Browse Category: Wealth Creation

Accelerate your NETWORTH , Here’s HOW?

Here is a post on How to accelerate your Net Worth & achieve Financial Independence. Increase in net worth will accelerate your journey towards Financial Independence

Net-worth gives a clear measure of your wealth. In accounting terminology, net worth is really everything you own of significance (your assets) minus what you owe in debts (your liabilities)”. Assets include cash and investments, your home and other real estate, cars or anything else of value you own.

 

how to increasse networth

 

Now when it is clear what is net worth, I am sure you would want it to keep growing at a healthy rate. A healthy growth rate in net worth will give you a confidence in your life with respect to your finances.

Here are some of the methods I am listing down which can accelerate growth in your net worth. All these steps are simple and you can implement them in your financial plan to stay on top of your finances and off course net worth.

 

  • Work towards paying all debts.
    Kill the debt with highest interest first. Usually the personal loan which we take for some holidays or some family function carry the highest interest rate. Same is with the credit card debt. Make sure that you get rid of personal loan and credit card debt. Then focus on getting rid of consumer loan which you took for buying that 85 inch cool TV, auto loan for your cool SUV. The EMI on these loans might look small but if you do that math you end up paying a lot in interest on them. Remember the price you pay for any item bought on these loans are the cost of principal plus the cost of interest. Once you are done with all high interest loans, target home loan. Yes, though you get benefit on home loan but a loan is a loan. The feeling of having freedom with no loan is something out of the world.

  • Increase your contribution towards the Employee provident fund.
    If you do not have PF – Provident fund account with your company, open a PPF account with any public sector bank and max-out the limit of yearly deposit in the first month of every financial year. These account ensures that over a long run, you accumulate enough corpus which can help you plan your retirement years they way you want.

  • Make a budget.
    This article details on how to make a basic working budget. Once budget is made, trim your unwanted expenses. Remember you will not be able to trim your unwanted expenses unless you make a budget. Be on top of your expenses and cut down all unnecessary expenses.

  • Do not let your extra cash sitting idle in low interest savings account.
    If you have huge amount sitting idle in savings account, it is losing its value. Currently savings account give only 2%-3% interest. And the inflation is 6%-7% which means your money is losing its value. Immediately put your money to work harder through mutual funds, sweep in deposits, fixed deposits, stock market based on your risk appetite. The returns in these investment streams are higher than the regular savings account and money in them ensures that you are beating inflation and not losing value of your money.

  • Start building a mutual fund portfolio.
    This is from long term perspective and invest into this through systematic investment plans across a diversified range of mutual funds consisting of diversified equity funds, balanced funds, large caps, mid caps. This does not need expertise, it only requires basic knowledge which is available freely on the internet.

  • Reinvest all the income generated from your investments.
    Do not blow away the gains from your investments. If you keep re-investing, it will help in increasing your investment corpus considerable and that too quickly. Also this exercise of yours coupled with the brilliance of compound interesting will accelerate your net worth growth.

  • Invest a fixed amount regularly, every month.
    Pay yourself first – this should be the mantra. Automate your investments. Suppose you receive your salary in the first week of the month, keep your systematic investment plan SIPs automated for the first week of every month. This will ensure that you keep investing every month without a break. Remember – the one who invests regularly and over a long duration reaps the benefits.

  • Invest all the windfalls you get. Do not splurge.
    Gifts and inheritance money can be very helpful in accelerating your net worth.  Remember more money you put in investment, more your investment corpus would be and more money it will generate.

  • Do not go crazy about new vehicles every few years.
    Remember that vehicles are merely an instruments for going from point A to point B. Also remember there is a huge cost associated with the new vehicles in terms of insurance, maintenance, running cost etc. And it is a fact that a vehicle loses about 20%-25% of its value the moment it comes out of the showroom and it is a depreciating asset.

  • Do not accumulate loans to purchase stuff.
    Every new loan you take is a liability and is a hindrance in your plan to financial independence. Every new EMI / monthly payment added to your monthly income will surely decelerate the net worth growth.

