Your money, your plan

People say, 'With money, you can do anything.' That is only half the line. The full line is: with money, and knowing how to manage it.

Your money journey starts early: pocket money, gifts from relatives at festivals, money for the bus or the canteen. Do you spend it at once, or keep some in a gullak (piggy bank)? As adults we earn, spend on needs and wants, save, and invest for goals like a house or higher education. Money is a limited resource, so it must be used well.

Personal finance means planning and managing your own money to meet your needs and wants: deciding what to spend, what to put aside, where to invest, and how to be ready for what lies ahead. Planning to buy a house in five years? The planning starts today.

Personal finance stands on five pillars (Fig. 5.2):

• Income: the money you receive;
• Budgeting: deciding how much to spend and save, and on what;
• Saving: keeping money aside for the future and emergencies;
• Investing: putting savings into assets such as shares or mutual funds so they grow;
• Protection and risk management: guarding your money and things through insurance and careful borrowing.

Everything starts with income: no income, nothing to spend, save or invest. It is money received, regularly or now and then, for goods sold or work done:

• a teacher earns a monthly salary;
• a shopkeeper earns profit;
• someone who lets out a house earns rent;
• an investor earns interest on bank deposits;
• a shareholder receives dividends.

Many 'Earn While You Learn' programmes let college students study and earn at the same time, through part-time work, internships or apprenticeships. They pay the bills and teach real work skills.