The Panchsheel Of Personal Finance

Once you are in a position to save, accumulate wealth through long and steady savings.

- Venkata Ravi Ram

In June 1928, the humorist Robert Quillen labelled the expression “Americanism” as using money you haven’t earned to buy things you don’t need to impress people you don’t like. This article is about five basic tenets relating to your personal finances that help buy financial flexibility. These are by no means “new, improved with better shine”! All five are time-tested and relevant today (no…any day). Let’s begin.

Spend less than you earn

This is simple and one gets it instinctively. Spending more than you earn only pushes you into a bigger financial hole. How can one save where there is nothing left? Add to it, the stress it piles on you. Think of Floyd Mayweather (well-known American boxer won $75 million for one fight, blew it and became bankrupt), it is a reaffirmation that your capacity to save does not depend on your earnings but, spending.

Controlling spending habits is hard but, do you like going to bed at night knowing that the party you paid for on credit card is one more EMI to an already long list? Breaking spending habits is hard but harder is the fact of living with an increasing mountain of debt and interest.

Or sample this quote by well-known American civil servant J Reuben Clark Jr. -”Interest never sleeps nor sickens nor dies… it never takes a vacation…once in debt interest is your companion every minute of the day and night; you cannot shun it or, slip away from it, you cannot dismiss it and whenever you get in its way or, fail to meet its demands it crushes you”. Spend less than you make.

Fixed costs