If you follow the above listed steps diligently and track your progress, I am sure you will see a positive movement in your net worth. You need to improve, evolve your approach constantly in order to see your net worth moving northward. Each one of us has different lifestyle, different expenses but what is discussed in this article are basic building blocks to improve your net worth.

Improvement in net worth will result in creating wealth and early financial independence. Don’t you want the same?

When you should start investing in stocks?

When is the right time to start investing in stocks?

Most of the people who start looking to bring their financials in order have a question in their mind. “When should I start investing in high return instruments?”

They are fascinated by high 20%-30% annualized returns from equities. They have some extra cash which they want to invest for some time and even before anything happens, they convince themselves into investing the spare cash in high risk equity markets in order to rush towards achieving financial independence.

 

stockmarket

 

This reminds me of one of my friend, who reaped exceptionally well returns during the dot com boom and used to tell me how easy it was to tame equity market and double your money in no time.

Unfortunately he had invested all his eggs in one basket that is into the stock market and lost big time during the 2008-2009 market crash. This friend of mine had borrowed a lot of money to buy stocks in hope of making big and that too very quickly. But things didn’t work out as he expected.

There are two basic investment criteria of investing in stock which every investor should consider before taking plunge in stock market investing

  1. You do not have high interest loans looming at you:
    This implies that you should not have high interest loans like personal loan, consumer loans, credit card balances and rotation of balance on credit cards etc. The basic home loan is perfectly fine as home loans create assets and the home you bought is giving you shelter. Stock market investments are high risk investments. If you have high interest loans and still you go ahead with investment, you might land in trouble. There is no fixed investment life-cycle in stock markets. Sometimes you may have to remain invested if market conditions are not good. This might affect your loan repayment ability if you are planning to pay off the loan monthly payments from the returns on your investments in stock market.
  1. You have sufficient emergency fund to bank on during emergency situation:
    Emergencies never give you written intimation before they come. Emergencies bring mental trauma as well as financial hardships too. What if you lose your job due to some meltdown and you do not have money to pay for utilities and your home loan? To counter this type of situation, you must have sufficient liquid emergency fund to pay for rents, monthly home payments (EMI), utility bills etc. Ideally you should have an emergency fund to fund your 6 months of unemployment which should take care of all your bare minimum expenses in case of emergency. This fund should be somewhere stacked in liquid fund which can be accessed quickly. Never put your emergency fund in debt funds, equity linked mutual funds, insurance or stock market. Idea is you should not depend on market conditions to take back your money.

Also, one more important aspect you should consider. Being educated, you should know what you are doing. Take charge of your investments as it is not a rocket science to do a bit of arithmetic before taking the plunge. You need not to be an expert but a basic idea on how mutual funds work should be alright to start investing into mutual funds. Central idea is to avoid the risks posed by high risk investments as a naïve investor.

Investing is fun, it can be highly rewarding but to enjoy it you must set your house in order first, explained above in two simple points. This will cover yourself from the risks posed by the high risk investments in equities and you can do proper asset allocation to counter the risks.

 

 

Why you need Insurance ?

Make sure you are adequately insured:

Definition of insurance: A promise of compensation for specific potential future losses in exchange for a periodic payment.

The definition clearly says it all. However, the companies which offer insurance provide a bouquet of products. Whole life insurance, term insurance, endowment plan, ULIPs, health insurance is some of the product categories. However, each classification may have one or many products with slight variation

Why you need insurance

 

Why you need insurance?
You never know what is going to happen in near/distant future. If someone is the only earning member of a family and due to health reasons, he is unable to work, or due to sudden demise of the sole earning member, family goes in no earning mode.

  •  Who will pay the EMIs of home loan, vehicle loan?
  •  How the monthly household expenses would be taken care of?
  •  How to pay kid’s school fee & tuition expenses?
  •  How to pay expensive nursing care? Hospital expenses are skyrocketing these days.

    Leave apart human life, what if your vehicle needs emergency repair? If the repair cost runs into few thousand of rupees and you do not have contingency funds at hand for this repair, it will be pain for you to arrange the sum and repair your vehicle right?

