is not the wealth that you amass that makes you rich.
Rather, it's a question of what is in your mind, says
Money means different things to different people. The
human psychology specifically, the perceptions
and attitudes that people have about money play
a very important role in their financial well-being or
misery. Finance may be a fairly precise subject mathematically,
but human behaviour in many financial situations is usually
seen to be anything but rational. Little wonder that behavioural
science is increasingly being used in modern-day economics.
will hoard their money. Even though they are rich, they
will live very poorly wear old clothes, live in
a cramped house, make do with old furniture, buy no household
gadgets and take no vacations. At the other end of the
spectrum are the extravagant ones who live beyond their
means not only do they spend everything they earn,
but even consume their future income by using credit cards
and taking personal loans.
who have inherited or earned enormous wealth,
can become penniless. Yet there are others, who can build
a fortune from nothing, through sheer financial discipline.
One doesn't have to be a financial expert to lead a life
free of financial struggle. Rather, the point is to become
rational and judicious in one's behaviour to analyse
the various myths and misconceptions that we carry in
our minds and correct them to overcome illogical
behaviour and become more money-confident.
We are all brought up to believe that money is bad. Too
much money, we are told, leads to indulgence, extravagance
and tension. The rich, goes the common myth, are deeply
unhappy and cannot sleep well at night.
isn't true, but that is the popular mythology of money.
The problem is compounded by the fact that we don't learn
much about managing money in our schools and colleges.
Is it any wonder that, quite often, we develop negative
attitudes towards money? With such a negative attitude,
one cannot expect to attract money and become rich. As
a first step, therefore, we should remove all the guilt
feelings attached to money.
money fairly is no sin. By itself, money is neutral
it is people who make it black or white. Not having money
doesn't make us saints, and honest hard work can make
a person wealthy. Wrong means don't automatically come
into this equation.
the fear of losing
The problem is, losing money brings us much more misery
than earning money gives us joy. This irrational fear
of loss scares us, and we opt for low risk investment
options. Low risk means low returns. It does not create
wealth. We may continue earning a risk-free income, but
also lead a life of unfulfilled desires forever trying
to balance the budget.
it is gains one is looking for, then losses are a reality
that must be accepted as a fact of life. No one likes
losing money, but it's not as if the rich never lose.
But it still does not deter them from investing. The difference
is that they do not avoid risk, but try and manage it.
can help us overcome the fear of losing. Once we have
a basic understanding of the risk-rewards associated with
various investment options, we can take calculated risks
that match our risk profile.
Many of us have a mental block to numbers and finance.
They all seem Greek and Latin. We take a lot of precautions
when it comes to protecting our house special locks,
safety devices, watchmen, etc, but don't take similar
precautions when it comes to managing our money. We sign
forms, issue cheques and hand over hard-earned money to
a broker, friend or relative, without even understanding
the basics of investment. This is nothing but blind trust;
it's like leaving the front door wide open because the
people "known" to us can't be crooks! In money
matters, ignorance is definitely not bliss.
risk of fraud is one thing. More important, however, is
the likely mismatch between your investment needs and
the objectives of the instrument (insurance, ULIP, mutual
fund or savings scheme) that you entrust your money to.
Only you know your exact financial needs. It is this perspective
that must guide your decision about whether a particular
scheme suits your profile or not. Consult a financial
expert by all means, but you must make the final decision,
after a suitable assessment.
education and understanding of money matters and investments
is a must. The investment world is huge, and some parts
of it can be fairly complex, but it is not so difficult
that one needs to remain completely ignorant.
Should you buy the latest model of car, just because you
know someone who has one? Should you invest in equity,
just because everyone else is 'making a killing' on the
stock market? Is money the only symbol of success? We
stand to face a lot of financial misery when we try and
emulate others. We only create grief and jealousy for
ourselves if we live our lives based on others' standards.
one of us is unique. Therefore, we need a unique definition
of happiness; one that applies only to us. So often, it
is only after we buy what others have, that we realise
that it was not really worth having after all. If we equate
our self-worth with our bank balance, if we flaunt our
wealth to make others envious, if we are easily influenced
by others' opinions, we are only reflecting a poor mindset.
The main reason for people losing money is the 'get-rich-quick'
syndrome. If investment were to follow a gambling mentality
doubling one's money in a single throw the result
would invariably be disaster. Gambling never made anyone
rich, except the casino. Even those who hit the occasional
jackpot invariably seem to lose it in double quick time.
have to be realistic about our expectations.
are very few who have lost money by being patient. When
we plant a seed, we give it time to grow. And when it
grows, it gives lots of fruits. The important thing is,
the seed has to be of good quality and the tree must be
same principle holds true for investments. If we invest
in good quality schemes and give them time to grow, we
can reap good and consistent returns in due course. Our
heads must rule our investment decisions, not our hearts.
must be patient. Life is not a 20/20 cricket match; it's
not even a one-day match. It is like the test match of
bygone days, when there was no restriction on the number
of days, and matches were played till there was a result.
Starting early helps we benefit from the power
of compounding and are not forced to take any undue risks.
Greed is bad. Mindless acquisition of materialistic wealth
does not translate into happiness, for there is no end
to wanting some more.
doesn't imply, however, that living in want is good. There
is no virtue in poverty, either, if you can help it. It
is good to have desires. But money is not the panacea
for everything. It can buy us food, clothing, shelter,
and all the little luxuries that make life easier, but
it cannot buy us enjoyment. That comes from the mind.
get our priorities right, we have to make a clear distinction
between our 'needs' and our 'wants'. Money is important,
very much so, but more important is having good and genuine
desires it will make their fulfilment purposeful
and satisfying. That will give proper joy and meaning
to our money
journey becomes smoother, quicker, safer and more successful,
if we are prepared for it. The first step to becoming
financially successful is to prepare one's mind. When
we overcome our insecurities and set right the irrational
behaviours that limit financial success, we start understanding
our own psychological
profiles much better. We feel confident of achieving prosperity
and start acting rationally and positively. We are able
to set clear financial goals and draw the roadmap to achieving