oney! Money! Money!

Every single day, our lives revolve around it.

Either we spend it, trot to the ATM to withdraw it, look at credit card statements and bills (ouch!) or consider borrowing it.

If this ongoing, perennial activity is being done on a muddy path, you are going to slip and fall, and fall bad!

On the other hand, you can get by with intelligent concise placards and stride comfortably into your financial habitat.

• How to start saving

1. Maintain a healthy credit snapshot

Smart money managers think about tomorrow. Remember, life isn't about today or yesterday. It's about 20 years from now, 20 years of making, needing and spending money.

A important step in that direction is to build an impeccable credit reputation.

A good credit record is an integral part of your financial strategy. It will tell future lenders about your track record when it comes to handling money and your ability to repay the debt you are seeking to incur. It will also give them an indication of how much money they can trust you with.

So, if you are used to bad spending habits followed by consequent default on utility payments, you could be in trouble. It's time to do a rethink.

Thanks to the booming financial landscape, organisations like the Credit Information Bureau of India Limited will now monitor your payments, audit your detailed financial history and sniff out any delinquent record.

Yup, there is now a 24-hour financial hound offering these very appealing repayment and transaction-based morsels to a vast array of lenders across the country.

The impact could be a direct translation into a not-so-attractive credit rating! In fact, these very credit scores/ ratings will be one of the primary tools a creditor uses when determining the risk in lending money to you.

Basic credit-building blocks

~ Live within your means.

~ Be committed to your monthly budget.

~ Pay your bills on time.

~ Don't go overboard with debt.

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2. Appreciate the time value of money

Instead of investing on lotteries or game shows, where your chances of winning are a zillion to one, make your money work for you today.

Leverage the power of compounding. Do remember, though, that this is a double-edged sword -- it can work for you or against you. When you invest, it works for you. When you borrow, it works against you.

Here's how it works. You put your money in an investment with a given return -- and then reinvest those earnings as you receive them. The snowball effect over the long term can be astounding.

The lesson is this: every day that your money is invested is a day that your money is working for you.

Now, a peek at the other side of the fence.

When you borrow, remember that compounding is busy working against you. To put it clearly, every time your credit card payment is overdue, you are not paying just 2% per month in interest, you are actually paying 26.8% per annum!!!

So choose which side you want to sail on!

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3. Cash is hip

Life is often a roller-coaster ride and you have to be ready for sudden plunging dives.

A good hedge against such eventualities is to always keep sufficient funds in a savings or fixed deposit account.

Remember, when you are in financial distress and need to raise money, you will either need to borrow from someone or sell an asset -- both of which can lead to a poor deal.

How thick should your nest egg be? You are the best judge. It depends on your overheads and personal circumstances. Obviously, if you are married with a home and a family, you will need to keep a larger balance than a single person roughing it out!

Thumb rule: A sum equal to three or four weeks of your family's income should help you to sleep soundly at nights.

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4. How much risk do you fancy?

Risk appetite, like beauty, lies solely in the eyes of the beholder (or investor in this case).

Whatever you do, be realistic. Risk is an integral part of our lives and you cannot wish it away. All your friends may be investing in the share market, but are you sure you are up to it? The returns could be fabulous, but do remember that stock prices plunge, companies go bankrupt and indices go haywire.

To earn the highest rewards, you have to assume a fair amount of risk. If you minimise your exposure to the perils of investing, then you have to accept lower returns.

So your choice of investing products (it could be stocks, mutual funds, insurance, gold, fixed deposits, real estate, etc) should  depend on when you will need the money, your goals, and if you will be able to sleep at night knowing that the amount you have invested may not make it back home.

• Should you save or prepay your loan?

Financial success is a lot about giving yourself some breathing room and moving beyond a paycheck-to-paycheck lifestyle.

It's about discipline and self-restraint. Believe me, in the long-run, it pays off big-time.

Illustration: Dominic Xavier