Answer to above questions in case of unexpected happening is INSURANCE. Insurance make sure that there are no financial hardships to family if something goes wrong.

Do your own research – A little bit of homework is a must

Do not assume that you need to buy insurance policy because your friend who is a salesman in insurance firm told you to do so. First identify purpose of buying insurance. Insurances can be of few types

  • Life insurance: The only purpose of life insurance is to provide safety net to the people if the person taking insurance dies a premature death. This is for the ones who have people financially dependent on them. This gives them means to offset financial losses in case of their demise. The best or rather ideal route here is to take term insurance policy. This is the least expensive solution and serves its purpose well. There are many online calculators available for calculating premium by various service providers online.Other life insurances like whole life policies / ULIPs are also available but they are usually not worth due to the cost associated with them. The investment returns from these products are poor compared to investments in other options.There is no benchmark formula, but general thumb rule is that take insurance cover equal to your liabilities plus 10 times of your annual income. So if you have a home loan + vehicle loan of INR20 lakhs, your insurance cover should be of INR20 lakhs plus 10X your annual income. 10 times of income will give your family a sustained monthly income to cover the expenses for family members
  • Health insurance: If you go back a little in history and compare historical cost of medical treatment, it doesn’t take rocket science to arrive at conclusion that the cost of medical treatment has gone up considerably. And keeping the trend, it will keep moving upward. You must insure yourself to cover the cost of medical treatment. There are host of factors on which the health insurance premium depends. But it is worth comparing offerings from different service providers and to take the best plan based on your requirements. Health insurance will safeguard you from cost of medical treatment and will save tons of cash for you. Also, a healthy family of four, husband, wife and two kids should have a INR8 lakh family floater health plan to cover emergency medical expenses.
  • Vehicle insurance: Vehicle repairs are expensive. Imagine a situation where your vehicle meets with an accident. The vehicle becomes immobile and you need to fine a tow truck. Then the cost of repairs which can break your back. As per the government rules, it is mandatory to take insurance and people usually opt for a third party cover in order to cover any litigation cost arising post accident. But you must opt for a comprehensive plan as there are a lot of costs associated with repairs once your vehicle is involved with an accident. Again loads of online calculators available and based on your needs, opt for the best plan that suits you.

There are other insurances also like home owners insurance, renters insurance, asset insurance, travel insurance but the most important and must have ones have been covered earlier.

If you are not insured and some mishap occurs, your financial plans will go haywire. Also taking proper and adequate insurance is one of the building blocks of financial freedom and wealth creation. Not taking insurance or not taking adequate insurance can make a serious dent in your investment portfolio.

Bottom-line is that one has to make sure that he/she is adequately covered through insurance, both for life as well as health.

Lifestyle inflation – Why it is bad for you?

What is lifestyle inflation?

When you are fresh out of college, you get a job which is usually an entry level job. You start earning with this entry level job and you move out to a place of your own – either in the same city or some other place. Once you are on your own, you start spending money on all essentials. You have to pay for stay, groceries, internet, utilities, internet etc. You somehow manage all these expenses with your limited income. Gradually time passes and you get regular salary hikes. With these hikes over the years you increase spending. You now make frequent trips to restaurants, you move to a bigger home in a nice neighborhood. You now have a big car for commute instead of using public transport, you have pets, and you now wear branded cloths with the really nice Swiss watch to match your stature.  

lifestyle inflation

Lifestyle inflation comes in picture when someone raises his lifestyle – standard of living in relation to the increase in earnings. If you see it, lifestyle inflation is not a bad thing. After all we all work hard to improve our standard life & comforts. When we get promoted, we need new cloths to match our profile; we need nice vehicles that match our status to commute.

Lifestyle inflation creeps up slowly, we will not know unless we start having serious problems with money we earn. Our food expenses will skyrocket, fuel expenses, expenses to maintain home and vehicles will increase gradually and they will reach to an extent where the total outgo starts pinching us. Lifestyle inflation is a big hindrance to financial independence and wealth creation as once you succumb to it; you have very little cash flow dedicated to investments for future in order to have a sufficient investment corpus to fund retirement.

