5 Money Arguments that can prove toxic in a relationship

Relationships are constant work, which means they are not easy to maintain. Many a times a money becomes a sore thumb in relationships. Frivolous spending habits, overly miserly behavior secretly stashing money, etc. have been the death of many  relationships. Know the top reasons for money clashes among partners & effective ways of resolving them: 

1. Overspending:
                    Overspending is the root cause of many problems. Recklessly spending on shopping, travel, eating out to the extent that it affects the other partner is the number one reason for finanial stress. According to a survey, 44% respondents shared they fought because of their own or their partner's spending habits. If your partner's spending habits are pushing you into debt and affecting your own savings plan, it is time to bring in change. 

Remedy:
                    Sit down with your partner and create a budget for monthly spends. Allocate funds for food, travel, shopping & any other expenditure they may be addicted to. Ensure they stick to that budget. Create an automated plan to save a large chunk of the money as soon as the salary hits the bank so that there is no temptation. Also, request them to put away their credit card if they cannot trust themselves with it. 

2. Saving too much:
                    An extremely of anything is not good. If any one partners entire focus is on saving, when will you both live a little? Saving at the cost of small gestures that can create happiness is also a big no. If all a person does is work and save, it can induce sadness, depression and frustration in their relations. 

Remedy:
                   Communicate with your partner so they know how their habit is affecting them. Just saving without leaving a comfortable lifestyle is no way to live. Yes, saving is important but that cannot be the sole purpose if there are not too many liabilities. Going out to eat once a month, talking a holiday once a year etc. is important to strike the right balance.

3. Being Stingy:
                   While overspending can result in a never-ending cycyle of debt, frugality can have a major effect on the mental health of the spouse and children. This normally happens with people who have the money but spending it causes them anxiety. So they try to save every penny they can at the cost of even embarrassing their spouse. It could result from having a tough childhood or ingrained from a stingy parent or just a constant fear of going broke.

Remedy:
                   Try to understand their motivations. Run some numbers to pacify their anxiety. If there is enough money saved to ensure smooth sailing for the next 5 years or 10 years, or if money is already saved for goals such as education, wedding etc. bring it to their notice. There is no harm in getting professional health from a financial expert or a counselor to soother their worries.

4. Lending Money:
                   Getting money into the equation with friends and family is never a good idea - whether borrowing or lending. A partner can feel cheated when money is being lent out to one's relatives without consulting first or they are deprived of their needs as a result. It is known to be a major cause of money arguments among couples.

Remedy:
                   While there is nothing wrong with extending a little help, it should not be at the cost of your family's financial health. Lending a small amount never really harmed anyone; however, the amount should not exceed 5-7% of your income. It is important for partners to be on the common ground when it comes to lending - discuss and decide together.

5. Lying about Money:
                   Marriage means being a team. if one partner goes rogue, it can have lasting effects on the marriage. Having a secret stash of money saved is like cheating your spouse. Lying about spending, hiding an addiction such as gambling are other big red flags. These have proven to be deal breakers in relationships.

Remedy:
                   There is no white and black when it comes to having your own personal savings. If telling your partners means they would insist on taking the money to funds their own needs, it is a grey area and OK to lie by omission. But if the reasons are more selfish and about hiding money from them, then there is an issue. The only remedial measure is to come clean with your partner. 

If you or your partner are facing money issues, use these tips to resolve them and come out stronger. After all, a relationship is for better or worse. 

Poor People Vs. Rich people

7 things poor people do that the rich don't:

• Poor People watch TV, Rich people reads books. 
• Poor people get paid based on time, Rich people get paid based on results. 
• Poor people blames others their misfortunes, Rich people take responsibility for our own failure.
•  Poor people focus on savings, Rich people focus on investing. 
• Poor people think they know it all, Rich people continuously learn.
• Poor people believe that money is the root of all evil, Rich people believe that poverty is the root of all evil. 
• Poor people have a lottery mentality, Rich people have an action mentality. 

Human Life Value (HLV)

"Human Life Value (HLV) of any person can be measured by capitalized value of that part of his income or income earning capacity  devoted or meant for dependents arising out of economic forces incorporated within his being, like character, health, education, training, experience and ambition."

In general, the family of an earning individual is completely dependent on him for subsistence, for other comforts and amenities. Family's economic security is protected till the family head is able to continue the flow of income stream as a result of his productive efforts. Out of his present earnings he also saves for creation of an estate in future to arrange for economic security to his dependents. This potential estate has also to be added to the present economic gain the family is getting.

Thus, HLV of an individual gets converted into an economic value to his family (including his savings in future). To calculate HLV on a scientific basis, we have to deduct self-maintenance expenses incurred by the earning individual. As such from his total earnings we have to keep aside a reasonable amount, which he might have spent on self-maintenance. The balance is the surplus economic value offered to his family totally dependent on him.

Human Life value is a dynamic concept. It represents the total amount of corpus that should be made available to the family of the client in case the client dies today. Human life value will change on a periodic basis due to multiple factors like change in the age, living standards, interest rate, inflation rate etc.

Methods for Calculating

A.      Income Replacement Method

B.      Expense Base Method

Notes regarding Human Life Value Calculation:

1.       Under Income replacement method, Human Life Value is calculated as the present value of all future incomes of the client till his/her retirement, discounted at the expected interest rate which the family will be able to earn post death of the client. Under this method, income can be assumed to remain constant or grow at a fixed rate.

