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Money evokes extreme emotions. While we all know that money is just a means to supposedly greater ends, varying from person to person, we get to see love, anger, jealousy, hatred and most of all crime because of unscrupulous desires for money.
November 8th will go down as an important day in India's economic history. The whole attention was drawn away from US elections to India with the announcement of Rs. 500/Rs. 1000 notes demonetization by the Prime Minister, Mr. Narendra Modi. Let alone India, the world was stunned by this bold and gutsy move in a country where everything seems to move at a slow pace. Singapore media compared Mr. Modi with Lee Kuan Yew, the first Prime Minister of Singapore and considered as nation's founder, with the headline "A New Lee Kuan Yew is Born in India". Within a couple of hours, we all received hundreds of WhatsApp messages with facts, opinions, jokes, images and videos on demonetization. I probably have not laughed so much in a long time with the jokes on social media.
While the nation digested this important news, everyone including economists, journalists, writers started sharpening their pencils whereas political parties began pointing their knives. It has been mentioned ad nauseam that the demonetization step will extinguish unaccounted (read black) money, fake currency and funding of terrorism activities in India. However, the acceptance of any step is not so simple with 1.25 billion people. The inconvenience that everyone is put through for exchanging the old notes at the bank and withdrawing the new notes from ATM with everyone rushing in at once, is something no one has been prepared for. Kudos to the bank officials who have worked day and night to tide over the short term liquidity crisis for individuals but the long queues do generate unwanted emotions. Of course, some opposition parties and even media persons have taken to the streets to champion the plight of people going through the pain.
We can see emotions related to money with the demonetization exercise. Money has undeniably been a factor in defining relationships, creating conflicts, achieving goals and attaining peace for people who understand the nature of money. Some time back I had attended a workshop by Kinder Institute on 'Seven Stages of Money Maturity'. The workshop explains with the help of a model and examples, about the various stages that each individual goes through while experiencing the associated monetary emotions. It is quite possible that a mature adult is at a relatively immature thought process of money stage. Your financial maturity age can be quite different from your biological age.
Ever since I completed the Kinder workshop, Mitraz has been providing Life Goals Planning for all its clients which helps them realize how money is related to their most important desires and dreams in life. Demonetization has led to the rise and expression of many emotions in all of us.
The Indian masses have been frustrated with the day to day underhand dealings but go about their business sidestepping the corruption landmine as much as possible. So, the general feeling amongst most people with the demonetization announcement was that of Cheerfulness due to anticipated elimination (reduction) of black money in the country. I have noticed few other emotions gauged from questions, media reports and my observations.
1. Anxiety - Would I be questioned if I deposit a large sum of money? Since then this question has been clarified by the Government.
2. Concern - Due to short term liquidity crunch and restrictions on the withdrawal amount.
3. Distrust - What if banks do not honor the exchange after some time even though it is amply reported that old notes may be deposited until December 30th. This has led to some chaos because people who do not need money immediately are also standing in queue.
4. Fear - Should I be reporting income hidden in cash and pay tax? What if, the Government somehow finds out and persecutes me?
5. Happiness - It is business as usual for people who have understood the demonetization action, its impact and implementation timeline.
6. Hope - for a better future sans the ills of bribery and corruption.
7. Pain - People with unaccounted wealth have to either forgo the complete amount or declare and face huge penalties.
When cash component in a real estate deal becomes the norm, everyone follows suit - some even unknowingly - with seemingly obvious benefits of tax saving (actually evasion). The emotion primarily in play is Gratification with larger cash flow and profit. We all realize that we have to pay taxes for nation building but we convince ourselves that it should be done by someone else. This conviction leads us to somehow minimize our own tax outflow. There is some advice I personally and in official capacity give to my friends, relatives and clients.
1. Declare all income even the ones received in cash and pay tax. There is no problem of storage and fear of theft if you declare everything. Besides, cash kept out of bank gets used slowly and is a non-appreciating asset.
2. Make investments with the primary objective of Returns with proper Risk Management and not tax saving or avoidance. While tax planning and legitimate tax saving should be done beyond a point, taxes have to be paid.
3. Insist on financial transactions (like real estate deals) that are accounted and do not generate black money. There will be higher taxes such as stamp duty and capital gains tax but you will have peace of mind in the long-term.
4. Be compliant like you expect others to be.
So, money is known to generate emotions which leads people to take actions not desirable in the long term. This is especially true when laws have loopholes, enforcement is weak and corruption is rampant.
Say 'NO' to any kind of unaccounted transactions and unaccounted money. Ultimately, what matters is Peace of mind!
The writer is the Managing Director of Mitraz Financial Services Pvt. Ltd and can be contacted at firstname.lastname@example.org