How to tackle Lifestyle Inflation?

One can easily tackle the lifestyle inflation. There are some ways which can keep you on track and combat lifestyle inflation

1. Budget the expenses and note down every single expense you incur. By doing this you can flag any expense which is steadily increasing. Once you single out any particular expense skyrocketing, you can easily curb it

2. Keep your financial goals in mind. Have the goals written and the plan to achieve them also in writing. This will help you in sticking to your plans. If you stick to your plans, lifestyle inflation cannot cripple you.

If one follows the above two simple steps, it’s easy to limit lifestyle inflation. The entire premise is to stay within your limits, never make expenses column more than income column in your life. Plan wisely and stick to your plan.

To Sum it up: Though there is peer pressure to incur expenses, but increased expenses with increased income to a certain extent justifies your lifestyle inflation. But if it increases more than your income then it will cause a serious dent in your future life. Take charge, have control on your spending and keep investing regularly is the mantra to beat lifestyle inflation. Once you master this art, you are set to taste financial freedom much before others.

Needs Versus Wants

Today I am posting about a very important topic. It is must for us to draw a line between needs & wants. Today’s post is guest post – Courtesy my dear friend Sundeep

We have heard and some of you might have read a lot on wants and needs. And still most of us keep struggling with how to distinguish between them. Before we go there let’s understand these two words:

Need :- Without meeting these, your survival can be in a jeopardy
Want :- Some desires lurking in once survival is taken care of

 

Needs Vs Wants

 

Definitions look simple and understood by everyone. However when people have to apply it in their life many people classify things in wrong category and mostly this mistake is one way. Most of the people tend to count wants in the need category. There is hardly any vice versa case. Why should it be this way?

The answer lies in human nature. Gimme more! is slogan of human life. Being a social animal(don’t get offended I am just reminding we are animals at all), we have learnt to follow social rules, behavior, etiquette’s. In the journey we eventually started following each other’s desires, ambitions, materialistic goals. No animal kills\eat once it is full stomach i.e. once survival is taken care of. Man is the only animal who has so many problems to take care of once survival is taken care of. Life style, social status, peer pressure, relationships, bank balance, real estate,….

Note: Wants and needs are not necessarily limited to monetary things. There are other needs like emotional, psychological, spiritual etc. however those are out of scope of this discussion.

Let’s understand wants and needs in detail

Q: What are the basic needs of life?
Ans: Food\water, clothes and shelter.

Let’s say we have 3 families. Family A which earns 5,000 Rs\month. Family B earns about 50,000 Rs\month and C where it is 5,00,000 Rs\month. Do you think basic needs of life changes for any of these families?

No they don’t. There can be 10 other things listed as auxiliary needs depending on which earning class a person belongs to. However the basic needs don’t change.

What changes is the affordability factor which opens up choices for meeting their needs. Family A buys grains from government rationing store. Family B buys it from wholesale grain store and maybe C buys it from malls or super market. But all they are ensuring is to have wheat flour, rice, sugar etc. available at home. Although the expenses will be different they are still going towards needs.

Now suppose family A thinks that they should have some sweet dish occasionally for dinner. Howsoever small wish it appears, it still falls under wants. The same sweet dish at the the end of meal could be frequent for family B & daily for family C. But for them it doesn’t fall under wants, because they can afford it without altering or disturbing financial priorities. Similarly, there can be some wishes and demands for family B and C which will fall under wants.

This small example can help you apply the need vs. want test on bigger things. For this, you have to be truly conscious about your actions, to be able to judge the difference. Sometimes the line seems so subtle and mind plays games on you in judging a want as a need.

Note that, occasionally going for a wanted thing is no crime and actually sometimes it is required to boost and energize family, show your love and appreciation. One must only be conscious about the decision.

 

Here are few more examples of wants as a thinking exercise for you. Note that the list will change significantly based family income group. Here I am considering middle and well to do class.

