Understanding Money Management
Money Management is more than Investing.
Investing is about ‘providing money inputs on a regular basis like SIP and Lumpsum.
Investing also gives you the road map to specific goals.
Money Management on the other hand helps you to understand your ability to spend money to lead an optimum life.
We need to spend money througout life and not just when goals are around.
Understanding the total money requirement for a Good Life and providing the Cash Flow is Money Management. This calls for Asset Audit, Evaluation and Optimisation which is rarely ever practiced.
For example the salary that one earns may not be good enough to meet all needs optimally but there may be availability of Assets in addition that could have been used at the right time.
Traditional way has been to limit everything to the salary and continue to live a sub-optimal life because of limits imposed by salary.
The investment and savings is for another day (Retirement). Sacrificing today for a imaginary tomorrow is certainly a necessity but the question to ask is “to what extent?”
But have we ever assessed the power of our money.
Sometimes people keep compromising their entire lives and over design their Retirement Corpus.
By over design I mean they create much higher cash flow potential than they would ever need.
Of course one has to budget a Margin of Safety and have a slightly overdesigned Retirement Plan.
So if one needs a Rs 1 lac lifestyle for 25 years, it is ok to plan a lifestyle of Rs 1.25 lac to Rs 1.5 lac
But does it make sense to design a lifestyle of Rs 4 lac per month at the cost of sacrificing lifestyle and other needs for several years in the pre retirement phase.
Perhaps some of the spends in the pre retirement phase that one chose to sacrifice could have actually led to more wealth creation.
Like sacrificing a business investments such as
a) Building a team
b) Buying better technology
c) Spending on Brand Building & Marketing
Making some key spending sacrifices can rob you of both wealth and happiness that was actually destined for you.
Again lifestyle sacrifices of limiting holidays, not hiring the services of an additional servant, chauffeur could eventually prove to be a futile sacrifice.
Because the amount designed for the last phase of life is often overdesigned much beyond one’s need.
As a result of this kind of inappropriate approaches to Investing, many people land up DYING RICH AND LIVING POOR which is most undesirable.
Money Management is not just Goal Management.
It is goal management and beyond.
It is really Life’s Cash Flow Management.
Hence there is much more to optimising life and money than we actually do.
Modern Money Management (3Ms) is the Practice to Optimise Life.
**Disclaimer : This Article is only for information Purpose and should not be treated as Financial Advice.**
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