Money is fungible

One of my money management goals for 2022 was to reduce stress caused by “overspending”. (Overspending within quotes because I am technically not overspending, but my accounting makes it look like overspending.) I didn’t really make a conscious effort towards this goal, but I have improved quite a bit. The benefit of letting your subconscious mind solve problems, I guess. The primary reason for the improvement is my realisation that money is fungible.

Something is fungible if it can be perfectly replaced by another instance of the same thing. I have 3 ₹10 notes in my wallet: they are fungible. I can give any of those 3 notes when I buy something for ₹10. Which specific note I give out doesn’t hold any significance. Likewise, the money I hold in this account vs that account doesn’t matter. It’s all money that I have, and it’s all money that I can spend when there is a need.

I made a tax estimation mistake earlier in 2021, and that required me to sell some of my debt investments to make the tax difference. For a while, I kept that on my to-do list saying I should repurchase those debt assets to make my portfolio whole again. Over the past few weeks, I have acquired a new understanding that it doesn’t really matter if I do or don’t repurchase those debt assets. I had an unexpected expense; I liquidated some of my assets to meet that expense; end of the story. Thinking that the left pocket has to repay the right pocket is an unnecessary stress.

Focusing on smaller pockets of money and trying to keep every pocket healthy leads to stress. Assessing the health of the entire portfolio is a much simpler task. Since I sold my debt assets to pay the tax, now my asset allocation is skewed towards equity. I just have to sell some equity and bring the portfolio allocation back in shape. That’s all there is to do now.