  1. You are hungry and decide to go for pizza house instead of healthy rice-plate
  2. You keep changing your mobile, motorbike frequently
  3. You only shop from branded stores and often shop extra clothes
  4. You just had a full stomach dinner, still walking past an ice-cream parlor you give into your temptation
  5. You own two flats and can be easily convinced that you need to buy another one since you have sufficient balance and/or recently got increment in office
  6. You like to change your house interior once in 5 years
  7. Sizes of your fridge, car, wardrobes, TV sets, ornaments(and even body) grow bigger and bigger
  8. You have a masters degree and it feels gratifying to go for a distant learning MBA, although it is not at all relevant to your job profile
  9. Your mutual fund is providing decent returns but you would like to switch to one with even more returns
  10. Your child is doing good in studies, you want him\her to do better and register him\her at another famous coaching class
  11. Your child is good at swimming, but you would like him\her to be good at dance and also play a musical instrument because many friend’s children do that.
  12. You go for weekly shopping at a mall and return with at least twice the number of items you had on your list and when you cross-check items with your list, you haven’t covered even the half of it.
  13. .
  14. .
  15. List can go on…

From all above examples you can see that, mistaking wants for needs is going to take toll on your budget and eventually you.

Once you know that you must choose consciously, and you keep practicing it, it is not that difficult. In case of doubt, ask three simple questions to yourself:

  1. Are you doing something just because you can afford to do it?
  2. Do you think you may ever regret doing it?
  3. Can you do without doing it?

Now let’s take first example in the list and try to apply these questions. For better fitment I will put an outside student studying in city in the role-play here.

You are hungry and decide to go for pizza house instead of healthy rice-plate option

Q: Are you doing something just because you can afford to do it?
Ans: Yes. It is start of the month and I have just received monthly pocket money from home.

Q: Do you think you may ever regret doing it?
Ans: Yes. At the end of month if I run out of money received from home, I may regret this overspending.
Q: Can you do without doing it?
Ans: Yes. I can certainly have the rice plate and satiate my hunger.

All Yes means definitely you are falling for a want disguised as need. Revisit your decision. If all answers are No you can go ahead without any doubt. Even if occasionally you decide to go with your wants, make sure that a want remains on wants list. Don’t let your mind trick you into slowly converting a want into a need.

I would like to emphasize one thing at this point. One shouldn’t think that having to make this decision every time is sign of miserliness or deprivation,  because it is not. Rather this practice may help you refraining from making some silly or inappropriate decisions which may hurt you over a long period of time.

Respect your needs and be smart with your wants, that’s it. You will surely be in control of your financial conditions and also be a happier family. It’s a winwin for sure.

Focus more on increasing net worth

In the journey to financial independence, the most widely accepted approach is to earn more and more in due course. The formula is quite simple. Earn a good professional degree, gain experience and keep moving up the corporate ladder. This growth will give you thrust in your income too. So more your income is, more you have money.

 

networth & wealth

 

However there is one more catch. What if you are earning INR1, 00,000 per month and your monthly spend stands at INR1, 00,000 per month. This is something which is worrisome. This will be a kind of status-quo where you are placed extremely well in the corporate ladder and earning a handsome paycheck every month. However on asset / net worth front you are ZERO. You will not be able to create any asset which will appreciate and give you good returns in due course.
So, increase in income does not necessarily mean increase in your net worth. On the road to financial freedom, you must focus on increasing net worth and track it month on month so that you have all figures about your financial growth at hand.

It’s great to have a 6 figure monthly income but not focusing on net worth will make you work like a workhorse till you die. Instead of focusing only on increasing income, once must focus on increasing net worth as net worth again will keep increasing thus making a substantial gain on monitory front through investments and asset appreciation. Here you must note that more your income is, more your tax liability will be. However assets you make are taxed in different bracket which is quite less when compared to your tax on income. You are taxed on what you earn, not on what you own.

Off course I am not undermining the importance of increasing income, but if this increase in income is coupled with serious attempts to increase net worth, your hard work will bear fruits much earlier than anticipated.

