Most of us would either say ‘No’ and ‘I don’t know’ to those questions albeit all of us want our money to work harder than we do and generate residual income. Residual income is the income your money makes when put to work.
It becomes more pertinent at times like these when we get back to looking at every rupee with great appreciation as most of us are really grateful for being allowed to work 70+ hours a week even for peanuts in the midst of all the mayhem around us. If there is a way, we would definitely wish to make our money work harder.To accomplish that do to your money what your boss does to you.
The worst thing that our money can do is treason by forcing us to work harder for others. Most of the times we let it happen and wonder about the Government not doing anything about home grown terrorists and traitors. At our level, the money we borrow is that traitor. We feel it is ours but its loyalties lie with the lender. We need to get rid of that as soon as we can before we end up belly up, stiff and cold at times like this.
Identifying the vacation spots of money is the second thing on the list. To be on vacation, your money converts itself into pricey gadgets that attract us a lot when they are in the mall but never seem to do so once they are brought home. They are generally either not utilized or under utilized leaving our money to enjoy them. Most of us can recollect with ease, at least 10 such items in our possession. How about the traitor money relaxing at our home? It is just as good as putting salt on your bleeding wounds.
The third spot to chase money out is the low yielding deposits, mutual funds and things like ULIP which are generally instruments to let our money make the peddler rich. Peddlers have different names like ‘investment banker’, ‘insurance agent’ etc. Money as cash at home and in a savings account falls in this category. About 6-12 months of our monthly expenses need to be in this category as emergency funds but anything more than that is certainly money taking it easy while you are slogging. An easy way to identify if our money is tricking us to shirk work is to break down income and expenses to a per day level.
Most of us end up spending beyond our means as we measure our income (CTC, salary etc) on a per annum basis while most expenses are a daily feature. Let us assume a simple case of ‘B’ who needs to take a simple decision about making a purchase or indulging in something that costs 2000 rupees while his CTC is about 1 million (10 lakhs) rupees per annum. After every deduction including the highway robbers’ cut, A gets 7.3 lakhs per annum or about 60833 rupees a month. B feels he is pretty well off and can afford some luxuries. The fact is B makes about 2000 rupees a day (7,30,000/365) and so the day he spends 2000 or more, he borrows from another day’s earnings. On that day B has not made any contribution to his rainy day fund or the corpus that would get B his residual income. Things get scary when he breaks up his EMI and all other payments including electricity bills, grocery and so on into a per day amount. B is definitely living like an American, living like there is no tomorrow and living beyond means are also apt but they are so hackneyed.
Witnessing what is happening in the USA needs to be the wake up call for many of us. Saving for a rainy day adds to one’s corpus. Investing that money in instruments ranging from fixed deposits to large cap stocks as per a person’s age and risk appetite would mean a steady residual income. As an example, 365,000 rupees invested at 10% p.a. interest yields 36,500 rupees a year or 100 rupees a day to make it simple. All of us can calculate our daily residual income and then look at expenses in a new light.
For those of us living on peanuts our erstwhile CTC looks fabulous but like all fabulous things it was evanescent. In the light of this most of us would albeit hesitatingly agree that our residual income is our RE(sidu)AL income. It would make sense to use all other income as and when we get it to enhance our re(sidu)al income by prudent investment. Ask yourself “What is my RE(sidu)A income? ” Dinakarananda wishes you all the best and a good and growing residual income.
Written By ArthaYantra
