Where does the buck stop?

My grand uncle was a man of frugal means. But he was always happy and light in spirit and his favourite advice - which he dispensed freely to all, including us bunch of kids - was: "If you want to feel rich, just count the things you have that money can't buy." Of course we were too busy being kids to figure out what he meant but today, as an adult grappling with life's vagaries, I often recall his words with a sigh.

The journey from the world of childhood, where money did not matter, to the world of adulthood, where it matters to a degree that is disturbing has been a bumpy ride indeed. My perspective of the world's most wanted crisp piece of paper has slowly but surely undergone a paradigm shift. A hundred money-related questions flood my mind by the day. Will I ever see the chequered flag in this rat race to prosperity? How much money does it take to make me feel prosperous to begin with? Does my bank balance define who I am or do I define what it is?

The truth is, money has a larger-than-life presence in my life and I don't know how to manage it. In fact, it manages me.

Professor Adrian Furnham understands my concerns. A UK-based psychologist, he has been paying a lot of attention over the years to how money makes people go round. In The Psychology of Money, a book that he co-authored with Michael Argyle in 1998 and one that has won international acclaim for it path-breaking insights into the human mind and its response to wealth, he writes: "Bankers, economists and financiers assume that people, like themselves, are rational with respect to their own money. Their models and marketing strategies are based on homo-economicus: the rational human being. They could not be more wrong. People are ignorant, and irrational with nearly everything about their money. The belief about what money is good for; how best to acquire, multiply and store it; and about the happiness it brings are demonstrably false."

An idea that found an echo in his 2006 book, It's All About Money. Both books have such timeless insights, it feels good to revisit them especially at the cusp of a new year when I am compelled to examine my relationship with money as it has been through the year. Do I have the will power to bring about a change to this relationship next year? Watch this space.

Is it really true that most people are hopeless about managing money? Is this the one eternal human predicament that has no happy resolution? The answers understandably can be as varied as the people who are asked. We approach Hassan Jarrar, Amanda Hodges, Areej Sharif and Sarfraz Mansouri to indulge in some money talk. Just to familiarise you with them, Jarrar is a Dubai-based banker from the US; Hodges is an Australian export consultant in Dubai, Sharif is a Dubai-based media consultant from Canada; and Mansouri is a director of a Dubai-based advertising agency from India.

The emotion of money

What emotion do members of our panel associate with money?

Jarrar, Sharif and Hodges say, ‘Freedom'. Mansouri says, "Power'.

The interpretations of freedom are thus: Jarrar has early memories of his father's attitude to money. "His motto was: ‘I make it, it doesn't make me. He was pretty relaxed about money [but] sadly, he went from being very well off to nearly having nothing but his house when he passed away. He never seriously planned his finances and he was known to give away his money too often as loans to friends and relatives. I don't recall that any of them paid him back!" What this awareness means for Jarrar is that he has to "diligently and pro-actively plan for the future." Despite the throwback of what happened with his father, he believes money is "not the most important thing in the world."

Hodges' idea of freedom pivots on the ability money gives an individual to be benevolent. "Having it means the freedom to do certain things that one otherwise couldn't do," she says. "These things don't necessarily have to be material in nature. The freedom to make a difference in the lives of less fortunate ones can be incredibly rewarding."

Hodges is, however, clear on the care one needs to exercise to manage that freedom. "You don't need a lot if you know how to handle it properly and are happy living comfortably."

Sharif's take is of liberation. Having money untethers you from the yoke of justifying your actions or being questioned about things, she says.

And now to the power. For Mansouri, money allows him power living. In other words, he can live and conduct himself in the way he wants with confidence.

The pathology of moneyThere are different pathologies associated with money, says Professor Furnham. Your response to earning and spending can put you in any of the following five categories:

You've guessed it - they are the kind who have it, don't spend it and also hoard it. They tend not to admit to being niggardly, have a terrible fear of losing funds, and tend to be distrustful. Yet they have trouble enjoying the benefits of their own money.

These are the compulsive and uncontrolled spenders, particularly when depressed, feeling worthless and rejected. For them spending is an instant, but short-lived gratification that frequently leads to guilt (and debt).

This type is totally absorbed in money making which is seen as the best way to gain power, status and approval. These people argue that the more money they have, the better control they have over their world and the happier they are likely to be.

Compulsive stalkers of bargains even if they do not really want them. Why? Because getting things for less makes people feel superior. They feel angry and depressed if they have to pay the asking price or cannot bring the price down significantly.

They're exhilarated and optimistic when taking chances. They tend to find it difficult to stop, even when losing, because of the sense of power they achieve when winning.

So, who fits what in our panel? Jarrar and Mansouri describe themselves as compulsive spenders. Says Jarrar: "I should heed my own advice which I give to my children! But I also do think that money is there to be spent and enjoyed. I admire those who have the discipline to stick to a budget."

He feels it is important to enjoy the moment. Life has shown him examples of what happens when people live too much for another day.

"A friend of mine, who has passed away, dedicated his life to making and saving nearly all the money he made. So much so that his wife and children were deprived of even modest requirements, let alone luxuries. Two years after his death, his wife and kids not only squandered his fortune but also lost control of a couple of real estate properties he owned. It was as if they had an extreme reaction to the deprivation during his lifetime!"

Hodges feels comfortable in the moderate spender slot: "I am not at either extremes - I have never hoarded money or spent large amounts compulsively [although I admit to the occasional compulsive splash on a designer handbag!] A cousin told me once that you have to pay yourself first [she meant through savings] and then learn to live with the remainder to cover expenses, etc. Though I have tried to do this it is easier said than done."

