I can't afford it.
Do I really need it? If yes, how can I afford it?
I resonated with the first statement for a long time and only from the last few months my equation with money has changed that empowered me to ask the second question (How can I afford it?).
If you are reading my posts from the very beginning then you must have noticed the subtle change in how I talk about money. I had written in a few of my earlier posts that I hated money or it doesn't occupy the first place in my priority list. It still doesn't but it has surely moved a level up in my priority list. It also doesn't mean that I want to be a billionaire with the changed equation but I want to have enough money for my dreams/goals/secured life. And all of this change didn't happen just like that.
I would attribute much of this change to the MoneyGymmers Program by WOW community (women-centric community). And if I have to pinpoint an instance, then it happened after doing one of the exercises during this program. The exercise was about writing my interpretation about money by keeping my facts aside. You might not notice but we all have facts about money which we imbibe from what we have been taught or observed. For example, if you have always heard from your mother/father that money is hard to earn then you will consider it as a fact. You would work hard for earning money and also start believing that money couldn't be earned smartly (even when you can do it ethically).
As a part of the exercise, I observed myself to write my interpretations about money. I also tried revisiting my previous experiences related to money. In addition to my interpretation (Money is evil), I also wrote why I feel that way (Why I consider it evil?). One of the interpretations that I wrote was that money is an enabler or independence for me as it let me travel, pursue my hobbies, and create a space for myself (room, car, home office). The other interpretation I wrote is that money is evil as I saw a lot of family disputes and a few things going wrong with a friend because of money. The 'why' part gave me a clear picture of how I see the money in my life and why I see it a certain way. It told me about various emotions I have for money including love, hate, fear, and more. I also realized that if I have to change anything in me, I first need to acknowledge that I have a certain belief/habit/fear which needs to be changed for me to progress further. I noticed that I have negative interpretations about money. And that's when I started looking for ways to change it.
Ending this post here would not make much sense. So here are a few simple things that I learned during the course that helped me in changing my equation with money (loving it more and hating/fearing it less). I am following each one of the below tips personally and it's working for me.
Track your money in, money out
This method is an age-old method of accounting. Maintain a small diary or an excel sheet and write your earnings and expense datewise on the same sheet. This is the sheet that helps you in getting an answer to this question - How can I afford it? The key here is to maintain this sheet in such a way that it gives you a bird's eye view of your money habits. Categorize (Food & Drinks, Groceries, Petrol, etc) and write the exact item (Dominos Pizza, Pasta, Car Fuel, etc) on which you spend and your mode of payment (SBI Debit Card, HDFC Credit Card, Gpay (SBI)). I have also added a column categorizing my expense as a Need (eating basic food is a need), Want (eating pizza in a nice cafe is a want), or Investment (money spent on SIP, PPF, etc). It is a daily exercise but it's a real eye-opener. Just try doing it without fail for three months and you will get to know a lot about how you spend. You will find so many items that you could avoid spending on and also automatic withdrawal that you may not be aware of. Start your monthly SIP from that money. You can start it for as low as Rs. 500/month.
Maintain an emergency fund
I am a solopreneur with monthly bills and expenses that I incur whether I earn or not. During this exercise, I realized that I fear money because I have a fluctuating income and sometimes there are months when I don't earn enough. This course helped me in addressing this fear by telling the importance of building an emergency fund (one of the pillars of financial security). I have the fund ready now and it helps me in loving the money and sail thru those idle months. I also realized that my mind can now focus more on learning during those idle months rather than worrying as I know that I am prepared to handle the situation. Your emergency fund should be 6 times your monthly expenses (including your investments). This means your emergency fund can support you for at least 6 months. You can estimate this monthly figure if you keep a track of your money using the above method (you can categorize expenses as 'Monthly Expense'). It's generally advisable to keep this fund in FD or cash.
Buy a health insurance
Health insurance is another pillar of financial security. With rising medical expenses it surely makes me fearful to imagine me paying those hefty hospital bills from my savings. The current pandemic also makes us realize the importance of having health insurance. I suggest you buy one and stay safe. Buying it at an early age is much cheaper. Please don't fear buying it. It's simple. Go to policybazaar.com. Submit your query and compare various plans. To keep it further simple, check these: claim settlement percentage (must be greater than 95%), co-pay clause (100% should be paid by the insurer), any exclusions, pre-existing disease clause, waiting-period for any disease (if any), sub-limits (amount after which you have to pay by your own, often done for room charges), coverage of pre and post hospitalization, day-care procedures covered and no-claim bonus offered. Also, take in written (over email) that it covers COVID.
Understand the real meaning
I found that I fear money because I fear understanding its dynamics. I feared the financial terms and considered that its hard to learn financial jargon. But sadly, there is no substitute for learning. So start reading and become familiar with these terms. I suggest you start with 'Rich Dad Poor Dad by Robert Kiyosaki' by to understand the basics of money.
After reading this book, you will understand the difference between assets (something that puts money in your pocket), liability (something that takes money out of your pocket), savings (often doesn't grow your money), and investment (generates income or appreciate your money by growing it) which forms the core of managing money. Choose your method of learning. I sometimes learn from the Basis app which simplifies the financial terms with its micro-learning lessons (5-minute). I have subscribed to ET Wealth (a weekly newspaper) to make me familiar with financial terms and the WOW community does the decoding of this newspaper every Tuesday. I also read finance-related articles by Dhirendra Kumar & Vivek Kaul. These two folks make everything so simple to understand.
Managing our finance is a life-skill we all should have and this program surely helped me in learning this life-skill. I would say I have just started building this life-skill. The program is well-curated but please don't expect magic. You have to spend considerable time in your learning to understand the dynamics of money. I am continuously learning by reading more, sharing my lack of financial understanding within a safe space (WOW community), and by taking charge of my financial planning. And let me tell you that it does give me peace of mind and confidence when I know that I am financially secured.
Money can help you in living a joyful life and that's what this blog is all about. With this blog, I try to share whatever helps me in living a joyful life. Owning our life does help a lot in becoming joyful. So sit with yourself and understand your interpretation of money and start addressing any negative interpretations. Remember the more you fear or hate money, the more it will go far from you. And as a 33-year young girl, I can say that money is needed for a joyful life. The amount may differ for each one of us but we can't deny the joy it brings.
Today is the right time to start. Take charge. I would love to help you in whatever way I can.
I am thankful for all those personal messages you send me for this blog. It does motivate me to write every week. I would be happy to see your likes and comments. Feel free to share this blog if you think it’s worth sharing. I am referring the paid program by the WOW Community as I believe in ‘Paying-it forward’ but please clear all your doubts regarding the program from the WOW Team. Take care and keep growing :)
I always recommend WSJ 6 weeks Money Challenge
https://www.wsj.com/articles/sign-up-for-wsjs-six-week-money-challenge-11597338433