The secret to financial success
This series of articles will provide sound financial advice that
stands the test of time on how to protect and grow your wealth in simple
language for anyone to understand and reach financial freedom and
Banks and finance companies can go bankrupt, stock markets can go up
as well as down but the strategies explained in the articles will give
financial literacy for you to take control of your finances away from
The secret to financial success lies in how much money you spend and
how much money you save and prudently invest during your working years.
If you budget properly and live within your actual means, you will see a
positive cash flow that will allow you to determine what you can afford
so that you don't reach too high and fall.
If you earn more than you spend you have everything you need to build
your wealth so that you can live comfortably later on. The most
important thing that determines whether you will be financially
successful is controlling your cash flow.
How you build your wealth will be a function of what your current
lifestyle needs are, and putting a little bit away for the future to
grow which will be a function of your investment goals and a function of
your risk tolerance, (both of which will be discussed in the future
articles in the series).
In other words, whether you live within your means, not buying what
you want but what you need and can afford within your income level. No
matter how wealthy you are, you have to monitor your spending and have
an idea of how much you are spending compared to your income.
If you are an executive earning Rs. 100,000 or a driver earning Rs.
25,000 a month if you are spending more than you get, you are bound to
get into difficulties. One of the main causes in today's context is
consumer credit that coaxes you to spend more than you can afford and
ultimately devastates your financial future.
There is constant pressure on you to buy cars on lease, finance your
vacations, or sign up for credit cards and get you into debt with
installment payments even at zero interest.
This relentless pressure to spend money you do not have never
ceases.You may vehemently deny that you are trying to keep up with the
Joneses, but unconsciously it is happening due to the consumerising
society we live in. You may be already suffering crushing financial
stress with your stomach doing somersaults from the anxiety to make ends
meet.What is truly required is minimalist lifestyle and to do away with
inner Jones to live within your means with strict financial discipline.
Make sure that you spend money on what is important and meaningful
for you and simplify your lifestyle. Purchase what you need without
using consumer credit. Which means you will have to really think whether
it makes sense before you purchase and wait longer to buy things.
Too much debt makes it harder to reach your investment goals. Having
monthly loan obligations means that the money needed to service those
loans can't be used for something else, something that increases your
wealth. Being financially literate does matter, but the deciding factor
is whether your thoughts are living in the past, present or future,
which will make the difference in your financial behaviour.
People who live in the past may be more cautious (which can cost them
money in the stock market if they fear risk) but also less likely to
default on debt. People who live in the present tend to focus more on
the moment and less on changing their financial situation.
People who live in the future may be more financially literate but
also feel that they can predict the future, which could lead to taking
on too much debt or making bad investments. None of the time
perspectives is a perfect scenario, just like everything else in life,
each perspective has its pros and cons...but the optimal scenario is to
strike a balance among all three. Creating a balance between present
desires and future goals will ensure happiness now and in the future.
People sometimes ask me for help after they realise that things have
got out of control. All these people have one thing in common, not
necessarily age, or occupation, or lifestyle choices.
The trait that they all share is that they are unhappy. Here's where
the 'buy now, pay later', instant gratification mentality sweeps under
the carpet: There is a price to pay for your spending decisions, and the
price can be steep.
People who choose to live beyond their means while they are working
are likely to pay a hefty price during their golden years for their
By foregoing smart financial planning during the working years, when
you have both time and resources on your side, many are going to be in
for a rude awakening when you realise that you are staring at retirement
with depleted savings.
What was supposed to be a time of leisure suddenly looks pretty
bleak, with few decades of retirement ahead and little to draw on.
Look out for the next article on how to get started.
The writer is the Group Director and CEO, Candor Group and can be