“Every rupee that you own has a time value attached to it.”

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This is one of the core principles of finance. It simply means that every rupee you own today has far greater value or worth than a rupee owned tomorrow. The logic being that a rupee today can be leveraged to generate more money in the future as money has time value.

In a world dominated by consumerism, money has become an important commodity. Almost everybody wants to become rich at some point in their lives and becoming rich can be attained without much stress just by adopting the right financial habits. The opportunity to become rich is present right in our home, in the money that we keep idle or in the money that we lend to our relatives or friends etc.

A majority of people especially business owners have the habit of keeping cash reserve balances in their house, offices. Most of us even lend money interest free to our close friends, relatives or to any other institution. This means that a part of our money is lying idle which is not the habit followed by rich people. Rich people leverage every income generating opportunity as they know that money has time value attached to it; they make sure that;

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“Every rupee is involved in a continuous income generating activity”.

Keeping one’s money idle is the foremost common mistake followed by most people. Lending and borrowing are plain transactions.
For example:

  • When you borrow money from a bank or from any other institution, you are charged a rate of interest and this interest amount is calculated on a per day basis, monthly basis, yearly basis. This interest amount is calculated on the number of days you utilise the loan amount.
  • Similarly when your money is deposited in any FD or Commercial paper or capital gain bonds or in any other area where you get returns, you get the fixed returns based on the number of days the said instrument is there with the banker, or with the assets management company or with anybody else.

Therefore, when you lend you money to someone else, the common rule is that you too charge interest rate against it.

“However, a majority people don’t charge any interest if the amount has been lent to their relatives or to their close friends”.

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Their reasons for not charging interest range from societal norms of our culture to feeling ashamed or hesitating to charge or thinking it’s haram or that it’s not moral or that it’s not required etc. These reasons however cannot deny the fact that, if money has been lent interest free, that money is still lying idle. It’s not generating any income!

A win-win solution here can be to charge a minimum rate of interest against the amount lent as no money should be kept idle without generating any income. Hence;

“Charging interest rate is a non-negotiable golden financial habit”.

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The percentage of interest to charge however is on the tables of negotiation. It is up to an individual to decide if they want to charge a high rate of interest or minimum rate of interest. The point here is to inculcate a habit whereby you generate some kind of value income for the time during which the money is kept idle.

Call to action:

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  • A common tool used by high net worth individuals is generating interest income on their money via call money market. You too can opt for this option and invest through any asset management company based on your requirements in any kind of liquid fund, money manager fund. Both these monies are going to be invested into a call money market where you can generate a daily income.
  • Start charging interest rate on amount lent from today itself. If you don’t want to charge excessive interest rate, then charge minimum rate of interest (bank rate).


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