Friday, November 12, 2010

Using Money Creatively

They say most people are more uncomfortable talking about money - even more than talking about sex. It is an uncomfortable thing and it is evident in the way we use it. We either store it, hide it, throw it away (all those shopping binges you kick yourself for later). We get uncomfortable in dealing with large sums of money (remember how quickly we return any money given to us for safe keeping). We get worried when sometimes the flow of money reduces (biggest cause for those lines). Most are perpetually worried about money flow reducing in their life and are constantly worried when it will stop (as if worry brings more money). It is really interesting to see how people react to money and how money reacts to them.

I think the early value and belief system that I saw never encouraged much money or even talk of money. So money was a convenience - at best. It was not spoken about except in hush hush tones. And it was something that does not grow on trees - so much work must go into it. It can have bad consequences if there is too much of it (or even if one has excessive thoughts about it). Just enough is fine, and whatever we have, we must be very very careful with it. Of course not having access to great amounts of money makes it all seem rather distant anyway and I somehow thought that if we build some saleable skill we'd get some work and that would enable us to pay the bills. In time we will make enough to buy a car and a house and live happily ever after feeding off FDs and stuff like that one has built up over the years. Or something like that. A most uncreative way of looking at money. A most formal, unappealing way of treating money.

But then when I worked in a bank I realised how money can be used creatively when I saw all these businessmen and their proposals. Unlike the common perception that businessmen are crooks, I rate them highly, next only to politicians for their flexibility of mind and thought. So you see businessmen creating value out of a thought, raising loans, pledging small assets and leveraging ideas to raise that much more. And all this money that he raises, he uses well in building assets that will work for him. And then he pays off the lenders, appeases the shareholders and is happy juggling all the flow of money. It never ends, this flow, and has to be constantly juggled and he does that, happy in using that energy to create bigger things.

This is where most fail. We look at money as something that needs to be stored. Or as something that needs to be used against a need. How often have we looked at money as something that can be used creatively? How often has it been used to create something else, bigger, something that can grow more than through the conventional routes? Once that thought comes in, money becomes something alive - it bustles with energy and starts moving. Like a plant. And one understands the many ways that money can flow in. And out.

I realised that we carry much more money than we give ourselves credit for. We lock it all up and look at the bank account despairingly. But then if one sees all the stuff that can be liquidated, all the money that is locked up, all the debts that are due to you, all the liquid, semi liquid assets that can be used or leveraged then suddenly it takes a whole different hue. And after that comes the bigger leverage - your capacity to raise debt, to take loans - which is again money. It is interesting how this play of consciousness guides the flow of money - how it is always there when you need it, and enough. But to get more than enough, one must be comfortable enough to be with money, to respect money and to play and flow with money.

Through all those years in the bank, the one thing I learned is this. That one must always use long term funds for long term uses - (i.e. house loans should go for building houses etc), and short term funds for short term uses - (part of salary for paying off bills) etc. If required one can even use short term finances to build long term assets which is prudent thought it may tax one a bit. But never, ever, use long term funds for short term uses, (i.e. proceeds of selling a house to fund a world trip), however tight it appears. That is a recipe for disaster. All the businesses that I saw going bust adopted this crazy attitude and the ones that did well always used money judiciously.

Now to use money creatively!


Prasanna Kumar said...

Very useful article. Now if I think about all the times when I used long term funds for short term benefits., it was always disaster if not immediately but later.

Thanks for the good one.

Harimohan said...

Thanks Prasanna.