Can You Handle Money When it is in Your Pocket?

459 Views

A miser grows rich by seeming poor. An extravagant man grows poor by seeming rich – William Shakespeare

There are many people who have a great talent for spending money – their pockets become empty within a few days after getting salary. Rest of the month, they have no/little money left to use for important things. As long as they have money in their wallet or purse they cannot stop from spending money. Only when they have no/little money, they can control their spending habit.

This is not the case only with the people who earn monthly salaries. There are many people in India, who have inherited wealth from their parents and lost it due to inability to control their spending. A famous author on personal finance, Robert Kiyosaki says, “If you do not know how to care for money, money will stay away from you”.

We all know that money goes fast from the pocket than it comes in. It is difficult to control our emotions while handling money. Once emotions say spend, we will respond to our feelings and spend immediately; this is because our emotions are many times stronger than our logic. The way of handling money in our wallet determines our financial situation. So, let us know how to handle money properly.

Be emotionally strong
You need to understand the value of your money. You need to be emotionally strong and limit unnecessary spending by controlling desires.

Azim Premji, the second richest Indian with a personal wealth of Rs 85,000 crores, still lives a frugal and modest life. He has money to purchase the most costliest and luxurious car, but still drives a six-year old Toyota Corolla which costs around Rs.12 lakh. He generally will not spend money unnecessarily for his personal things. He is emotionally strong to cut impulses and spend unnecessarily. Don’t think that he is a miser, he recently gave away Rs.1,530 crores to a non-profit educational university.

Sensible people like him have developed an ability to not get carried away by emotions. If you change your spending behaviour, you may not be immediately satisfied but it will allow you to reach your financial goals and get more emotional happiness later.

Learning and implementing the principles of personal finance will help you become financially strong. In order to be financially strong, you need to be cautious about your money especially while spending. The habit of tracking expenses and spending money according to your budget helps you manage your spending and possibly increase your savings. If you are careful while spending, you will save money for other useful things or emergencies.

Delayed gratification
Instead of spending too much to get instant satisfaction, delay the gratification (emotional pleasure) to be financially strong. It has been proved that the people who can control their impulses are more successful. A test conducted by Prof. Walter Mischel at Stanford University, will give you a better understanding of this concept.

He had conducted a test on four-year-old children each of whom was given one marshmallow (a sweet item) and they were promised to give two on a condition that he or she has to wait for twenty minutes before eating the first item. These children were then monitored later for several decades. The children who were able to pass the marshmallow test were able to delay gratification and were found successful in their adulthood. So, this is a good and real-life example of the benefits of delayed gratification.

If you adopt frugal living, there is nothing wrong if you are called as a miser by some people. Many spendthrifts exaggerate when someone is frugal and call them misers. You should not take such comments seriously and change your cautious spending habits. Your spending decisions should be the same even if you have surplus money. This can happen only when you live below your means; that is significantly less than your income.

Avoid being impulsive
Many people tend to make impulsive purchases. Because they want to live a classy lifestyle and spend money on what makes them happy and feel good. Some people buy some unnecessary stuff like buying five watches, dozen pairs of shoe, 10 hand bags etc. But remember one thing, if you are irresponsible with your money, high earnings may not give you better financial situation. Many times impulsive decisions with money lead you to a financially sub-optimal situation.

Lastly, we would like to say that spend money on need not because you have money. Someone who has money in his pocket and still will not spend unless it is justified has grown as a person. Such people will become financially well-off. So, be careful while handling money in your pocket. If you have a habit of saving money instead of making unnecessary purchases, overtime you will even become rich.

Take aways from this article:

Cut unessential costs aggressively
Control your emotions while spending your money
Develop contentment in your life
Sacrifice excessive tendency of expensive recreational activities
Control money and not let money control you