Basics of Managing Money

Money, Money, Money,

Man Made Money,

Money Made Man Mad,

Mad Mad money,

Mad Mad Man. 

Don't know why and from where it came to my head now, but was reminded of this, or this are the lines that came to my head as I registered for the course:

http://www.prime5c.com/managing-money.html

Course is interesting. 

Basics of Managing Money:

1. Is it essential to know about money? 
2. How much money should you earn in the 5th year after your graduation? 

Money is an important aspect of life, it would be good to know about the nuances of money. There is nothing shameful if you aspire to earn lot of money, as long as it is in the good way. 

The course is covered in three modules:

Module 1 - Money economics

Sessions: 6 | Time: 1 hour 23 min

How did Money Originate: 14 min

How did money originate? - It was neither invented nor discovered. It slowly evolved over a period of time. Story of the Barber, carpenter and the milk man. Many years ago, there was a system called barter, it was cumbersome. Then came yellow metal with the cousin silver and paper currency. People were giving their golds to temples and they gave a note which was used by people. This is called the Gold Standard. Issue boiled down to Trust. One bright morning Govt. said there need not be backing and currency was born. This does not mean gold standard was better. As long as people trust the system, paper currency is acceptable, and that is how it was evolved. Today we have Debit cards, Credit cards, mobile banking, electronic wallets etc. There is a wide speculation and strong belief that by 2040 currency will disappear. 

1) Is money an invention or a discover?

2) What is barter and what are it's limitations?

Needs, Wants, Necessities, Comforts & Luxuries- 16 min - These are 5 Forms of spending. Focus on your needs and not want. Ensure you don't spend more than 10% on wants. Spend money on necessities, compromise on comforts and until you have enough money stay off from luxuries. Necessities are things without which you cannot do. They are for life, efficiency or conventional. 

These three progressively take us to higher level of happiness. When it comes to money, different people have different priorities. 

Tax, Savings & Investment-23 min

What are taxed and why it need to be paid? Share the responsibility and earnings to the government. They set up the environment where we earn. So we are partners in the venture we do. They with the money, help maintain the infrastructure. There are two forms of taxes - Direct and Indirect or expenditure or GST.  When people don't pay tax, the tax rates for good guys will have to pay will increase. Why is the government wasting tax payers money? If you earn Rs. 100/- and pay Rs. 30/- as tax, that Rs. 30/- becomes government's money. That they should spend it judiciously is another matter. But it is not over money. 

There are three category of people:

Income - Savings = Expenses

Income - Expenses = Savings

Income + Borrowing = Expenses

The first cheque you write should be to yourself.  

While savings and investment sound alike - the difference is savings is short time, can give less return, but ensure that money is not lost. Investment is more long term. You put aside for longer period. 

1. Is it okay, not to pay taxes? 
2. What is the desirable saving equation?

Learning Material - Income and Expense (3 pages) and Saving (3 pages)

Module 2 - Personal Finance Basics

Sessions: 6 | Time: 1 hour 19 min

Money goals - Smart- 23 min - Make it SMART - Specific, Measurable, Attainable, Realistic, and Time Bound. Write it on a paper in your own handwriting.  -  What, when, ow much, from where, why? 

Smart it, time it, Write it. Time is Immediate, short, medium or long term. Record your goals. 

Power of compounding - 13 min - 8th wonder of the world. You earn interest on the interest. Longer time, More money. Small savings grow into an incurably large amount. There is a great advantage of starting early, as there will be longer time horizon to invest. Like wine, longer period, greater the value of investment. 

Budget and Record keeping - 13 min

1. Right now how much money do you have in your wallet?
2. What was your income last month?
3. What was the approximate spending last month? 

Maintain record of your income and expenditure. 

Learning Material - Credit and Debt (1 pages), Financial Planning (1 pages)

Module 3 - Digital Banking

Sessions: 8 | Time: 1 hour 18 min

Banking Basics 

Not many will step into bricks and mortars or the physical bank in the future. This is not surprising. Last 20 years, banking have undergone a metamorphosis. Bankers drop in at our homes. Opening bank account is the most exciting thing for a teenager. Banks world over are regulated by Central bank, and are interconnected. Bank takes 4 documents when opening an account. KYC documents are important. Depositing here is of lower risk. 

18 min: Online Banking

Now we are in the era of Mouse and click banking from bricks and mortars banking. 

Mobile Banking : Banking on the move.  

Cards : HSBC introduced ATMS in 1987, in the matter of few years it will disappear. Now there are three types of cards available - Prepaid cards, Debit cards and Credit cards. 

Comprehensive level - digital bank, internet banking, ibanking, mobile banking. 

12 min: How to invest in bank term deposit - 6 Parameters to look into before investing - few ratios to know if the bank is good or not for investing, these ratios will be available on the internet. They are:

1. Gross NPA ratio  - Higher the ratio, risk is more, lower the better
2. Net NPA to total Assets ratio -   Lower the better (Net = Gross-provisions)
3. CASA - Current account, Saving account ratio to total assets - Higher the better
4. Net Interest Margin - Lower CASA, less would be the net interest margin, the higher the better
5. Capital Adequacy ratio - Capital to risk weighted assets. Higher the better. 

For Bank the raw material is money and finish product is money. 

Identify 10 banks and find the 5 ratio. Based on the 50 numbers, see which banks are good. 

18 min: Learning Material: Insurance (2 pages), Investment (2 pages), Retirement (1 pages), Govt Schemes (4 pages)

Closing

You should be careful about money and take necessary safeguard. 

There are three parts to Money:

• Making or earning money as the only person who make money are the ones working in the mint.
• Managing Money - Be wise
• Manifesting Money.