List your assets, estimate the value of each property including your earnings from salary, shares and savings, and add up the total. Then list the liabilities, which are basically loans you owe. You have simply found the total value of what you own and what you owe. Subtract your liabilities from your assets and that’s is your net worth in financial terms.

Wait a minute. Is the answer a positive figure or a negative? If your net worth is a negative figure, then you are in serious trouble.

We all earn and spend money, but how well do we manage our cash flow determines our level of financial discipline. It boils down to how wisely you make your financial decision to secure your future. And, this will depend on your financial literacy aptitude. In other words, financial literacy is the ability to use knowledge and skills to manage one’s financial resources effectively for financial security.

It starts with saving. Studies have found that Bhutanese are not good savers.

According to a financial literacy survey conducted in 2016, Bhutanese spend heavily on improving their living standards and little do they explore investment avenues.

The survey pointed out that most of the family income is spent on consumption for purchase of food items and electrical appliances. A substantial number of survey respondents prefer to buy cars, houses and land with the savings they have.

Statistics reveal that household consumption in the country is more than half of its GDP and its increasing annually.

This will upset the country’s account and trade balances.

Why save?

Because future is unpredictable, saving money provides a safety net during rainy days, like to educate one’s child, to buy a house or to do funeral rites.

Equally important is where people save as Bhutanese prefer stacking money under their beds rather than in banks.

Consider the average annual inflation of about five percent. This means that the price of goods and services are increasing and it erodes the purchasing power of money. Figures from the National Statistical Bureau (NSB) reveal that Nu 77 in December 2012 is worth Nu 100 in January 2017.

Keeping the money idle at your home is theoretically a loss as there are no incentives to save. Banks assure interest on saving and this will keep up with the inflation.

The Royal Monetary Authority (RMA) has initiated a financial literacy programme targeting mostly youth.

Nangsi Dema of financial inclusion and literacy unit of RMA said even civil servants are not good savers and youth are not aware of how banks work. She said that target is to reach the last mile, unbanked population in the rural pockets through digital finance.

She said a financial literacy curriculum is being developed in collaboration with Royal Institute of Management (RIM) for the schools. “This will be a part of value education because we don’t want to burden the students by including in the mainstream curriculum,” she said.

On savings, she said people do not go for financial shopping. Financial shopping is similar to window shopping, comparing the rates and services different banks offer. This is important to get the best return.

Why loan?

There is a traditional Bhutanese saying: “Wealthy is a man who has no loans.” This, however, is not always true in the financial world.

Perhaps, it may hold true if you are living on borrowing instead of earning and not investing. Availing loan to buy a television set or a mobile phone or to fund a holiday in Bangkok, for instance, is not in keeping with a good financial discipline. Then you are indebted to the bank and most of your income would be exhausted to repay the banks.

Loan becomes worthy if the plan is to multiply the amount by investing in productive activities. This is why the RMA has initiated a priority sector lending scheme to encourage entrepreneurial and agricultural ventures.

The returns from such ventures will not only assure repayment but also generate income. It creates employment and contributes to poverty reduction. This way the ripple effect will be on the whole economy.

Secret SAVE formula 20/50/29/1

Save a minimum of 20 Percent of your net income and keep it aside: Keep half untouched for rainy days

Keep provision after of 50 percent for your regular and unavoidable expenses

Distribute the 29 percent as your volatile fund to spend on Investment, paying off loan, treat yourself, top up a little for regular expenses

If no plans on the 29 percent, double your savings and enjoy the balance

1 percent left? What should you do?

Tshering Dorji