Why you should focus on net worth:

  • The major component of the tax is computed on the income, not the net worth
  • Higher net worth gives you much more financial security compared to high income levels.
  • High income can be spent easily and loose its value, but higher net worth is not that easy to dilute and spend. This way the assets, equity you create is safe from impulse purchases
  • Net worth always keep growing – the components will keep on working and giving you passive income hence overall net worth will keep increasing

 

How to increase net worth?

  • Practice frugality: This is the first step. This will ensure that your expenses are always less than your income
  • Pay down your debt on war footing: Debts are trap. They suck money in terms of interest. Though monthly payments look small for any debt, especially consumer debt, but if you consider the entire cost of debt, it is indeed a high figure.
  • Track your expenses: This will give you a very clear picture where your money is going month on month. If you keep tracking, it will give you clear alarms about money drains.
  • Have an emergency fund: This will help you in fighting emergencies like car break down, home repairs, sudden job loss etc. You need not to break your fixed deposit or take out money from retirement savings for emergencies.
  • Start investing based on your appetite and with proper asset allocation: This will help you grow your net worth and in turn your wealth. Also a proper investment portfolio gives you a good passive income month on month and is your best buddy in the race towards financial freedom.
  • Find ways to increase your income and keep investing religiously all the raises you get: This will help you in avoiding lifestyle inflation. Believe me lifestyle inflation is the biggest wealth killer. If you divert salary raises towards investments, you are enhancing your wealth in the longer run.
  • Track your net worth month on month: This will give you clear picture of your performance towards your financial freedom. Also this will tell you every month whether you are moving in right direction or not?
  • Look at starting some side hustle, or some side business in addition to your day job: Again this will bring additional money which can be invested again to increase your wealth. Anything which contributes to your wealth speeds up your journey towards financial freedom.
  • Avoid any consumer debt: Again consumer debts are traps. They force you to pay higher amount for the goods and come with processing charges. Plan to pay cash and learn to live within means.

No doubt focus on increasing income is important in creating wealth. But income is only one part of the overall equation which contributes in creating wealth. But focus on net worth will make you an individual with multi pronged approach on creating wealth.

Save TONS of cash with timely home maintenance

A home is usually one of the biggest purchases in terms of price tag one will ever make. Real Estate costs a big chunk of money going in as down payment and a commitment of 15-20 years in terms of the monthly EMI going against the home loan / mortgage.

In addition to this, homes attract various other monthly outgoes such as

  • Insurance premiums
  • Association charges
  • Annual property dues
  • Electricity charges
  • Water supply charges
  • Any other tax imposed by local authorities

 

timely home maintenance

 

If you add up all the above mentioned charges, homes do cost a bomb. But even after paying a bomb, home can be a big drainer of cash if not maintained properly.

Home cannot be “buy and forget”. Instead it must be treated like your car or your bike. You have to do regular maintenance, oil changes, check Tire pressure, do washing and cleaning, fix up damaged parts of your vehicle in order to use it regularly without any problem. If you miss out a couple of cycles of maintenance, your car may stall during an important journey and you may end up spending a huge sum to bring it back in working condition. If you service your car properly, keep it clean, wash it, take care of electrical, change oil as prescribed in manual – you can use it for years and it will never let you down in any of the journey you undertake. Above all you can always get a good resale value. Potential buyers do consider looking at the maintenance record of automobile before striking the deal.

Same is with the real estate/ house.
The list of things which can go wrong if not maintained can go very long.

  • Not keeping bathrooms clean can hamper the outlet of water and can flood your home causing serious damage to your furniture. 
  • Not maintaining AC/Fans can make them stop functioning and can incur heavy cash damage to you. 
  • Not regularly painting the house can make the plaster weak; it may come off and might hamper the resale value considerably 
  • Accumulation of dust particles can take sheen off from the shiny furniture and make them look like scrape material 
  • Not doing regular service / replacement of electrical fittings can cause electrical short circuit and can damage the entire household furniture due to fire 
  • Not taking care of bathroom fittings can damage them and they can start rusting and become useless. Believe me it costs a lot to replace these fittings 
  • Not trimming grass in the lawn will make it look really bad and the sight is not inviting for the visitors at your place. 
  • Unclean flooring can lead to the damage tiles which in turn can decrease potential resale value of your home

There can be n number of line items which can be added in the above list. Bottom line is – the home must be kept well maintained. It gives positivity to your own life plus it increases the life and worth of your home. Later if you wish to upgrade, you can sell your home at good price if you have kept is presentable to potential buyers.

