Ever have that Bad Broke Feeling? Worse, did the feeling continue for a long time? Worst, do you see things not getting comfortable in the next 3-6 months? It’s ok to have that feeling once in a while when Life decides to throw a Basket of expenses at you.. but there’s something you need to work on if you feel this every month and you don’t see cashflow issues getting resolved within a year.
There may be many reasons that may leave you broke , living paycheck to paycheck every month.. many specific reasons actually.. But I am listing the top 3 that may be applicable at a Strategic level. Identifying & fixing these will be helpful in working towards Financial independence.. the rest of personal Micro-economic reasons , I leave it to You to analyze for yourself… but here are the Macros that may need attention:
1.You don’t have a “Life Happens” Fund: One of the biggest reasons why people are constantly in the loop of scarcity is not having a “Life Happens ” Fund. Sophisticated people call it an “Emergency” Fund.. I’m just calling it what it is. Imagine this.. So it’s a bright sunny Sunday day at the start of the third week of the month, say it’s the 15th of the month & your Bank account is running just about right to pull you on for 2 more weeks till the “Large Credit Alert” message pops up on your phone. And then… that Sunday afternoon as you were taking a peaceful nap, your AC shuts down.. you try switching it on/off.. it isn’t responding . You call the AC guy.. he checks it & says “Coiling gaya hai.. Copper gaya hai.. Gas gaya hai… bohot kharcha hai.. usse acha 5-10 hazaar daalke brand new ayega with warranty”… Makes sense .. But you now need 30000 for a New AC. Then when you go to checkout the ACs , your car stalls.. turns out the Battery is Dead…. Mechanic says ” Battery ka Life gaya hai.. andar ka coating nikal gaya hai.. battery khatam hai.. repair nai hoga… Naya lagaana padega” . Of course you’ll get one put immediately..can’t manage without your car.. So that’s another say 7000. .. In all this ongoing hassle , you leave your phone in the Car Door and as you open it , the phone falls on the ground.. screen crashed. After paying the Car Battery ( Swiping your CC of course) you take your phone to the service station.. guy says ” Screen gaya hai..” This time You tell him ” Repair nai hoga na? Replace karna padega na?.. 5 hazaar daalke naya aa jayega na?.. with Warranty?.. Pata hai mereko” 🙂 .. the guy just nods.. but it makes sense.. So now you’re on your way to the showroom to buy the the AC as well as a new phone. Average decent Phone.. say 30000 and AC..30000.
So in 1 day you’re down 67000 .. you swipe your Credit Card of course cuz you had the balance to just take you through the 2 weeks…and as Credit card companies & banks have made it so convenient for you convert any purchase above Rs. 2500 into “Easy EMIs” …you go ahead and easily do it. The result: You’ve piled on Debt for the next 6 months/1 year/2 years depending on the tenure for EMI conversion. This month it was the AC, Phone & Car battery. Next month it may be some Furniture, Urgent Medical expenses, Microwave going down .. You falling sick and unable to go to work for month…anything. The possibilities are endless… Because “Life Happens” and you don’t have control over certain things.
So You need to make a “Life happens” Pool…before Life Punches you in the Face! Build it slowly & steadily.. Start with a goal of building a sum worth 3 month’s Expenses and build it up to 6.. it may even take a year or 2 to build it… but it’ll be the best Financial solution that’ll take care of surprises and not get you that Broke feeling, every time “Life happens”. More importantly , Replenish it once you utilize a portion of it for whenever you need it.
This is a Personal Struggle for me as well. It is very difficult to voluntarily park Funds in your “Life Happens” Fund when , in the first place you are trying hard to make something happen in your life… Worse if you spend all your money in making your Life “Happening” by buying Shit you don’t need, you’ll never be ready to handle whenever “Life Happens”.
2. You are Fancy!! : Hahaha ..I’m using this word after a long time.. and it’s Funny, but this word perfectly captures the idea. That’s right, don’t be “Fancy” when you’re “Not Fancy!” Are you an owner of a Big Business Conglomerate? Sure, be fancy, then.. but don’t be Fancy when you’re not really Fancy… Focus on your Financial Goals..Invest money, Invest in your Business/Hustles, Build your “Life Happens” Fund… Don’t buy STUFF when you can’t really afford to or don’t really need .. in pursuit of just being Fancy in the eyes of Society. I get it ..when people are talking bout their latest gadgets, their new Nike shoes at the gym, and their latest cool sunglasses, what will you do? Show them your Investment Portolio?? or brag about your emergency Fund?? That’s not Cool!! But you know who’s winning the race right? So don’t deviate from your Financial goals.. Don’t try to be fancy when you’re Not Fancy… When you’re really Fancy, Be Fancy!!.. but until then work hard to get there without buying dumb shit!
3. You don’t know where Your Money is going : You can’t control what you’re completely unaware of. Do you know your precise spending on Transportation/Petrol ? Eating out ? Discretionary Spends? Weekend outings? Groceries? Domestic help? DTH? Electricity? How many of these expenses are Necessary and how many can be altered? Unless you know what can be altered/controlled how will you control it? Personal Finance requires daily tracking of your Bank account… figure out where Your money is going .. see your statement every day and you’ll realize How you can control your Flow of Money. Deduct the Necessary Amounts from your income and make a plan for the balance amount… else you’ll end up being Fancy with that Balance amount 😀 .
A lot of other reasons also cross my mind..I’ll write about those too in a different Post. But the above listed are Strategic Reasons that if once addressed can pull you out of that Broke Feeling and put you in a more Positive, more confident & a more Financially independent state of being.
That’s all for now!
See you around.. Cheers!
Dad So Kool