Know your money

During my career as a Financial Planner over many years, I have observed an investor’s problem in knowing the difference in his expenditure and investment. Here I come up with the normal concept of knowing what you are doing of the money you saved.

Investment: Anything where you put your money now and it generates return in future is the investments. For an instance, you are investing your money in a real estate, bonds, mutual funds, etc. The return cycle can be short term as well as long term depending on the nature of instrument you purchase. It is a situation where your money earns money. The ‘earned money/ income’ part is called as interest or dividend and your money is called as principal. Also anything that you buy, increases its value with the passage of time is also a second type of investment, e.g. buying a property will increase its value in years. You might not get the immediate returns or cyclical returns but definitely additional money on the sale of your property after number of years.

Expenditure: Next big deal is to understand your expenditures. Any amount that is spent for which there are no clear likeliness of generating additional money is expenditure. Expenditure once done is lost. It is clear consumption of money. For e.g. buying a new car, its value will depreciate over the time unless it is a vintage car which may increase its value over years.

Thus, you should clearly decide and judge yourself about your hard earned savings. It is essential to know your goals. Do you want to invest or do expenditure? Ask a question to yourself and then take a decision wisely.