The approach to keep your home properly maintained is very simple

  • However busy you are with your schedule, take time out on weekends, make a schedule and pay attention towards one item per week and make sure on monthly basis you cover all important items from the list once. 
  • This will ensure that your property is safe, appreciates in value and looks good to any visitor coming to your place. 
  • You can plan it in such a way that first Sunday of a month clean all fans, fridge, electrical boards, sockets and check for all electrical fittings. 
  • Second Sunday typically can be spent in dusting your furniture and glass items, arranging your reading interests. 
  • Third Sunday can be spent in cleaning bathrooms thoroughly (apart from regular alternate harpik cleaning) and cleaning of drainage outlets like sinks, kitchen wash basins, balcony outlet for any blockages. 
  • Fourth Sunday can be dedicated to floor cleaning, removing stains, kitchen cabinets/tabletops/counter tops cleaning, and keeping / refilling insecticides and anti rodent. 
  • Make schedule every alternate year to paint the walls and use superior quality of paint which lasts longer. 
  • Exterior painting should also be done at regular interval with superior quality of washable paint. A monthly outside wash can work magic on the exterior looks of your home. 
  • Weeding and landscaping your lawn monthly can make them look better and they will certainly make your house inviting for the visitors.

A small schedule can make your home last longer and can increase its value over time. Above all it can save you tons of money that can go into drain by handling emergency maintenance arising of negligence.

Timely maintenance can also help you in creating and increasing your wealth. more the price of your home, more wealthy you would be.

 

Habits of Financially Successful People

 

financial independence

7 Habits you can observe in financially successful people

I am sure you must have come across loads of successful people around you. It may be through media, social media, print media, or electronic media. I am also sure you must have wondered what makes them so successful. No doubt, there is hell lot of hard work that goes behind anyone being successful, but a successful person inculcates certain habits in their daily routine which makes their chances of succeeding much more.

Just like merely saving money cannot make you wealthy, it is same with success. It’s not only hard work, but smart working and making use of resources around you optimally make you successful.

One needs a proper plan and a proper execution both in order to get successful in any task. If you are preparing for any examination, you should plan in such a way that you cover your entire syllabus systematically and make sure that you do it well in advance of examination date. Also, getting fit and healthy just before during exam time is important which will ensure proper success in the examination.

Same holds true for financial success too. By financial success we mean a stage where you feel financial independence in your life – that is you no longer need to work for money. This is what is called as early retirement, where you “work what you like” – not “Like what you work”. As per some of the major financial planning books and personal finance websites, there are 7 common habits/traits exhibited by financially successful people

 

  1. They live their life “goal oriented”. This means they create elaborate plans for finances and keep changing them as per the external conditions to keep themselves on track. Measuring goals give them a perspective of what they are doing is on right track as per planning or not.

 

  1. They are organized in every aspect of their lives. They plan properly for every task, allocate proper resources and keep measuring the progress. This is true with the work they do at their workplaces as well as their personal lives.

 

  1. They are open to suggestionsplan adjustments. They are capable to adjust their plans with changing dynamics around them. This is must as a good plan has always scope of adjustment in order to achieve the desired outcome.

 

  1. They are action oriented. They take actions, quick in decision making based on facts and accept accountability of their decisions. Same is the quality of a good leader.

 

  1. They are frugal. This is the most common behavior among all millionaires. They stay away from lifestyle inflation. Lifestyle inflation is one of the biggest hurdles in financial independence and wealth creation.

 

  1. They are good team worker. They team up with spouses and near friends to work collectively towards the financial goals and plans. When you are a good team worker, you get inputs from all members and this ensures success of overall plan.

