Browse Tag: planning

Do not wait to invest

It is often said that “the best time to start investing is NOW!”

Do not be surprised with the fact that most of the new investors are always confused about what is the right time to invest. Quite obvious, the educated ones want to save their principal amount and with whatever knowledge they have gathered, they know if they enter at extreme market highs, they could stare at huge losses few years down the line.

 

right time to invest

 

Everyone knows that one cannot time market. Instead of fretting about when to enter the market, tie your investments to how long you wish to stay invested. Always associate a goal with your every piece of investment. Along with the goal, also try associating a timeline too to your investment. For example, if you start a PPF account – you have a time period of 15 years (lock in period) to invest. In addition to 15 years, you can add blocks of 5 years to this term. So now you can associate the goal of buying retirement home with the proceeds of maturity amount after 20 years. INR1,50,000 systematic investment for 20 years can yield approximately INR4,50,000 on maturity.

Once you start working, you have enough financial goals staring at you

  • Buying an automobile
  • Buying house
  • Finances for wedding
  • Starting a family
  • Kids education
  • Retirement planning
  • Medical expenses
  • Taking care of dependents

And the list can go on…..

Take control of your life. Be at the driver seat. Identify goals in your life, assign a timeline and start investments for specific goals. Do not wait for the next salary increment, next promotion, your marriage, markets to go high or markets to come down and any other lame excuse that you can come up with to start putting money aside for your retirement years.

There are enough indicators for you to start investing the moment you start earning.

  • If you are in private sector, you will not get pension
  • Due to betterment in medical facilities and healthcare, average age of a person is increasing. You may have to live around 20 years in retirement before you die or may be longer. How you will fund your expenses?
  • Inflation is eroding the investment portfolios at a greater rate than ever as medical costs, housing costs, energy and every other service cost is increasing at a greater rates.
  • Cost of education for kids skyrocketing
  • Day to day living expenses are increasing

Whatever your dreams about retirement are (playing golf, traveling etc); you have to make sure that you outlive your money. If it’s the other way round, you will have to struggle a lot to place food on your table.

As I had mentioned earlier, your money is your money and only you can manage it better. You will have to invest and make your money grow so that you have enough funds for the retirement years. This will make you not to rely on your children to feed you during your old age and you can maintain your self esteem.

Investment is not a rocket science. If you are reading this, you must be having access to internet and internet is the biggest source of information in today’s world. It does not take special skills to get information about various avenues for investments based on your investment appetite. There are plenty of online tools which can compute returns over a period of time, based on historical data. Use them to tune your investment planning and you are good to go. Most important is the first step. Unless you take first step, you cannot climb the stairs. Same is with investments. Study, identify your goal, associate a time period to it and take plunge. You will learn many new things and there is always room to correct your mistakes in this journey, but the most important thing is the first step.

Do not think that your real estate property will take care of your retirement years; this thinking has created many house rich, cash poor individuals. You have to spread out your investments, must have proper asset allocation so that you can earn a regular income from your investments in your golden years. If you do not know how to invest, where to invest, start reading and do not hesitate to take help of experts. Investing has to be continuous process, month on month, year on year till you retire.

Remember you have to outlive your money without being burden on your children.

Happy investing !!!

 

What is an emergency fund? And why you should have one?

In personal finance and money management, emergency fund is the first line of defense against the unexpected problems in life. Financial emergencies can happen anytime, and most of the time they occur without warning.

  • What if your car needs immediate repair?
  • What if you are out of job for a couple of months?
  • What if you broke your leg while playing gully cricket?
  • What if a sudden voltage surge damaged your TV/Fridge/AC and all devices?
  • How you are going to tackle this?

Times are good, you can draw money on your credit card, or you can swipe your card to get new TV/New AC etc. You can take personal loans to pay for the home expenses if you are not in job for a couple of months. But all these options come at a cost. Cost is 18%-24% rate of interest per year.

So, you must have an emergency fund, which is money stashed away in an account which is reachable at a short notice of about 1 working day. Now the question is How Much? There is no thumb rule to it. 3 months of living expenses should be sufficient so that in worst case you do not have to rush out and get money on credit.

You can use a high interest sweep in account of any bank or a liquid / cash mutual fund. Mutual fund option is better as it saves you from the high tax if you are in higher tax bracket. Any liquid mutual funds can be cashed in 1 working day. You do not have to plan to earn huge interest on your emergency fund, but let it sit in some avenue which gives some returns and which is easily accessible.

Your money is your money!

As title says, “your money is your money“. None other than you would be able to manage it better. Others, who claim they can manage better, have their conflict of interest since they would be doing it for their livelihood. When they earn commissions for suggesting you the investment tools, they can never be honest with you. Here I am talking about the insurance agents, investment advisers and host of bank officials who always push you with some “REAL GOOD” plans

I am not pointing fingers at the financial planners, but at times, they cannot be believed due to conflict of interest clause. Their “BEST PLAN” might be the “BEST PLAN” for themselves but may not suit your needs.

