MONEY is the eternal elixir of life. It is power. It is energy. It is a passport to conveniences of life. It is the most powerful antidote to the crippling constraints imposed by poverty. Money is empowering and yes an obsession with money also brings in its wake misery – but that is besides the point here.
It is a fact that people spend the maximum time, first training themselves to earn and then earning money. The amount of effort put in getting good education and then getting a good paying job is almost Himalayan in dimension.
This is not the end of it. Once having entered in that never ending spiral, the person is completely pre-occupied in efforts to increase his/her income. This is normally done by working harder, working longer hours, opting for higher and specialized education and so on. The spiral continues and we are sucked deeper into it trying to earn more money.
The question that now arises is - How should one manage this money?
Isn’t is funny that so much effort is put in, time and resources invested to develop a high earning capacity but people are totally ignorant about how this money should be managed.
I call this “Financial Illiteracy”.
Life was simpler in the past. The choice was limited and one would place money in nationalized bank fixed deposits or small savings schemes managed by the Post Office or the popular Public Provident Fund. Of course, there was the mandatory insurance with Life Insurance Corporation (LIC) and units of UTI where you had almost assured dividends every year.
Stock markets were considered as “gambling dens” and avoided by a large section of the population.
Times have since changed. Many changes have taken place and India is slowly moving away from a tightly controlled and Government owned structure to a more market related structure.
This has meant
- Exposure to market fluctuations
- High fixed returns now becoming a thing of past
- Safety has become relative and capital is exposed to possibility of loss
- Element of risk is now an important factor to be taken into consideration
- Entry of private players in the financial markets
- There are now multiple choices and of varying complexity
- Smart marketing and product positioning has come to stay
- “Financial Advisors” is a new breed that will be part of the scene henceforth.
- Introduction of dematerialization has added a new concept of ownership.
It has now become imperative to understand how to navigate through this maze. It has become increasingly important that basic concepts are understood such that one is not taken for a ride. It has also become necessary to understand financial and other types of risk and accept it as a part of our life.
It shall be my endeavour to expand on this theme and attempt to de-mystify some of the so-called complexities.