The wise man saves for the future, but the foolish man spends whatever he gets.
C. Northcote Parkinson in his book 'law & the Profit' propounded what is known as the Parkinson Law,
Another equally significant statement that he made was,
Anyone who has ever managed a personal budget knows just how true this insight is. Individual expenditure not only rises to meet income but also tends to surpass it and probably always will. Inspite of all our good intentions, haphazard spending patterns lead us into financial bondage. While it is vanity to chase after wealth and money according to James is the root of all evil, the Bible does not deny that money is a necessity for survival, for sharing with others, and for enjoyment. Jesus in the parable of the talents (Matthew 25:14 -30) presents a vivid picture of how God condemns financial slothfulness and encourages the prudent investment of our assets. We have to exercise wisdom in all money matters.
Where does the problem come from?
The most common causes of a financial problem we are to guard against are:
1) Inflation/ Recession - Inflation decreases the purchasing power of money. Salary increases does not keep pace with price increases and there is an actual decline in the earners disposable income. Recession has too few rupees chasing too many goods. Prices fall, interest rates decrease, and so do job availability and salary rise. This cause is usually beyond the control of any individual and depends mainly on Government policies and market forces.
2) Emergencies - Unexpected guests who drop in for a two weeks stay, expensive medical tests, fitting of a dental bridge, losing a job, fire, your purse getting picked, etc.
3) Things - a product of free enterprise market system. Advertisements bombard us with information about various things, creating in us desires for things that we do not need. A new home video system, Bose amps, Erickson T 28 1.4 cm thick mobile, Reebok air cushion shoes, Versace hand bag, Revlon non transferable lip stick, Ray ban sun glasses, Hero Honda CBZ bike, a lap top....
4) Get It Now - Not only do I want these things but I want them now. Why plan and save for it when we can take the 'thing' home today & pay for it in easy installments spread over the next decade.
5) Keeping Up - My friend/ neighbor has a 'thing'. I cannot stay behind. I got to get it - and now.
6) Sale's - Upto 50% Off. and there goes another 400 rupees from your pocket for another pair of shoes(you already have 6 pairs). We do not Save when we spend, no matter how much the price has been reduced.
7) Easy Credit - To help us with all our financial needs the financial market offers you 'credit'. The Golden Card, the Platinum card, the Global card (You have never stepped out of your town but you need a Global card). When properly used credit can be a worthwhile asset especially when used for acquiring appreciating assets such as a home, investments in real estate or in a promising business enterprise for capital investment or as a buffer against inevitable ups and downs in cash flow. The reality however is that credit is used for routine buying of consumer items. Credit is offered at a price and most often you are paying not only for the use of the card but also interest for delayed payments. The bonus points gets you items which are usually discount coupons for some products, restaurants or shop for which you are again spending money.
It is therefore recommended to read the fine print in the application form and see what you are getting and at what cost. Proverbs has this to say about borrowing and lending
" Just as the rich rule the poor, so the borrower is a servant to the lender"
On the importance of Planning and Saving Proverbs has this to says
" The wise man saves for the future, but the foolish man spends whatever he gets". Note these three steps towards good financial planning:
1) Maintain specific, written financial goals - make the goals measurable, achievable and motivational. A goal is a dream with a deadline.Prioritise. However do not be a slave to your goal, do not overplan.
2) Avoid debts on perishable or items of depreciating value. Repay Principal first.
3) Invest a portion of every rupee for the future -Start now. Use the 10-10-80 Plan.
10% of Gross ( Before Tax)
Giving to your church, prayer group,
recognised charities or to any needy person.
10% use for Long term Savings & Investments
80% is for Living expenses
( including short term savings and taxes)
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