Book excerpt: Dear women, here’s some sound advice to manage finances like a boss
In her book of essays, The Whole Shebang, Lalita Iyer offers practical advice on everything from love, career, sex, money, body image to parenting, managing friendships and even finding the right underwear.books Updated: Sep 12, 2017 08:56 IST
For the benefit of all of you who are trying to have a better relationship with money, here is a list of money rules I put together. They may seem pretty basic, but it is shocking how ignorant women are even on the basics.
1. Balancing your accounts
This simply means balancing what you earn against what you owe (and spend) and making sure your credit always exceeds your debit. The way to do this is to list down all your expenses and all your income and add them up. If your expenses exceed your income, something is surely off and you need to find a way to reduce your debt. This is particularly good for those of us who refrain from writing accounts because we are scared what they may reveal. It helps when you know how much money you have in reserve and what is available to spend.
2. Credit card 101
First things first: A credit card is not money you have. It’s money you owe. And you must know that this money will keep growing exponentially by a stealthy device called compound interest (which is actually interest on interest and just to give you a rough idea: it is twice that of a home loan). So if you only pay what is the minimum amount owed on your credit card every month, you are going to be in huge debt very soon. Are you the type who cannot recall what you spent on that had incurred you a huge credit card bill? Are you using your credit card for things you cannot afford otherwise? Do you feel that your credit limit is actually your bank balance? Do you find yourself applying for a new card when all your credit cards are maxed out? Then you need some serious credit card therapy.
3. Shopaholics anonymous
Shopping is the most expensive way to feel good, and there’s a reason they call it retail therapy. Imagine giving so much power to clothes and shoes as a means of feeling good. It is an addiction, like any other and to get over it, you need to divert the urge somewhere else, take occasional inventories of things you own and never wear and most importantly: try to distinguish between want and need. A friend of mine suggested a small tip which always works for me: The next time you go shopping, wear your coolest clothes that make you feel super attractive. The urge to shop is much less.
4. Having a goal. Sticking to it.
Formulate a plan with a goal for a month, six months or a year and chart your progress as you move along. I usually promise myself an incentive like a holiday or a piece of luggage or home improvement. At the end of it, you will experience the joy of earning your own reward.
5. Having spend-free days
Try a day in a month where you carry no money or cards and see how it goes. Walk, carry lunch that day, and try and observe where the urge to spend money strikes you the most. The experience will make you richer. The early days of demonetisation in November 2016 was a reality check for me. I realised how much money I spent mindlessly, even though I don’t use credit cards.
6. Investing well
Instead of avoiding sections in newspapers that talk money, try reading up on investments and spread your money over some regular old-fashioned schemes like PPF and post office savings as well as newer ones like mutual funds. There are books and columns on money management. You can set aside a small amount every month and track it and slowly raise the bar. Stocks and real estate are other options, but it requires a deeper understanding of the market. But nothing is rocket science really.
7. Rewarding yourself
Treat yourself to small pleasures whenever you have been good with money: some nice dessert, books, fresh flowers, scented candles, a spa treatment.
8. Giving back to the community
Once you have been good with money for a while, start donating for a cause you believe in and something you can track. It will create a feeling of abundance and joy that shopping can never match.
9. Planning your retirement
You need to have a nest egg both as assets and savings for your retirement irrespective of a spouse or lack thereof or whether your parents are going to leave you a nice inheritance. You will also have to factor in that you will still need money for your expenses long after you stop earning and you don’t want to be dependent on children/family. You will be surprised how few women factor this in. I have already budgeted for a halfway house with my friends when I am 60. I don’t believe children should be treated as old-age insurance.
10. Knowing your net worth
It is important to have a rough idea of how much your assets, savings, investments are worth and what they total up to, so you always have a realistic image of what you have at your disposal, in case of an emergency. Another thing is to ensure that there are a few things in your name (you have no idea how many women are clueless about this) so that you know you are never down to zero just because you chose to walk out on a marriage. Divorce battles are long and tedious, especially when money is involved, so make sure you don’t end up on the short end of the stick.
Excerpted with permission from The Whole Shebang: Sticky Bits of Being a Woman, Lalita Iyer, Bloomsbury.