Most people fail to realize that in life, it’s not how much money you make, its how much money you keep. We have all heard stories of lottery winners who are poor, then suddenly rich, then poor again. They win millions and are soon backing to where they started.  Because, they tend to focus on the word “literacy” and not “financial literacy.”



Why people in financial mess

So when people ask, “Where do I get started?” or “Tell me how to get rich quick,” they often are greatly disappointed with my answer. I simply say to them “If you want to be rich, you need to be financially literate.”

Illiteracy, both in words and numbers, is the foundation of financial struggle. If people are having difficulties financially, there is something that they cannot read, either in numbers or words. Something is misunderstood. The rich are rich because they are more literate in different areas than people who struggle financially. So if you want to be rich and maintain your wealth, it’s important to be financially literate, in words as well as numbers.

Today, doctors, CAs, MBAs, lawyers and other professionals are facing financial challenges because they leave institutes without financial skills, millions of educated people pursue their profession successfully, but later find themselves struggling financially. They work harder, but don’t get ahead.

What is missing from their education is not how to make money, but how to spend money-what to do after you make it. It’s called financial aptitude-what you do with the money once you make it, how to keep people from taking it from you, how long you keep it, and how hard that money works for you. Most people cannot tell why they struggle financially because they don’t understand cash flow. A person can be highly educated, professionally successful but financially illiterate. These people often work harder than they need to because they learned how to work hard, but not how to have their money work for them. 

A Journey of hard-working people

The story of bow the quest for a Financial Dream turns into a financial nightmare. The moving-picture show of hard-working people has a set pattern. Recently married, the happy, highly educated young couple move in together, in one of their cramped rented apartments. Immediately, they realize that they are saving money because two can live as cheaply as one.

The problem is, the apartment is cramped. They decide to save money to buy their dream home so they can have kids. They now have two incomes, and they begin to focus on their careers. Their incomes begin to increase. As their incomes go up…their expenses go up as well. And the No. 1 expense for most people is taxes.

As a result of their incomes going up, they decide to go out and buy the house of their dreams. Once in their house, they have created liabilities as housing loan. Then, they buy a new car, new furniture and new appliances to match their new house. Ail of a sudden, they wake up and their liabilities column is full of mortgage debt and credit-card debt.

They’re now trapped in the rat race. A child comes along. They work harder. The process repeats itself. More money and higher taxes, also called bracket creep, a credit card comes in the mail. They use it. It maxes out. A loan company calls and says their greatest “asset,” their home, has appreciated in value. The company offers a “bill consolidation” loan, because their credit is so good, and tells them the intelligent thing to do is clear off the high-interest consumer debt by paying off their credit card. And besides, interest on their home is a tax deduction. They go for it, and pay off those high-interest credit cards. They breathe a sigh of relief. Their credit cards are paid off. They’ve now folded their consumer debt into their home mortgage. Their payments go down because they extend their debt over 30 years. It is the smart thing to do.

I run into this young couple all the time. Their names change, but their financial dilemma is the same. They come to one of my talks to hear what I have to say. They ask me, “Can you tell us how to make more money?” Their spending habits have caused them to seek more income.

They don’t even know that the trouble is really how they choose to spend the money they do have, and that is the real cause of their financial struggle. It is caused by financial illiteracy and not understanding the difference between an asset and a liability. An asset is something that puts money in my pocket and a liability is something that takes money out of my pocket. This is really all you need to know. If you want to be rich, simply spend your life buying assets. If you want to be poor or middle class, spend your life buying liabilities. It does not know the difference that causes most of the financial struggle in the real world.

Power of CHOICE

In reality, the only real asset you have is your mind, the most powerful tool we have dominion over. Just as I said about the power of CHOICE, each of us has the CHOICE of what we put in our brain once we’re old enough.  That is the main reason people want to live in a free country. We want the power to choose.  Financially, with every rupee, we get in our hands; we hold the power to choose our future to be rich, poor or middle class. Our spending habits reflect who we are. Poor people simply have poor spending habits.