 

  1. They are persistent. They have plans, they work towards achieving the goals and they try out hard to work towards it. They do not give up easily. When a plan is laid out, persistence and perseverance can only guarantee its success. Wealth creation is all about persistence as it cannot be created overnight – except when you win a Jackpot.

 

Financial success is not an overnight affair. It requires a planned approach where you are persistent and it may take few years to take shape or see initial results. You may face many hurdles in due course, but staying put, fighting odds bravely can lead you to financial independence. You have to believe in yourself, stay focused and stick to the basics. There is no rocket science involved.

 

 

 

When you should start investing in real estate?

People when they purchase a place to live in, they consider it as an investment. It is indeed a big investment as the ticket price is very high. With easy credit availability, aggressive advertising and last 10 years of upward trend in real estate market, people start thinking that why not to buy another home/flat as an investment and keep it. The general belief is that the price will increase in proportion with how it has increased in the past decade.

This is a kind of greed which is churning out a category which is house RICH and cash POOR.

real estate investment

Investment in real estate is not a bad idea, but one must have done basic investments rightly and must have enough cash buffer to take on emergencies. Also, the person should factor in the potential extreme property market swings. Since house purchase is a big ticket investment, one must weigh all necessary parameters carefully before taking the plunge.

Purchasing first property for self occupation cannot be considered as a pure investment. Everyone needs a roof over the head. First property provides this roof over the head and even in worst scenario, you will have your house intact – a shelter for you during your bad times.

When you are out to buy your investment property, then a lot of parameters kicks in to be considered before you buy your investment property. You have to safeguard yourself from emergencies, invest certain amount at other avenues which can be cashed in bits and pieces when required. An investment property is a big chunk of money parked and you cannot sell it piece by piece.

Some thoughts on when you should start investing in real estate

  • You are adequately insured (life cover)
    There are plenty of thumb rules and formulas floating around which will give you an idea of how much insurance you should buy. Do a little bit of research and purchase a good term plan to cover your life.

  • You have sufficient funds for taking care of emergencies
    Again as told earlier, property is a big ticket purchase. You cannot sell it at will and money gets locked when you make purchase. So to safeguard yourself, you must create one emergency fund which will take care in case of any emergency.

  • You have adequate medical insurance
    Whether buying property or not, you must be covered adequately for your health. Cost of medical treatment is increasing hence you must take adequate cover for you and immediate family.

  • You have a good Debt folio
    Again in investment pyramid, a good debt investment comes at the bottom stage – that is initial stage. You should invest some amount in instruments like FD/RD/Debt funds/PF/Bonds etc.

  • You have a good asset allocation and a mix of equity into your investments folio
    Based on your age and investment appetite have proper mix of equity and debt. You must have relevant equity exposure to gain from the rising markets.

  • You have at least 40% cash for making down payment for the investment property
    Having 40% as down payment, you save yourself from huge EMI going out monthly against home loan / mortgage. You must aim for maximum down payment so that the EMI doesn’t pinch you and you can have a peaceful life.

  • You have adequate funds to cover schooling of your kids
    Again the investment in property should not leave you with insufficient amount for your kids education. Amount for kid education should be kept and invested into a separate account.

  • After paying off your EMIs you still have 70% of your in hand salary at your disposal
    You should aim to restrict your monthly EMI for home loan to not more than 30% of your monthly take home – post taxes. This will give you a good 70% amount for running house and incurring other expenses. This is a healthy ratio.

  • In case of job loss, you should be able to support your EMIs for a good 6-9 months
    You should have enough in your emergency fund to tackle job loss scenario and you should be able to sustain 6-9 months with your EMI in case of job loss scenario.

If all the above basics are in place, then only one must look forward to buy an investment property. One should not become House RICH and cash POOR, as you have many other costs associated with your life & family.

If you play it too tight, the EMIs will hurt you, you will be broke if you lose your job, you will not be able to pay property taxes /maintenance. The cash flow will hurt you and you will be rich only on paper.