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4 Lessons Ramadan can teach us about Personal Finance

04 Apr 2022

Hi, I’m Areeb the Founder & CEO of Kestrl: The Muslim Money App. We like to take inspiration from the Qur’an and Hadith for how to live our lives and navigate our personal finance journeys. Here are 4 lessons the Holy month of Ramadan can teach us about our Personal Finances!

1. Financial Fasting

More than any other month, Ramadan is a time where you want to be as efficient as possible with your time, removing usual distractions and bad habits, instead using the opportunity to maximise rewards.

The exact same mindset can be applied when creating a Budget, getting the most out of your income by cutting spending on certain ‘Non-Essential’ expenditures. Consider fasting from ‘bad’ or distracting spending habits this month (like maybe a Netflix subscription?) and freeing up more spiritual time as well as savings this month.

Our Budgeting tool at Kestrl is perfect for immediately identifying non-essential expenditures and then picking which ones you may want to cut out this month. Just plug in any UK bank account and we’ll immediately categorise your spendings into ‘Essentials’ and ‘Non-Essentials’ so you can figure out how much you can and SHOULD be saving each month.

2. Realistic Goals

During Ramadan, it can easy to overestimate what we can accomplish in a day, often setting ambitious targets like reading a chapter of the Qur’an daily. However, by day 10 fatigue can set in, you may miss a chapter leading to disheartenment and the ultimate abandoning of the goal entirely.

It’s far better to set realistic targets that you can stick to every day.

The same is true when setting financial goals and savings targets. Understanding how much of your income can be realistically saved each month, WITHOUT having to sacrifice too much can allow you to plan for future goals more accurately e.g., saving for a House deposit.

At Kestrl we’re developing a tool to help you do just that called the Kestrl Eggs. You’ll be able to set and visualise your goals on a timeline and then save towards them in discrete pots of money called Eggs. Kestrl will let you know whether a timeline is realistic or not based on your set budget and historic spending/saving. More about this product coming soon!

3. Sensible Optimism

Ramadan can be a time of extreme spiritual highs, but also at times serious challenges and disappointments. As Muslims we are taught to see all hardships as a test which we can ultimately overcome. As stated in the second chapter of the Qur’an **Surah Baqarah (2:286):

لَا يُكَلِّفُ ٱللَّهُ نَفْسًا إِلَّا وُسْعَهَا

Allah does not burden a soul with more than it can bear.

There is a very similar concept in investing known as ‘Sensible Optimism’, the idea that whilst things may look bad in the short-term, if you hold on to your investments rather than selling then they will more than likely recover (especially if it’s an investment that tracks the markets).

Investing is inherently risky, and you are just as likely to lose money as you are to make it in the short-term due to fluctuations in the market, and a whole host of factors out of your control. A great example of this is what happened to the S&P 500, (a good tracker of the US markets) just before the 2020 Covid lockdowns were announced.

However, seasoned investors will know that given time, the markets will tend to recover in the long-term and move ‘upwards and to the right’, particularly if you’re looking at a fund that tracks the market. If we zoom out on the S&P 500 chart we see that by July/August of 2020 the Markets had completely recovered, and by early 2022 they had increased 1.5x.

4. Practice Gratitude

One of the best qualities we can try and hone this month is of course, Gratitude. Acknowledging what Allah has blessed us with by giving up what is normally considered Halal during fasting.

Gratitude and Humility are incredibly important and often underestimated skills when it comes to ‘Staying Wealthy' as opposed to ‘Getting Wealthy’. Or more specifically, the recognition that one’s success has often as much to do with factors beyond our control as it does with our own abilities.

History is full of examples of those who could amass vast sums through their hard work and risk taking, however lost it all by failing to acknowledge that a lot of our success has little to do with our efforts, and a lot to do with forces beyond their control. Some would call this luck, in Islam we call this Rizq- the idea that our wealth or sustenance has already been written for us.

A beautiful example of this is illustrated in the Qur’an in ‘The story of two gardens’ in Surah Kahf (18:32-44) which serves as an excellent reminder of the affect that Wealth can have on us.

Thanks for checking out this blog post! Download Kestrl: The Muslim Money App to start achieving your financial goals without compromise today!

Don’t forget to check out Kestrl PLUS, our shariah stock screening tool and access your free trial here.

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