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6 Financial Lessons Only A Father Will Teach You

Budgeting encourages us to draw up a spending plan so that we have enough money for the things we need the most and prevents us from running up debts.

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Legendary investor Warren Buffett has attributed his phenomenal success largely to his father Howard H. Buffett who, he said, gave him the best advice of his life: It takes 20 years to build a reputation and 20 minutes to lose it. The senior Buffett told his son that if he remembered that, he would do things differently. Warren Buffett took his father’s advice seriously. He developed a passion for investments, mastered risk management, and became one of the wealthiest people in the world — all the while fiercely guarding his reputation and integrity.

Not everyone becomes a billionaire, but everyone should listen to his or her father, who is often the first teacher, role model and financial planner. Fathers teach many important lessons to their children, preparing them for the various stages of their personal and professional lives beginning with the value of humility, integrity, honesty and responsibility. They also guide sons and daughters in their careers, helping them to overcome challenges and achieve their aims, including business, entrepreneurial and investment goals.

Father’s Day, on June 21, has come at a time when the world is going through an unprecedented crisis, economies are straining to recover, businesses are struggling to reopen, and individuals are trying to survive job losses, pay-cuts and financial hardships. One way to celebrate this day would be to recall the financial wisdom imparted by your father and use it to make the right choices and come through these difficult times.

Here are a few Father’s Day lessons that you can prioritise as you work remotely to emerge in a financially better position when you resume work and adapt to a ‘new’ normal life.

Save for a rainy day: It all started with the piggy bank when fathers would give their children a coin, usually of a particular denomination, over several weeks or months. When the piggy bank was full, the children would break it open and use the accumulated money to buy their favourite toys. As they grew up and started working, fathers advised their children to set aside a portion of their income every month and use it for luxury shopping, home renovation, a holiday or an emergency. The lockdown has offered most people a chance to reduce unnecessary expenses, or discretionary spending, and save for a time when it might be needed the most. Left unutilised, the money can earn interest and turn into a sizeable corpus.

Set financial goals for the future: The piggy bank is a perfect analogy for financial planning or setting financial goals from a young age. It inculcates the habit of savings and investment, and sets long- term, albeit realistic, goals for the future. We were repeatedly advised to balance our income and expenses, so that we did not live beyond our means. A sound financial plan ensures a robust financial health.

Budget, budget, budget: No matter how hard we work or how much we earn, it is quite unlikely that we can save or invest without a proper budget. Living within our means inculcates spending discipline, ensures better financial health and influences sound financial decisions. Budgeting encourages us to draw up a spending plan so that we have enough money for the things we need the most and prevents us from running up debts. In the COVID-19 era, especially, a fixed budget can enable us to keep tabs on our income, expenditure and savings, and help see us through this or any crisis.

Pay your bills on time: We live in a consumer-driven world and though we may live within a reasonable budget every month, we still run the risk of falling into a debt trap resulting from an outstanding loan or an overdue credit card payment. A father’s Rule No.3 is to pay all our bills and EMIs on time, even ahead of due date if possible, and opt for a loan only if absolutely necessary. The lending market offers a plethora of collateral-free credit facilities to help tide over a cash crunch.

Invest wisely and safely: Teaching children about the fundamentals of investing is critical to their financial literacy. As they grow up and step into their first job, they are told about the importance of researching the various investment tools in the market, including stocks, mutual funds, insurance, bonds, pension, small savings schemes, gold and fixed deposits. A thorough understanding of these investments helps you to park your funds in safe instruments and reap the benefits in the future. The pandemic offers an opportunity to revisit our investments, plan afresh, and set new and realistic goals for the years ahead.

Keep an eye on the details: Another golden rule is to check each and every financial detail such as interest rates and credit card balance before taking any financial decision. For example, if you plan to take a loan or apply for the RBI moratorium on loan EMIs, which has since been extended by three months, till August 31, 2020, make sure you read the fine print so that the deferment of payment proves beneficial to you. Opting for the moratorium without going into the details may cause more problems than it may solve.

So, this June 21, offer a big thank you to your father and if you can, continue to gain as much financial skill and knowledge from him as you can. Your father is still your best teacher.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Gaurav Chopra

The author is Founder & CEO, IndiaLends

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