I recently was reading about Jan Dhan Yogjna and came across some really nice posters created by their team which is used to educate public in their financial literacy camps.

On looking those posters, I was really touched by its simplicity and how powerful they are to install basic foundation lessons. There were many posters in the PDF file I saw on their website, but I picked 6 posters which I was to show you and teach you some important and foundation lessons on money.

I request you to read what I have written for each of them (don’t skip them) to benefit most from them. I know some of you might feel, these points are not for you, but trust me – many of you need them as much as others.

Lesson  #1 – Essential Expenses comes first before Non-Essential Expenses

You always have two kind of expenses, essential and nonessential and whatever income you earn should first go into expenses which are extremely essential in nature like food, house, education, Medication etc .

If you see the porter above, it shows you a pot which in its bottom has all the essential things and all the non-essential things come about it. In the similar way, when you are investing or spending your money always ask this question – “Have I taken care of the essential first ?” .

I know this looks too basic thing and its assumed that even a fool knows this, but reality is very different. You will see lots of parents who have spent 30-40 lacs on lavish wedding of their children, who are now struggling to even buy a house.

There are people who have invested their money in land, which is locked and now they are struggling to pay high education fees for their children. There are parents who are saving for their car, even before they have any money accumulated for their kid’s school fees.

Lesson  #2 – Financial Planning is extremely Easy – if you are ready

The next poster shows the simplicity of financial planning and how easy is it to implement. All you need to do is be ready beforehand and act on requirement. The above poster is created from a poor person’s perspective, but there are big things to learn .

Whatever is your future need, write it and then find out how much you need to invest on a monthly basis and then DO IT . There is no extra ordinary thing done by those investors who always meet their life goals, all they do is properly save with discipline.

Lesson  #3 – Spend, Reduce and Avoid

You always have 3 categories of expenses in your life. Needs , which needs to be taken care of no matter what you do and you have to spend on those things, no matter what, like education, food, health, medicine. You should make sure you spend on these things and don’t cut on them provided you have the money for these things. Its essentials of life and they are critical for your existence

However there is another category called Wants, which are “great to have” things in life. Things like expensive clothes, entertainment, holidays – which is something where you have to define your limits. You don’t have to cut them out of your life, but always remember how much you need to spend on those things.

You have to REDUCE your spending on these things if possible and then at last there are VICES, which are bad for you, which destroy lives in long run. Smoking, alcohol , gambling etc which give a pleasure in short-term, but should be totally cut out from your life. Most of the people in lower strata of income always remain poor mainly because of these vices.

Lesson  #4 – Debt will destroy you, if you dont handle it properly

I love this poster most because I know most of the people can relate to it more than other posters. Debt is like sugar – sweet for now, diabetes for future . Millions of people today are in debt cycle which started very small.

When their career started, they bought a bike on EMI , or they swiped their credit card because they need loan for some not so important purpose in life (and many times, very important) and then from that time, till date they are paying the EMI for some of the other purpose.

Availability of easy credit has made them addicted to loans and credit offers. One side when one has to save and grow their money, people in debt cycle are actually doing the reverse.

If you see the image above, you can see how poor people get in debt cycle, the easy availability of credit from sahukar or friend in their village makes sure that they are always in that debt cycle, because anytime they need money, they can get it (at small level) and the interest they pay does not look huge (because it’s in rupees terms) like Take Rs 1000 and give back Rs 2 every day , that is bloody 72% per year. Avoid it if you can

Lesson  #5 – Save money keeping in mind your life cycle needs

Most of the people live as if life will always be great and they will always see happy days in life just because their current situation is awesome. Bad things happen in life and you can have it too . It’s important that you save for bad days keeping in mind all phases in life.

I came across a 53 yr old person recently who has spent on everything else in life, but has Rs 0 for him today and now when he is free from other responsibilities in life, wondering how will he manage in his old days since only 7 yrs are left before he will be “senior citizen” .

You will see change of jobs, birth of child, death of someone , lowering of income and many other things which will need money that time which brings an important question – “Are you saving minimum 20-30% of your income for your future needs?” . If not , think on this .

Lesson  #6 – Borrow to undertake an activity, which enhances your income

I want you to stay grounded with that statement for a moment.

– “Borrow to undertake an activity, which enhances your income“

No statement can make it simpler than this. If you are taking loan, ask the question (unless its emergency) – “Will it be used for something which can enhance my income or build me a growing asset ?” . If the answer is YES – you can go ahead, else refrain from it.

Most of the people I came across have tons of personal loans, credit card debt, car loan which is not helping them build anything in life, it’s mainly for their consumption . To some level I am not too much against it personally, but when it’s beyond the limits – it really troubles you all the life because you never get a good enough start in your financial life in initial years.

Basic, but foundation lessons

Today’s article was a bit basic in nature, but I would say its very important one which builds foundation of every investor. Despite it looking basic, millions of investors don’t follow it and get into trouble. I want you to send this article to at least 5 people you know are starting their career, or you feel need some foundations in personal finance knowledge.

Would love to know what you think of these lessons and did you love these posters ?