Six Clues That Tell You If Your Income Really Matches Your Expenses
Is there such a thing as having enough money? Some of us keep screaming that we don’t have enough. Some humbly boast of not being rich. When we look around us, we can’t help but be jealous of the wealthiest. Can we check if we earn enough? Or can we tell if that bragging colleague or bragging brother-in-law is really doing as well as he claims? Here are some clues to work with.
First, do you regularly accumulate short-term debt that you pay off in quiet resignation? Are there credit card chargebacks that you regret but can’t avoid? Do you borrow books from friends and relatives, even small ones, from time to time? Are you tempted to click on this Netbanking link to check what this pre-sanctioned personal loan consists of? You may be lacking the income you actually need for your spending habits. If you’re the God who doesn’t have a single rupee in debt, you earn way too much anyway. Please step aside.
Second, is paying bills and EMIs stressing you out? Hesitant to set up self-pay for your utility bills and EMIs because you want to be sure there’s enough money? Do you find yourself unable to continue the insurance premium and the SIP you started? If routine payments require juggling the bank balance, you may be too cramped. The first sign of income sufficiency is the surplus in your bank account at the end of the month. If your income has to stretch to meet routine payments, you are either earning too little or spending too much, or both.
Third, do you find it stressful to deal with situations that involve sharing expenses with others, where you have no direct control over the choices that are made? Do you feel overwhelmed while on vacation with friends and find that evening drinks are pinching your budget, but you can’t express yourself? Do you avoid dinners and meetings for fear of unexpected expenses? Do you make excuses when going out involves spending money? Did you catch yourself arguing with your siblings about the gift for your parents? Sometimes when you can’t control how much you earn and how it’s spent, your frustration with uncontrolled spending is heightened.
Fourth, do you hesitate to help someone in need? Do you argue and quarrel with vendors and service providers to get a good deal? Do you indirectly bring up your financial difficulties in a conversation where you think you might be expected to participate? Having less to allocate to competing needs makes you acutely aware of the opportunity cost of money. Each potential expense appears with the other use you can spend the same money on. You can’t bring yourself to be generous when you’re unsure of how much money you have and your ability to replenish what’s been spent.
Fifth, do you find yourself juggling your strengths too often? Do you pledge or pledge your gold, deposits or investments to raise funds? Then do you have trouble rebuilding it? Do you too often consider borrowing against your PF and other long-term savings? Do you anticipate a bond, deposit or insurance maturing long before the proceeds reach your bank account? You may think that somehow your assets can be rearranged to improve your financial situation, and that seems like a better deal than going into debt. Assets are only enhanced when you are able to save and invest sustainably. Rotating what you already have won’t do much except signal your denial of your income.
Sixth, are you attracted to get-rich-quick schemes? The poor are the biggest buyers of lottery tickets. Others might consider this habit a sheer waste of money, considering how the odds are stacked against buyers. But the act of buying the lottery itself is a disguised act of desperation, where the low-income earner sees no other exploitable way to get rich. When they think that nothing but a miracle can improve their income, that is what they have in mind when buying these lotteries. If you find yourself day trading with no training or strategy, placing bets on IPOs hoping to make a quick buck, and searching the media for names of stocks to buy and for sale, your real problem might be that you are unhappy with the amount of money you already have.
There is no generalization of how much one should earn and how much one should spend. However, a situation of financial comfort is a situation where you do not borrow regularly; you pay your bills and contributions painlessly; you manage a social life that sometimes allows you to drop by unexpectedly; you have a buffer to cover unforeseen expenses; you have a stable surplus and savings and, therefore, you can take a long-term view of saving and investing, without having to rely on luck; and you are empathetic and generous with those less privileged than you.
If you find that you or your loved ones consistently display some of these traits, don’t immediately categorize them as stingy, selfish, and intelligent. When your brother suggests you take a hike instead of pub crawl, when your sister tells you that her family always prefers to eat at home rather than in a restaurant, when your friend brags about his daily business profits, and when your uncle spends all his time counting, classifying and reworking his deposits, don’t judge them. Consider the possibility that they face a level of income and wealth that may not provide adequate protection, and show empathy.
As for those asking if the situation can be remedied, the answer is quite simple: the revenue generated by an asset depends on where it is deployed and how it is used. You are the human capital that generates the income. Make sure you have invested in your skills, knowledge and attitudes and are deploying them to earn optimal income. You can blame your situation and your luck all you want, but this asset was your responsibility from the day you were born. Make it count.
(The author is president of the Center for Investment Education and Learning)