The saving-spending dilemma: Are you saving for a luxurious future while ignoring present needs?
Money earned is income, or flow. It is a payout that an asset offers. Human assets earn incomes or salaries; real estate earns rent; equity earns dividend; debt earns interest; gold earns nothing.
Over our money lives, we manage both the value of the asset and the income it earns. We primarily spend the income and save a portion of it to build assets. The primary purpose of the asset is to enable future income.
Problems arise when we are unable to prioritise what matters. Depending on our life stage, among others, one becomes more important than the other.
I look back at our early earning life in the 1980s.
We had been allotted living quarters within the premises of one of the Brooke Bond factories, where my husband worked at the time. The large French windows of the bedrooms impressively opened into the lawn, but we had no money to buy curtains. Our princely savings was then Rs 5,000 in the bank, and an empty house needed the basics.
We stuck the weekend newspaper supplement, that had just begun to come in colour, on the windows. The full-page Onida advertisements ensured that we slept with a naughty devil smiling at us. There wasn’t enough to spend as we wished.
We squirrelled away a bit in savings, but there was always some large expense staring at us. I still smile at the benevolent personal finance advice that asks the young to save for retirement as soon as they begin earning. The truth is that there is no money for stocking up as they are busy spending on life.
Even in our mid-30s, we did not have much savings. In those pre-insurance days, one hospital bill could have wiped out the little we had.
It was in our 40s that we began to save and build assets, but we lived in times when air conditioners and
