Money Management

“Balancing your money is the key to having enough.” ― Elizabeth Warren, Amelia Warren Tyagi

Continuing with the quote above, many of us learn to balance our money from our real-life experiences. Except for people who had taken Personal Finance Management as a subject of study and are Financial advisors, or are experts, or who grew up with a mentor that had passed on his or her years of money management knowledge to the protégé, we all have duly learnt our lessons on money management, sometimes the hard way. Growing up we had family and friends surrounding us, as well as an abundance of time and vigour to spend it all. There were never any money issues or any talks about money; for we were told, it is for the adults to worry about.

When we started our career in our twenties and our first paycheck arrived, hardly did we give any thought to all the aspects of managing our personal finances. From there on like many others, we too have now understood the importance of caring for personal finances and how much it is important to improve the quality of life and in achieving our dreams and goals as a family. Whilst investing in getting our dream home, providing our kids with good education, taking care of the health of our parents, showed us how to manage our funds for investing, saving for education and health, the pandemic of 2019 showed us the importance of a corpus built up for emergency funds.

Most of us get uneasy at the mention of a ’Budget’ or are lax about it. Budgeting is an important part of personal finance, especially if we want to take control of our spending and work towards our financial goals.The more diversified our life activities become, the more necessary it is to take stock of our personal finances.

The main aspects of Personal finance can be broadly classified as follows:

1. Income

2. Expenses and liabilities

3. Savings

4. Investments and Assets

5. Insurance


Income is inflow of cash into the family. It is the first aspect of managing our personal finances. Income may be in the form of salaries/ pay checks, bonuses and arrears, rental income, interest earned, dividends or income from any other source. This is the cash which we have in total which we may spend, save, or invest. Although we can always develop new means of generating income, however, for many of us we have less control over it, as it is mostly dependant on others.

Expenses and liabilities

It is the header under which all the spending of an individual or family is classified. Spending may be in the form of cash which includes spending on groceries, children’s education, utility bills etc. Or credit like payment of EMIs, credit card dues etc. These may also be termed as liabilities. Spending may also be classified into fixed expenses such as monthly subscriptions perhaps for TV, newspaper , school fees, etc., and variable expenses such as utility bills, groceries etc. ‘Expenses’ is one of the major factors which erode our income and affect the fund to be allocated for saving and investment. However, the good news is, this is also a factor, especially the arbitrary and discretionary expenses, which are completely under our control. The more an individual has good spending habits the more he/ she is likely to have a good personal finance management; for them, just as their income, expenses are equally important.


Savings are not to be treated as leftovers from our income after spending. Instead, savings should be made a priority, and gradually should be increased to achieve a specific financial goal as determined by an Individual. It also becomes important as it forms the basis from where one can move on to the next aspect of personal financing i.e., investing. Planning a monthly budget is the most effective way of working out in building up a healthy savings corpus.

Savings can be classified broadly into the following which can be varied and may be created as per one’s financial requirement or goal:

1. Savings and current deposit accounts: In India, they are also called as Demand deposits as they can be liquidated into cash at any point of time through cheques, withdrawals etc. All banks offer this basic facility and hold the most liquid securities i.e., which can be easily converted to cash. These types of accounts fetch nominal rate or zero percent interest.

2. Deposit Certificates: Also called as Term or Time deposits, these deposits are of a certain amount, kept for a certain tenure and can be withdrawn after maturity. The interest is earned based on the tenure and the amount may vary from bank to bank.

I prefer to club the below three in savings although these funds are mostly created for investments toward a specific savings goal.

3. Emergency Fund

4. Child’s education

5. Retirement Fund

Investment and Assets:

I like to describe investment as savings with a goal. I believe, to invest without any specific purpose is like a ship without a rudder. You can keep on sailing but may never reach your destination. This is also the asset in one’s portfolio and best form of building up corpus for education, retirement, etc.

Following are few ways of investment:

1. Investment in Mutual Funds: A mutual fund invests money of the investors in stocks, bonds, short term money market instruments, other securities or assets or combination of these investments. The combined holding of one’s asset is called as portfolio. The greatest advantage of investment in Mutual Fund is that it allows one to diversify the investment strategy. Mutual funds may be.

  • Equity funds (stocks)

  • Fixed income funds (Bonds)

  • Money market funds

They are also classified as

  • open ended (doesn’t have a maturity date and investors can buy and sell units at any point of time) or

  • closed-ended (runs for a specific period).

The open-ended schemes are further categorised into.

  • Equity schemes

  • Debt schemes

  • Hybrid schemes

  • Solution oriented Schemes

  • Other schemes

2. Investment in Bonds: Compared to stocks, investment in Bonds is safer and yields better results. They are issued mostly by companies and government wherein they borrow money by selling bonds to investors. The investor is paid a fixed interest after a particular duration till its maturity. At maturity, the corporate or the government who has issued the bond, pays the bondholder the bond’s face value (or par value). Bonds may be Floating rate bonds, Convertible bonds, or Callable bonds.

3. Investment in Stocks: Investment in shares through stock market is another form of investment which yields high return when well managed. Being volatile in nature the risk involved is also high in this sort of investments. Almost all banks now offer their customers the facility of opening and operating Demat account for dealing with his/ her securities. Some banks even offer trading facility which makes this investment just a click away.

4. Investment in Real Estates: Commodities such as gold are a few more investments which I would definitely like to mention here, however, this type of investment is time consuming and needs legal compliance too especially if one is investing in real estate.


Insurance is the protection we provide to ourselves and our families to mitigate the risk of potential financial loss due to some unexpected and sudden happenings in life. Insurance should never be treated as investment. They provide a financial cushion to tackle any emergency arising from serious medical ailments, accidents, or death of the earning member. Talking about death is painful but being prepared and making one’s family prepared is prudent. It also is essential for one’s peace of mind and the first step is to buy a term insurance coverage for covering most of the liabilities and some more, a health insurance for the whole family to take care during medical emergencies, accident insurance and also an asset insurance for covering the movable and immovable assets of an individual.

Life is uncertain...however, there is a thin line dividing a life living frugally and a life living miserly. In today’s social media dominated life, where we get to see people uploading pictures of vacations in exotic places, getting married lavishly or dining out in trendy places, we tend to get influenced by these.But we should always bear in mind that they are uploading pictures of various phases of their life as they happen. Not everybody would be at the same stage in their lives or would do things exactly as others. Often, we do not know the story behind the success, glitter, and glitz of such an individual. It could be that they had prepared for years to take these exotic vacations, lavish weddings etc. Always remember, everybody has their own financial goal/s, and it is their journey to make.

To conclude, I quote Regina Brett “Don’t compare your life to others. You have no idea what their journey is all about”.

Maybe we all can draw inspiration and work towards achieving our financial goals by focusing on achieving financial health.

Disclaimer: The suggestions and materials presented here should not be regarded as financial or investment advice and are only for general information. The author and the publisher is not a registered financial advisor. The information / advice rendered herein should never be used without consulting financial professionals. By reading and using our content available herein, you are demonstrating your consent and agreement to our disclaimer.

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