Saturday, December 06, 2008

A "personal finance" dish

Writing the previous post, I started thinking more and more about personal finance. Is it the need of the hour, what with more and more people losing jobs and the ones that hold them not yet sure as to how long the entire recession would last? Oh! personal finance has been around ever since man started commerce and brought in the concept of individual wealth management. But it has gained more and more spotlight in present times.

It may be due to the course I'm taking or due to the recession that is unfolding right before my eyes, but I've started taking some interest in finance finally. There are a number of finance guides and people who are great with finance that help people in trouble. Also, there is more openness about finances than before(or may be there were earlier and I am aware of them only now).

Recession in some far away city puts you in a cocoon and you don't really care much about it. But recession in your neighborhood is a different game altogether. So, to improve the health of the US economy and the people of the world, I'll show you how to make a dish out of personal finance. Yeah! Eating(doing) this will surely nurse your finances back to robust health. Some of the ingredients are:

1) Spend less than you earn - In a nutshell, don't spend what you don't have. And, keep some saved for the rainy day! Absence of this ingredient led to the mortgage bubble burst and it shows what has happened to us right now. This ingredient is the base of the dish. If this is absent, then any ingredient or tool used would be useless.

2) Earn more than you spend - In a nutshell, try to earn what you want to spend. And, don't touch your rainy day savings. This ingredient might sound eeriely similar to the above one. But it is not so. Say you have $10. Say you spend $5 and save the rest. Now your savings is $5. Say you increase your earning to $20. Then you can increase the spending to $10 and still save $10(an increase of $5). Or if you decide to stick to old spending ways, then you save $15(an increase of $10). That is the difference between both concepts. This is yet another important ingredient without which your dish size would never grow. It is like yeast is to bread and cake risers to cakes. However, you can add as much of this ingredient as you want to the dish(unlike yeast or cake risers). The more of this ingredient, the better is the dish.

Now add generous mixtures of the above two ingredients and add a good amount of patience, confidence and determination. Let the dish sit for some time. Do not add ingredients like debt, new credit cards, loans, etc. These ingredients will make the dish go bad! As you stir the mixture and start eating(using) it, there would come out of it, vapors called "more money" that would chase away the debt ghosts(like how real food chases away the hunger ghosts). These vapors can be seen using special tools like budgets, spending plans, etc. Further, the dish can further spiced up by tools like high interest rate accounts, couponing, deal watching, thrift store shopping, etc.

To magically increase the quality and quantity of the dish, you can use the investing tool to stir the dish from time to time. However, if overused, this tool can even spoil the dish. So care should be taken when using this tool. The author recommends that this tool should be used only by advanced cooks or by beginners under the guidance of an advanced cook. If a beginner wants to try it, he/she should use it only sparingly and can slowly increase the duration and speed as time goes by.

Voila! You finally have a magical dish that can not only chase away debt ghosts and keep them far, far away but also give you benefits of financial health like good credit score, enough money to achieve your dreams(isn't this what all of us aim for?) and most of all, a peaceful sleep at night without worrying about paying bills on time(what else is needed in life?). Eating(doing) this all through your life gives you a long lived robust financial life as long as you live and makes things infinitely easier for your kids and others. Now, don't you want to make your own magic dish from this recipe?? :) Let me know if you find this dish yummy and useful. I'm sure you'll soon send me a postcard from Hawaii thanking me for your robust financial health and hence remarkable mental and physical health.

Note: Longer the exposure to this dish, better becomes your health. So, use it more and use it often!


Arun said...

my personal finance policy is simple.
"no impulse buys."

before i hit the buy button on anything i ask myself - "can I live happily/comfortably without this crap?".

jch said...

I still haven't trained myself to be aware of my own spending. Part of that is the big switch from being a broke college student to making a steady salary. I'm working on ways to make me notice and track my spending so I don't end up wasting my money.

@Arun, I totally agree that impulse buys are a killer.

alpine path said...

Arun, yup! Thinking for atleast 10 seconds more has stopped me from making some very stupid purchases! They didn't look stupid then but are totally stupid now. And yeah, most amount to crap! :)

jch, yup! I'm in the same boat trying to figure my way through grad life finances. But since the income is smaller, I don't have much to spend and hence tracking is easier too. Welcome aboard! :)