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7 simple tricks to a happy financial life

June 08, 2009 16:54 IST

We are a transition generation trying to find a balance between retaining our traditional values and also finding a way to ape the West in terms of lifestyle changes.

Well, one of the areas that seems to face marked change due to this shift is that of personal finance. Managing money has been a constant challenge for today's young generation which has upped the antennae on spending.

They are more brand-conscious than any generation before has ever been, the wardrobe has 10 or more different styles of attire for every occasion; vacations abroad are common; buying a house and a car by availing loans is also common. Educational loans and vacation loans are also on the rise.

Conservative with loans and expenditure

Ever heard of your dad or granddad take a loan for a vacation or for that matter for a festive and high spending involved occasion like a wedding? Do you recall them buying clothes because retail therapy helped their blues every other month?

In fact, the average person belonging to the previous generation would spend money on clothes for festivals, weddings or periodically once or twice a year. They always preferred quality over quantity on anything purchased: be it furniture, utensils, clothes or home accessories.

Living life king size!

Today's generation likes living life to the full. What is the point in hoarding away money for a future which is as unpredictable as the weather! They would rather enjoy themselves to the hilt, while the party lasts!

Stress is a huge factor that contributes to these drastic lifestyle changes one is a witness to these days. Today's generation works very hard and plays harder. They want to experience everything in a short span of time. They are impatient to reach their goals and in the hurry to reach their destination they forget to savour the simple pleasures of life that our parents and grandparents had all the time for.

They lived within the incomes they received and saved as much as they could. Their income expense statements showed more cash inflows rather than outflows.

However, the younger generation argues on this aspect. We have but one life and it is too short, so we need to pack all the action in before old age sets in. What's the point in trying to spend on entertainment, travel, food, looks and grooming with creaky joints and false teeth.

Slaving and saving like ants!

There sure is a point there. Our dads and grand-dads lived like an ant generation. Slaving away day after day in the same environment, in the same job for years together, stowing away finances in different debt instruments to accumulate and serve their purpose, when they are old.

Of course, some invested it in land, stocks, gold, etc. as well, which was left to their discretion and knowledge in such matters. The point then is to step back and look at both the lifestyles. Take the good out of both and ensure that our life is to the fullest, with the best of both worlds.

Taking a few leaves from the books of our parents and grandparents:

1. Ensure that there is an emergency fund stowed away for a rainy day. A job loss, recession, illness, etc. could prove to be a temporary setback for which you may incur additional expenses best managed with this emergency fund.

2. Keep impulse purchases to a minimum. Indulging in branded items for certain purchase choices like consumer durables and other long lasting products is fine. However, it does not mean that you should go overboard with being brand conscious all the time.

In case of clothes, look out for the sales season where you avail discounts, shop for quality over quantity, which is any day better. However, if you are the kind who loves a lot of variety and like to outgrow your liking for the same kind of clothes over a period of time, indulge in less expensive clothes with a comparatively lesser shelf life, which can be discarded and refilled with other choices.

3. Don't live life king size all the time, try and bring it down a few notches most of the time. For example, instead of planning a vacation that is out of the continent, you could try a vacation spot in Asia or India, which will bring the same benefits in terms of relaxation and fun and yet be less cumbersome on your purse strings.

4. When there is a boom, there is bound to be crash around the corner. So hold your horses and don't overindulge in luxuries, tomorrow may not work out as planned, nevertheless it is wise to be prepared for it, even if it is bound to take you by surprise. A little foresight could save you from a load of trouble.

5. Take care to have a mixed portfolio with investments in debts and equities apart from an emergency fund and other savings.

6. Debt counsellors advise that 60 per cent of your income should be set aside for savings and investments and 40 per cent should be able to cover your living expenses as well as any debt expenses you might have incurred.

7. Use your credit card judiciously and keep a tab of your debts to ensure they are safely manageable. In fact do not take a loan unless it fits it well with the rest of your financial goals and you can safely repay it without any stress to your budget.

By all means enjoy life, but in moderation. Balance is the key element to have the best of both worlds. A little bit of this and a little bit of that make for a wholesome, balanced life sprinkled with variety.

Abitha Deepak, BankBazaar.com

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