"A father is a banker provided by nature." When we were kids, we often saw our fathers doing the best in terms of managing the finances and providing the best for our education and other needs. We often wondered how did our father do such a good job with limited finances? Well, the financial practices and behaviour of our older generations have evolved and some old-school finance ideas used by our forefathers have stood the test of time and continue to be effective. Some of these are:
1) Maintain a cash-flow diary:
Many of us have noticed that our father would keep a cash-flow book where all our inflows and outflows were noted. We frequently tend to keep incurring expenses without keeping track of them. As a result, a lot of us find ourselves broke before the end of the month. Thus, we should keep a cash-flow journal so that our consumption can be tracked and carried out appropriately to avert this. The availability of numerous digital diaries for free can make maintaining records easier. Further, keeping a record and filing all of our utility bills, bank statements /passbooks, invoices & warranty cards of purchases and other basic things is also an age-old practice that probably most of us would have learned and followed from generations. This could serve as an important way to maintain track of your expenses.
2) Envelope budgeting:
Envelope budgeting is a concept that has been practised for several generations now. Many of our materialistic expenditures are planned even before we make a budget at the beginning of the month. We have a history of following the trends to keep our social status. Because of this, we frequently overspend, which causes us to reduce our savings and investments. Since an expensive purchase today could cause us to fall behind on our financial goals, this issue needs to be remedied. Therefore, budgeting should be done methodically and rigorously. Envelope budgeting is a simple practice whereby we put money into different envelopes or categories at the start of the month and then start spending on our relevant expenses by withdrawing from the related envelope. You may sometimes have some money left by the end of the month i.e., you have spent less than what you have budgeted for, you can make use of this by adding an extra amount in ongoing investments. You can carry this practice of budgeting either by using physical envelopes, or this can nowadays be maintained in the form of digital accounts, budgeting apps or simply having different bank accounts or wallets used for different expenditures.
3) "Out of sight, out of mind" strategy:
Any savings left idle in our bank account causes our hands to itch. The equation, “Income (less) Expenses = Savings’ is often true for us. Any income balance available to us makes us feel rich and we tend to spend it on shopping, entertainment or crossing items down the bucket list. We often make impulsive decisions on our expenditure in the mistaken belief that we have enough money. So it's best that we change this equation to, ‘Income (less) Savings = Expenses’ as early as possible. A SIP in mutual funds schemes can make this happen easily whereby SIP investments would be deducted at the start of the month. Transferring your income towards an investment, which is the best possible way to make it useful. This will also put your unplanned and impulsive spending in check. This simple approach of keeping money out of sight or reach, if aggressively practised, can do wonders for your financial well-being and could help you in bringing discipline towards your investments.
4) Protect your health, protect your wealth:
In today’s hasty world, work stress, erratic sleep patterns, bad eating habits, consumption of alcohol & tobacco have become common in our social lives. With rising disposable income, social life revolves around get-together parties on most weekends with outside food & drinks. This not only cuts pockets but more importantly, has an impact on our health. In contrast, a different form of social life is still enjoyed by the older generation. Meetings at parks during walks, discussing topics at the tea stall corner, samosa parties and an occasional home visit for a regular lunch or dinner with home-cooked food is more healthy, saves money and more importantly sounds possible and meaningful. A balanced diet, good sleep, and exercises are all necessary to safeguard one's health and we all would agree, health is wealth.
5) Be patient:
Being patient is a key virtue for success in financial investments. With the right asset class, it allows you to harness the power of compounding interest. Patience is required not only in financial decision-making but also in our daily routine. Like, taking the “Buy and hold” investment position takes a lot of patience, but the fruit that one gets out of it is sweeter than being impatient. One has to give reasonable time for their investments to perform. Being patient also does not mean being idle. One has to make sure that important decisions are not procrastinated and that regular monitoring and periodic adjustments to your portfolio are still necessary.
Bottom Line
While these old-school ideas remain evergreen when they are combined with modern financial techniques, they can help everyone to survive and grow in today’s financial world. Perhaps most of us would also like to explore the old ways, the simple and slow-paced life where the focus was more on quality of life, relationships, emotional stability, savings, living within means and where the display of wealth and acquisition of possessions and being too greedy and materialistic was looked down upon. We may have gotten educated and rich, but there may still be a long way until we become wise and wealthy.
