This post has been contributed by Tarun Bachhawat, our guest contributor, with help from the Fintuned Editorial team.
Just yesterday, I was watching the latest commercial from the stable of Royal Stag featuring the Bollywood A-guy Ranveer Singh. Basically, the punchline of that advert conveys the message that the culmination of small moments make your life large and one should strive for the same. Steering past that interesting life lesson, the reason my post begins with this annotation is because I could not think of a better introduction to the post.
I assume that after reading the above paragraph, your instant question would be, “How does this relate to money management or finance in general, at all?”
Truth be told, you aren’t wrong in asking that question. The reason that I started with a synopsis of this commercial is because while watching this ad I was reminded of a short but insightful conversation with my father that turned out to be the best investment advice ever.
How did it play out?
One morning my dad saw my wallet that had some papers, money and my credit cards and said, “Do you carry everything in this one wallet?” I simply replied, “Yes.” Post this answer, the conversation played out somewhat like this:
Dad: What if you are pick pocketed?
Me: That is sheer bad luck. There is nothing one can do about it.
Dad [Smiling]: There is a difference between hard luck and being foolish at your own will.
This remark did irritate me slightly.
Dad [Noticing the change in my expression]: Have you ever noticed how I keep my cash?
Me: Yes you keep some in your shirt, some in your right pant pocket and some in your inside pocket.
Dad [Smiling again]: Good. Have you ever thought why I do this? It is because if I am pick pocketed then I don’t have to worry as I will have some money in a different pocket which will help me reach home safely.
Honestly, that was a cool and helpful advice. Post this, he went on to share some more insights which I have shared below.
#1 Diversification is the key. Whether it be as big as managing your money portfolio or something as small as carrying your money, some assortment is important. In case of investments, you have to ensure that you try to cover considerable number of options, as per your risk appetite.
#2 Distance of pocket is directly related to the nature of your expenses
As my dad’s shirt pocket is the closest, it meets his daily expense requirements like travel, paying for a small snack in the evening etc. Similarly, the liquid amount in your bank account or hard cash has to be on you to meet you low-magnitude expenses.
The pocket in your trousers represents the requirement for short term plans like going for a short trip, buying a good watch or phone among other things. Finally, the inside (secret) pocket where my dad keeps a major chunk of his money is most difficult to access and he generally avoids taking out money from this pocket. As he mentions, this money generally represents savings for your long term requirements like marriage, education etc.
#3 Saving the best for the last: – Limit the use of credit cards
To be absolutely clear, my father is not at all against the use of credit cards and for myself, I have a couple of cards that are used to purchase tickets or pay online fee, pay taxes etc. That being said, he is against spending a portion of the money that you haven’t earned and on things you might not require. So the basic idea is to avoid spending money on luxuries that you have not earned or by taking money on credit from the bank.
In my brief but absolutely helpful conversation with my father, I learnt amazing money lessons that you might find in text books/lectures/seminars but don’t care to implement the same in a disciplined manner. I sincerely hope that my learning has made good sense to you and in case you have any doubts/suggestions for me, please feel free to reach out.