Monday, September 5, 2016

Rich or Poor - RIPE - economics of minimalism !

RIPE: the Economics of Minimalism

Around six years ago, I was discussing with my father the concept of money-management.
While I tried to impress him with my newly acquired knowledge of terms of finance and I was trying to explain some jargon, he kept listening patiently.

After another 20 mins of my blabber on financial planning and wisdom, it was my father’s turn to speak.
He asked me: Why worry so much about quaint terminology?

I mumbled some answer. But then he continued: Isn’t this all for becoming richer? Having a better life ?
I said: Of course! That is why there are financial advisors and CAs who help people plan!

My father agreed. He said, definitely that is correct, but at the core of all this notion is a very simple thing.
Just 4 variables, R,I,P & E. If you understand them - you will understand money, its role and its management.

Curious to understand the philosophy of RIPE I was all ears.
He continued: R=Rich; I = Income; P = Poor; E = Expenditure.

And irrespective of the absolute values of these variables, this is the simplified relationship between these variables:

R is when I > E and P is when E > I.

I resisted! And my father continued: 
He said, “No matter how much you earn, if your expenditure is more than your income, you will remain poor. And a poor man is often worried, needs to work hard, is full of complain and grudges and can not enjoy one’s life! On the other hand, if your expenditure is less than your income, you have a surplus. You can relax, enjoy your life, and derive pleasure out of smallest of things.”

He concluded: “Not that one should force poverty on oneself, but a fine balance between Income (I) and Expenditure (E) shall decide one’s state of bring Rich (R) or Poor (P). And often it is one’s choice”.

That wisdom, although an oversimplification has been a guiding principle in my journey towards minimalism and keeping E < I has given me immense joy and a lot of spare time to pursue dreams.

Dear Father, on Teacher's day, thank you for this life changing lesson!