Sharif regards herself as a conservative spender but of course with a few impulsive streaks: "It's a habit I grew up with. As a kid, my brother and I got our weekly allowances and while he would blow it the same day, I bought one candy at a time, saving the rest of the money for something really special."

While that habit has held her in good stead, she quite enjoys the impulses that strike her. For instance, a conversation with a friend on the importance of indulging oneself occasionally was so powerful she found herself heading to a jewellery store and treating herself to an expensive diamond ring. It was a rare moment that one, but she has no regrets about it.

The parenting of money

Professor Furnham says research has indicated that very few parents actually discuss money and spending with kids. As a result, many kids grow up with an unrealistic perspective on money that the supply is commensurate with the demand.

Jarrar is not caught in this predicament. "I try to instill the right values about money in them all the time. They need to know where it comes from and how hard it can be to obtain it. Equally important, they need to know how to hold on to it and make it grow.

"My three children have had a college fund account from the day they were born. They all know what underlying investments are in each." He is also particular about reinforcing the spirit of charity. "I make sure they know that we give to charities and the difference this money can make to the lives of others."

Sharif, who is single at the moment, is however clear about the money values she will pass on to her children when she has them. "I want them to know how to share money and educate them about the hard work it takes to earn it. They need to learn that money does not grow on trees."

Hodges seconds that: "It is important for kids to have a good relationship with money. They need to understand the value and importance of earning it themselves." Hodges does not have children yet but her wish list for them is ready. "I would definitely teach them the value of saving for the future and having a balanced approach to spending money. I would also encourage my children to pick up a part-time job when they are old enough so they understand that you have to work to make money. Money doesn't appear out of a machine in the wall."

Mansouri, who is married, but yet to be a father, recalls how his father taught him the value of money: "‘He was a very wealthy man and he never stopped me from indulging. At 17 I bought myself a very expensive Cartier watch with his money. My mother was very upset while my father simply said: ‘If he learns to spend, he will also learn how to earn'."

A lesson Mansouri learnt as a graduate student in Australia. "My father gave me only $3,000 to cover my expenses which I thought to be strange especially when he had not baulked at the Cartier watch I bought on a whim. When I questioned him, he remarked, "You will soon see the big picture'. At the time, I found his logic difficult to understand. Once in Australia, I had no choice but to put in long hours of work to support myself."

He mopped floors, cleaned dishes and was even promoted to an assistant chef and learnt to cook food. It was a far cry from the days when as a pampered son, he had a personal chef bringing him hot meals every day at home.

He finally understood what the ‘big picture' his father was referring to.

"When I have kids, I would want them to realise how hard it is to earn money. I would definitely work on making them realise its value."

The favourite fairytale of money

We all love to fantasise about money - the pot of gold at the end of the rainbow, the windfall of a raffle ticket, a lucky draw that makes you a millionaire ... so you can live happily ever after. All of us have our private money dream.

Sharif dreams of a simple but happy electronic glitch. "I would imagine getting a message saying ‘a bank error has been made in your favour'... just like in Monopoly,"

Jarrar recalls reading the Richest Man of Babylon, a must-read in his first investment analysis course at the university. (It is a series of financial parables. The stories are set in ancient Babylon and concern a Babylonian common man who used some basic financial tactics to amass wealth.) "I recommend everyone read it and also have their kids read it."

Mansouri's dream is more simple: "I fantasise about having my own private island with a luxury villa."

Hodges would love to believe in the Dire Strait's number Money for Nothing! "Unfortunately this is not true. Even the kids playing their guitar on MTV have to work for their money," she is quick to burst the bubble.

The satiation of money

If money is what gives us peace of mind, is there a magic sum that can actually set us free? When can we say to ourselves; ‘this much and no more' and be happy that we have drawn the line?

Says Professor Furnham about the power of money to satisfy: "Money has powerful emotional associations. Ask people what emotions are most frequently associated with money and research provides the following rank-ordered list: anxiety, depression, anger, helplessness, happiness, excitement, envy, resentment.

"Money, for many, can stand for security. Emotional security is represented by financial security and the relationship is believed to be linear - more money, more security. Money is an emotional life jacket, a security blanket, a method to stave off anxiety.

Jarrar's cut-off point after which he can happily zone into peace of mind of life? The $10 million mark.

"Personally, I think at least a savings account with enough money to meet all expenses and obligations is a must. Secondly, enough money saved for one's children's higher education including tuition, books, dorm and extra expenses is also a must. Thirdly, retirement savings must also be enough to allow me to live my "golden years" as they are intended to be - ‘golden'."

Hodges' fantasy cheque for emotional security: $200,000 a year for the next 50 years. "So about $10 million would be optimal. It would be enough to look after myself as well as others."

For Sharif, the sum would be around $1.5 million. "I would then have a house here in the UAE, one in my home country [Canada], a car in each of those countries [Audi A6 or VW], enough money for insurance on both residences for five years and a vacation a year for the next five years."

Mansouri admits that he has promised his wife, who is weary of his frequent business travels, one thing:

"The day I earn Rs100 crore [around Dh80 million], I will give up everything, settle down and spend time with family and kids. I know that this isn't difficult. All you need to do is make the right kind of deal and the right kind of move." That is perfect businessmanspeak.

As the numbers are all neatly stacked up, I realise I have yet to arrive at a figure for myself. What is my magic number? Strangely, I have never given it a thought. Will my grand uncle's words have any impact on the number I finally choose for myself?

Only time will tell.

- Suchitra Bajpai Chaudhary is ,