A big part of the middle class in our country is salaried and a majority of them are struggling to save money. Every month on 01st day, we receive a text message from the bank that the salary has been credited to your account which is further followed by another text messages of the EMIs that we have to pay. This continues smoothly months after months for years and one day we realise that though we have paid all our EMIs in time, we have not saved anything for the future. Isn’t that true? Yes, it is, for at least salaried class. But why does it happen that we fail to save despite having a decent income? Mr Robert Kiyosaki, author of the famous financial book- “Rich Dad Poor Dad” has revealed that it happens because we don’t understand “Cash-flow”. Our ignorance to understand cash flow is what forces our finances to this situation. Another reason is “We pay everyone else with discipline except for ourselves.” This has been further elaborated in the book – “The Richest Man in Babylon” by George S Clason.
The crux lies in evaluating one’s cash flow. Cash flow is nothing but an assessment of income & expenses. Income & expenses are created by our assets & liabilities. We can control our expenses & increase our income by doing the same with liability & assets respectively. Let us now see the practical way of doing it.
- Control your expenses: The best way of increasing positive cash flow is to reduce expenses. So, keep your expenses in control & retain your income for investing. But how can we do that? We can do it by delaying gratifications. Whenever we see a new mobile phone or finds a new suit hanging in the showroom, we feel like buying them which increases our cash outflow and reduces our chances for savings. Hence, simply by delaying gratification, you can control your expenses.
- Pay yourself first: When you get your salary, you have a list of everyone whom payment has to be made as you owe them. But have you ever put your name in that list? You owe it to yourself that you have a financially secure future. So start paying yourself before anyone else as your own interest comes before anyone in the world.
- Pay your liabilities last: Robert Kiyosaki recommended paying your liabilities last. He further explained that it doesn’t mean you should default. He means that you should first save the amount you wish to & then start paying liabilities. This method serves two purposes. One, it motivates you for saving. Second, it will encourage you to find a second source of income which will satisfy your liabilities thereby leaving more cash to invest.
- Invest in suitable savings instrument: Investing in a suitable financial instrument is equally necessary which may be done with the help of a certified financial planner. There are various savings instruments in the market available to all but not suitable to all. So, contact your financial planner & make an investing strategy.
- Start your own business: Try to build something of your own. As Robert says work on a business that does not need you to be physically present. If it needs you to be physically there, it is not a business, it is a job. It is imperative that you get a second source of income for becoming rich.