Mindless about Money

Mindless about Money

One thing you wouldn’t expect to find in Asia is mindlessness about money. It is surprisingly common, however. People who will bargain over a few dollars neglect thousands, sometimes much more.

At any one time banks have millions of dollars sitting in current accounts earning nothing and often – finally – without an identifiable owner. Why do people who are very money-conscious so often neglect it?

Money is boring. Not the idea of it. People’s eyes light up at the mere mention of a lottery win. In our heart of hearts we all think being rich would make us happy. ‘No more worries’ we imagine. My wise No 1 son said to me when he was young “If I haven’t got it, I can’t lose it”. Most people would rather have it and run the risk. But when you have it you have to look after it. You have to learn how to use it, including giving it away.

Because money is boring those in finance won’t do the job unless they are well paid. It becomes less boring the less you have. When you are broke money haunts you. When you have enough you don’t think of it much. A pity because money not properly accounted disappears. Businessmen know this and understand their accounts – or go bust. Learning about money is simpler than some professional accountants would have us believe.

We hear much about planning a career and planning is vital, even though plans never work out exactly. We are taught less about planning our financial future. Many people would like to help us but they all have agendas which lead, predictably, to investing it with them. Financial planning is less about investing it and more about getting it and keeping it.

Currencies are volatile and inflation, almost forgotten since the financial crash of 2007, can play havoc with your savings. Partly because of this it is wise to aim to keep earning some income after you stop your normal full time job. But true money management is about knowing what you value. Ask anyone what they regard as most precious in life and they will recite the mantra of family, health, happiness. Ask them how their spending reflects these values and you will often see a different picture.

It is useful to follow these principles:

# Share your financial plans and problems with your nearest and dearest. It is unlikely that you will both die at the same moment. The one left behind needs to know where the gold bars are hidden.
 
# Always check your bank, portfolio and credit card statements against your own record of income and expenditure. The time is well worth it.
 
# Know what your cost of living is. Think of it under two headings – ‘essential’ and ‘frivolous’. Put anything you could reasonably do without under ‘frivolous’. About 25% of what you buy is ‘frivolous’ by this definition.
 
# Keep your emergency reserve topped up. This should be about six months ‘essential’ spending. It must be easily accessible.
 
# Use credit for only two things: (a) the house you are going to live in, if you cannot afford it outright (b) business, when properly thought through. Most other credit is pouring money down the drain.

# Remember that whatever you buy, there is likely to be some ‘buyer’s remorse’ afterwards. Pay heed to it, then get over it. It’s your money.
 
Managing your money may not seem a rivetingly exciting thing to do.
 
Not managing it will lead to rivetingly exciting consequences.