A common man, who is working his way up in his career, is an educated person. He has basic knowledge of this world, how to live, survive, commute, plan things. Why not take charge of the finances instead of outsourcing it to someone who is unlikely to give you honest advice. We as employee help our companies to grow by managing their balance sheets, why not help ourselves by managing our own balance sheet of household finances & investments?

So remember, your money is your money. If you outsource your money management to someone, he will be more interested in sucking the commissions out of you by suggesting funds/avenues which gives him better commissions instead of suggesting you honestly where to invest. So take charge, control your finances. And believe me, with little knowledge you can be easily at the driver seat.

You alone will be the best person to guide your investments which is ultimately going to lead you to a financially stable retired life.

Why Money is Important?

A popular advert for a leading credit card company says “There are some things money can’t buy, for others there is MXXXXXCard”

Philosophically it can be said that money is not the most important thing in this world, but the fact is that without money, none can survive. We need money to buy food, buy a roof at our head, buy services to sustain our life/lifestyle and above all it gives us a kind of security.

  • When you are a student, you need money to fund education
  • When you start working, you need money to buy basic necessities
  • When you are married, and have family, you need money to build wealth and buy comforts
  • When you are sick, you need money for the healthcare
  • When you retire from work, you need money to sustain your lifestyle and fund expenses
  • When you are dead, you need money for your last rites

 

Money is required for every single stage of your life. We live in a world that thrives on Money. We don’t see this trend passing / changing anytime soon. The best thing is to use money as a tool, a mere tool so attain happiness. Not in terms of buying all luxuries available out there but to make wise decisions to have happiness and spread happiness in life of people who are connected with us.

Money is important but it’s also JUST money. Of course we should study hard, work hard to earn money but at the same time we must not lose our sleep over money. We should strive for a balanced life where you stop and smell the roses at will.
Wealthsamurai is about living life being lively, not about running around scouring for money all the time. We must focus on living a quality life instead of measuring our life by quantity of stuff we buy

Money & Life stages

From one’s point of view, there can be different stages in life with respect to money. Remember, this is only perspective – in general for a common man.

As one goes through different stages in life, the financial condition & goals are likely to change. They cannot stay constant over the entire life span. What holds good for you at early employment stage may not hold true when you are at the peak of your career. What is good for you at the peak, will likely change when you retire. If you manage your money well, you can strike a balance in all these years and can have a good plan for the years to come.

Stage 1:
Initial career years
From an Indian context, most of the parents pay for the kid’s education till University stage. So the first stage I am taking is early career years. The immediate goals for this stage may include buying a vehicle (a car or a two wheeler), planning for home, home furnishing, building a good credit history. However this might change soon as kids have started moving out on own soon and since education has become quite expensive, education loan is gradually become a trend now.
There is lot of energy and dreams at this stage. This stage decides how you will shape up your life, hence decisions taken are important and have long term impact on your life.

 

Stage 2:
Starting a family and career building
 One may switch jobs for earning higher compensation to increase financial kitty, growing savings, buying home, start to plan for retirement funds, start a family, begin saving for kids education, buying adequate insurance etc Income typically rises in these years.
The right investment decisions taken at this stage leaves a long lasting impact on your life. Also since these are initial years, money accumulated and invested wisely comes handy at a later date.

 

Stage 3:
Pre-Retirement years
Your expenses more or less stabilize now due to high income. Kid’s higher education, their marriage , prepayment of home loan, any other long term loan prepayment, putting away more funds for retirement, taking professional help for financial planning/ retirement planning. At this stage you become more organized for retirement planning.

 

Stage 4:
Early retirement years
You are officially retired, but you may want to work for sometime more as you are in good health. This is just to support the lifestyle, travel. You now work towards consolidating the retirement savings into a regular monthly income, managing taxes, and do everything in making your savings last till you breathe last. Preparing will also come during these years.

 

Stage 5:
Twilight years
You may become less mobile due to age and health issues. The goals include planning for assisted living (trend is picking up in India now), tax optimization, efforts to make your money / savings outlive you. Prepare yourself for this stage well in advance when you are at stage 3 & stage 4. You can consult people who are undergoing stage 5 and plan well in advance.

To sum up, your goals will change with each stage and if you are well prepared mentally for each stage, you can plan well. A well planned, goal oriented life will put you in less stress financially and ultimately make you sail through your retirement years.

The ultimate retirement goal for anyone it to outlive his/her retirement fund.
If you plan well at different stages of your life, this goal is quite achievable.

~ WS

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