You can watch movies or hear songs all day, or read sports and star dust magazines, or go on various blogs, chats and social media sites or a class on financial planning. You choose.

Most people choose not to be rich. For 90 percent of the population, being rich is “too much of a hassle.” So they invent sayings that go, “I’m not interested in money.” Or “I’ll never be rich.” Or “I don’t have to worry, I’m still young.” Or “When I make some money, then I’ll think about my future.” Or “My husband/wife handles the finances.” The problem with those statements is they rob the person who chooses to think such thoughts of two things: one is time, which is your most precious asset, and two is learning. Just because you have no money, should not be an excuse to not learn. But that is a CHOICE we all make daily, the CHOICE of what we do with our time, our money and what we put in our heads. That is the power of CHOICE. All of us have CHOICE. I just choose to be rich, and I make that CHOICE every day.

Invest First in Financial Education

Most people swim around daily on Google in search of “FREE solutions.” Two hours, later, they step back from the screen wondering where time has flown. What got produced? What is the tangible outcome? Only research. NO action that can lead to financial results.

Here they are wasting their time in small instalments and they are not even aware of it. Always remember, NO capital is getting generated from these activities. NO wealth is getting generated. There is NO increase in their bank balance due to it.

Most people simply buy investments rather than first invest in learning about investing. To help make profitable financial decisions, it is necessary to understand the basic purpose of investing.  We should a long view on our wealth.  We should not subscribe to the “Get rich quick” mentally most lottery players or casino gamblers have.  We may go in and out of stocks, but we should, firstly long on education. If you want to fly an aeroplane, you have advised to take lesson first. I am always shocked at people who buy stocks or real estate, but never invest in their greatest asset, their mind. Just because you bought a house or two does not make you an expert at real estate.

The ultimate goal of improving your personal financial literacy is to make smart money decisions and improve your financial well-being.

Financial knowledge and awareness can help you take mature decisions on every topic of personal finance from your expenses, savings, budgeting to using plastic money wisely. Each of these decisions has an impact on your finances overall and hence the ability to make good financial decisions is very important.

So how do you improve your personal financial literacy?

  1. Start by building up your financial awareness – you can read good personal finance websites, newsletters and read the financial newspapers.

           Warning: there is a lot of noise out there, choose only that information     

           Channels that give you impactful information. 

  1. If there is something you want to understand about a product but don’t have anyone whom you can ask, you can always do an internet search on the product and read up on its features. But be sure to access the right information from a website which verifies its information, such as a news website or an independent research website. Avoid reading personal blogs as these are simply an amalgamation of people’s opinions and may or may not be based on fact.
  2. Speak to your unbiased Financial Planner to give you an honest view on whether a particular financial decision is the right one to make or not.

The more information you gather, the more you will have on hand to make an informed financial decision. Every single informed decision you make will go towards making the most of your financial plan.

“Want to build your wealth to achieve your life goals, first, build your knowledge”

2005 Total Views 5 Views Today

The following two tabs change content below.

Suresh Kumar Narula

SEBI Investment Advisor, Founder & Principal Financial Planner at Prudent Financial Planners
Suresh K Narula is founder and Principal Financial Planner at Prudent Financial Planners. He has earned the professional CERITIFIED FINANCIAL PLANNER and got registered with SEBI as Investment Advisor. He writes on personal and financial planning articles and got published in Dainik Bhaskar, Business Bhaskar and The Financial Planner's Guild, India. He is also a member of Financial Planner's Guild India ( An association of practicing SEBI registered Investment advisers) to create awareness about Financial Planning in general public, promote professional excellence and ensure high quality practice standards. Suresh received his an from Himachal Pardesh University and an MFC from Punjab University, Chandigarh. He can be reached at
5.00 avg. rating (90% score) - 1 vote