2.       Under Expense based method, Human Life Value is calculated as the present value of all future expenses of the family of the client (excluding the client) till the life expectancy of the longest surviving dependent, discounted at the expected interest rate which the family will be able to earn post death of the client.  Under this method, expenses can be assumed to remain constant or grow at a fixed rate.

3.       Since Human Life Value represents a fund which the family of the client will be utilizing for funding their living expenses post death of the client, thus Human Life Value is always calculated as the present value of a due annuity.

4.       The difference between the Human Life Value and the present value of all net financial resources available with the family post death of the client can be managed by purchasing additional insurance.

Example:

                A young engineer raises a loan of $100,000 from a government agency under a scheme to support unemployed graduate engineers. The loan is being offered to set up his own business enterprise. Thus young graduate does not have any asset to mortgage with the government agency or the sponsor – bank, offering the loan. For capital redemption, a life policy can be taken, which can be hypotheticated against the loan liability. If during the repayment term the loanee dies, the refund of capital is made through the policy proceeds and the life assured’s legal heir or family can keep the business intact. Thus, HLV helps to enhance the credit worthiness of the life assured.

Financial Freedom

Financial Freedom is a word that has taken primacy in 21st Century. It is a term that describes a lifestyle that is organically planned where no one is required to work for income to cover their expenses. Financial freedom perpetuates that one can be free of the responsibilities on money as long as he has set a life defining plan to handle his finances. 

Financial freedom does not mean that one is free of debt. However, it contends that debts can be defined as an expense. While debt is a constant financial consideration, a person who as acquired financial freedom is allowed to mark debt as a part of his expenses rather than a weight to his financial goals. 

Financial freedom is a misconception for being rich. While we know that rich people have a number of million dollars in account, their overhead long run costs could mean that they are not as financially independent as they seem. Therefore, financial freedom is a concept attuned to your lifestyle and the amount of money you have to cover it. It is not as hard to achieve as first imagined.

Financial Freedom is Time Freedom

Financial freedom is equivalent to having an expanded leisure time. The concept of time is money comes into plan. In reality, A financial independent person will see the money is time. Once you are able to develop a sense of time freedom, then that means you are in a positive to acquire financial freedom. It makes one finances less of a concern. Defined differently, financial freedom allows someone to take time on activities without trading your free time for income. Financial freedom hinges a trade-able assets that compound over time to cover for regular expenses. It allows people to cut their working hours with no loss of income because of money making activities. 

Achieving financial freedom requires a different mindset. In our classic college education, we are taught to work for money. Therefore, we put in time to work and then we get our wages. Financial freedom removes the concept of time and money swap and allows an individual to make money work for them. 

To achieve financial freedom, fundamental attitudes about the concept of money need to be changed. Realizing that money is only a mean to achieve an end is one thing. Knowing that one should be judged depending on the amount of money they own is another. Judging financial freedom as the amount of money held defeats the purpose because in the end, you will not have financial freedom if you are not satisfied with the money that you have. It is a personal perception. This perception is highly related to the level of satisfaction that money brings. 

On another side of the coin, we should also remove the negative perception of money. While the saying that "money is the root of all evil" seems relevant, thinking that this is always the case will provide a repellent view about creating wealth. Always put into heart that financial freedom is a healthy endeavor as long as one feels it is ethically sound to make money. 

Having the right attitude about money will go a long way in dealing with different perceptions of financial freedom. Financial Freedom is ultimately state of mind. 

Wealth Erosion

The word "Erosion" is used to describe a "slow destruction process." it implies a slow process covering a long period. Its effects are not felt immediately. However, eroded productivity results into irreparable  loss and no time is left to recoup the damage caused. Therefore, proactive steps need to be taken to avoid the final disastrous damage.

Wealth as an Object
The same process of erosion can be applied t an individual's wealth. Individual's total wealth will include all the assets that belong to him and also the assets being held in the names of spouse and minor children. Tax treatment, applicable to the accumulated wealth is death with separately.

The total value of present day wealth may not remain at the same level in future. The slow process of erosion will reduce substantially the money value of the wealth accumulated. During the  pre-retirement stage, the effect is not much as the individual continues to earn income during his working life span.

Causes of Wealth Erosion

⦁ A continued fall in value of money.
⦁ Reduction in purchasing power per unit of currency
⦁ Rise in the cost of living
⦁ withdrawal of present day savings to finance the increasing expenses towards day to day living.
⦁ Liquidation of current assets to meet contingent liabilities  and repayment of unsecured loans.
⦁ Disposal/attachment of assets mortgaged against secured loans for clearance of outstanding debts.
⦁ Taxation on investments/returns/returnable asset value (Capital gain tax).
⦁ Fall in interest rates
⦁ Sudden discontinuation of income on account of earning individual's death, disablement or unemployment (even for a temporary period)
⦁ Government legislation in regard to land acquisition, property attachment, property auctions, enforcement seizures, kept under the custody of the liquidator, court receiver etc. Shifting of business, residence deeply affecting the realizable market value as a result of court orders or government legislation.
⦁ Prolonged sickness of the client and dependent family members requiring hospitalization, operation, follow up treatment, overseas treatment expenses etc.

There is gradual reduction in purchasing power per currency unit on account of inflation. Over a long period this may result in a steep fall in the value of money. The planner should be able to provide proper guidance to the client while discussing future event predicated o the basis of present economic and political situations, family need in the perspective of present standard of living.