a day’