The concept of money at all times. How to manage my money?

How many times in our life, we are placed at situations when we are facing the dilemma, of what do I do now?  You have a Cash Crunch! The economy is not doing well and I may be facing a situation of job cut, reduced salaries etc. How do I manage situations ?

The truth is every individual goes through certain phases in regular intervals. One has money a plenty situation and at the same time, in a short while from there-on will have a sudden dip in the resource called CASH.  So how does one even out the ups and downs in ones life in such a manner the one does not have to depend on external sources for a bail out.

The answer lies in understanding these phases and accepting the fact that all times are not same. Hence, have to be managed intelligently so that you live up to your present, as well as you provide for your contingencies.

You could be anyone a salaried person, a professional or a business person, but the situations don’t change to much as managing money is concerned. If one examines the pattern of money flows, one will find that all these people have times of very high inflow of money, as well as times which are leaner.

The key lies in the fact that how smartly the money flow is managed. Such that the leaner times or the contingencies are well provided for and you at the same time don’t compromise the present also.  What normally happens is once you see the large balance in your bank the urge is there to splurge with the surplus cash.  The issue is not stopping the all important expenses but arresting the urges for wasteful expenses.

So how do I do this ?

One concept that goes very well is to always maintain 3-6 months cash requirement in the bank. This money is the money that is reachable in the shortest possible time. This money has to have the feature that it is reachable even by the ATM. This money will provide for all emergencies that may crop up without any prior notice. The brighter way to do this is to avail the Sweep-in Fixed Deposit (this feature allows you to manage the money more intelligently) with you Savings Bank.  This way the money is not just sitting in the savings bank but earns a rate which is much higher or almost closer to the fixed deposit account. It’s a very commonly available feature with most of the savings bank accounts; the only fact is this product has not marketed by the banks for the reasons well known to them.

Next what one can do is to provide for the larger expenses that may come up with a view of next 1-3 years. The idea is what if I don’t have a job for the next one year!  Yes, this is a hair rising situation but it is equally a most likely situation in today’s world.  The best solutions for this kind of situation would be a series of small fixed deposits each deposit could be an equal to say 3 months of your salary or an average quarterly inflow of cash in case of professional or business person. This way you don’t have to break in a large Fixed Deposit and lose out on interest if there is a small requirement.

This way one could provide for all the contingencies without sacrificing the growth potential of the other money that are invested with a long term view. Or, dipping into the money, which are kept other bigger objectives like children’s education or retirement.

by

Amalaraj A Marian,
Planner and Investment Consultant
R/H No 9, Prabha Ashish Residency, Nr K. J. Metha High School,
Nasikroad Nashik 422101
Ph:9822004673/9225119965
Em:amalarajm@sancharnet.in