Rentals are dying...#covidtimes

If you have a house on rent and the tenants are continuing in the house and paying the rent.. then you are one of the lucky ones! 

With the impact of covid on jobs and the fact that lots of people are working from home, many of the tenants are moving back to their houses in their hometown. 

In my society itself in my block there at 8 to 10 flats which have all been emptied in the last 1 month. The impact of the blockades between delhi and NCR also hasnt allowed new tenants to move from delhi to the suburbs. 

These have also caused rentals to go down.. forget about the 10% increase in the rentals. ... though my landlord did not agree and wanted his 10%... which i gave. Him being a senior it would impact his earning income.

This is tough on the passive income streams for many people, especially retired seniors. 

For others the banks haven't reduced the emi interest rates by anything appreciable and other income channels have impacted salaries.

Its a vicious circle. 

Time to be careful about ones money... thats simplefinancialsense 

covidtimes . Debt ... or not to Debt?

Times are tough and will get tougher as we progress.  Some of us may have to take on debt to wade us through these tough times.

What rules should be applied while taking on debt IF and only IF one has to ( read my previous post on creating an exit strategy of your investments).

 Credit card debt is a NO-NO.

This is the highest debt interest. 30-40% pa interest rates. Which means your amount to be paid back doubles in 2 to 2.5 years. Do not fall into this trap .

If required move away completely from using credit cards to debit cards. 

Hopefully you havent taken the moratorium on credit card payments because all that the banks are doing is to postpone  the payment but are still charging the exorbitant interest rates  

Home loan extensions or additions

This is usually the lowest possible interest rates available. Good to use and and is also long term in nature.

Personal loans

Above the home loan interest rates and definately possible to use. However do not use these loans for stuff like travel ( not the time to travel). Use it if you need to buy some sort of an asset like a car or something.

Zero cost EMI

Lots of companies do provide zero cost emi to help reduce the burden on cash flow for people. Ask the manufacturer or service provider to give an option.  If they do have an option ask if you pay upfront can you get a larger discount. 

I got a nice discount for an online course yesterday by paying upfront.

In short the rules dont differ too much from regular times, but the important point in these times of covid is to conserve capital and be frugal until things improve.

Be smart.. simplefinancialsense. 

Have started using another site for my blog.. please visit there as i stop off this site over the next few weeks. Www.simplefinancialsense.wordpress.com 

Student debt crisis.. future of Indians

A student in the us is in extreme debt as they pass out from higher studies.  They could have anywhere between $ 200k to $ 400k in educational loans which they need to pay over the next few years.

A student could make anywhere between $60 -$80k per annum as they get into their first jobs. With income tax rates as high as 40% in the us , it would take them a really long time to be education loan free .. even before they can start saving for the rest of their lives.

The above scenario is one of the key points in the next American election where a few of the presidential hopefuls are promising waivers on student loans if they get elected.

As you can see it would be something very popular and could be the winning edge for the elections.

In India something similiar is emerging.. in line with the theory that India financial structures would copy the west as it happens.

Today an MBA from the IIMs which are actually state sponsored would cost around 14 to 16 lakhs for a 1.5 yrs programme. Consider this vs the 1.5 lakhs i paid for my MBA in 2000s... a 10x increase in 20 years. Much much higher than the regular rate of inflation that we see published from the GOI every month.

In my days passing out at least got me a 2x-4x salary of what i spent for my education.. so the ROI was fantastic. Now days one would be lucky to get 1x of your investment.. even from the best colleges if you are a fresher.

The government of course is enabling student loans ( coincidence with the way us works?) And more and more students are making use of these facilities.

All that we will do is as a society get into more and more debt .

Recently i was watching a video of how professionals are living in hongkong.. and it shows how difficult it is for people who are so qualified ( see here). Hongkong is one of the most premier locations in the world... however having significant constraints in land space. India is facing similiar situation with its high population growth ( towards which there is no proactive control measures initiated ).

Student debt will in the future create significant headwinds for our children and their future generations. 

The big difference lies in our culture.  With the Indian family system parents would like to plan for their children's education as much as possible.

All these point towards how even more important financial planning will be in the future. Start now and help your future generations.

Thats simplefinancialsense

Fooled by the financial markets...

The bad story continues in the Indian markets belying all expectations of a broader recovery post the budget on 5th of july.

Some of the budget provisions especially higher tax on the super rich and its clarifications led to another large fall in the main indexes on friday.

Some of the results especially in the financial sectors continued to add to the woes of the market with YES bank falling over 20%, Dcb bank 20% and RBL by 15% all on the day of the earnings.

These huge negative sessions have been the norm especially from mid 2018 and changes were expected post the Narendra Modi government coming back to power which it did with a thumping majority.

However these last year has belied all beliefs in the power of compounding in the equity markets. How can we even think of 15% cagr long term when the cuts in the broader market is over 50%!!

Somewhere doubts start to creep into the mind around if this cagr is just another marketing gimmick for the financial markets.

Lets look at the following.

1. When the whole thing is on doing a SIP who profits... the intermediaries and the AMCs.
2. When the markets go up and there is good return , then the fund managers and the intermediaries continue to get great benefits and large bonuses... who benefits..? Same as point no 1.
3. When the market drops , these so called as experts start looking at who has lost the most.  I mean if they were experts should they not have done the right thing and sold off the stocks which now seem to be at " too high valuations"? . However there is no reduction in their bonuses or anything.. no penalties for their mistakes. They continue to make large sums of money .. customer can go to hell!
4. How many stocks today at 50% or less than their IPO prices... humungous. Look at the recent ones itself.  So these so called experts make their money and cheat all the people coming into the markets. Who benefits?

So in all the above cases who is benefitting.. the financial markets and its itermediaries. The people working there only seem to have positives built in.

Now lets take a quick look at the so called returns of the nifty over the years.  At first cut it looks fantastic. However, when we start peeling the onion we start finding the following points.

1. The nifty continuously changes its top 50 stocks
2. Bad performing stocks are taken out frequently and better performing stocks are brought in. Take a close look and some big names who were fill it shut it .. all today dropped to less than 10% of the value.

So when 2 happens can the nifty ever  go down? Nope.

Its a game...  we need to understand the game and separate the marketing from the reality and then learn to play the game.

Thats simplefinancialsense

Tailwind in life of financial freedom

We all know that compounding is the world's 8th wonder... and the more number of years you save and invest the faster ( geometric progression ) you are on your way to financial freedom.

Being financially free can significantly change your career and your choices in later life.

As a new professional, i remember back in my days , i was staying away from home. I had a large chunk of costs due to paying rent for home , daily food etc. These of course crept into my savings and i really did not have an investment plan apart from keeping my money in the savings bank account or my dad forcing me to put some money into my ppf account.

Later on in life , after my mba i was lucky enough to be back home and stay at home while working. It saved me a bunch load of money apart from all of the pampering i got .

In India we have the opportunity to really without any hitch stay with our parents even after starting to work - unlike the west where this seems to be a taboo.

This lack of expenses should be considered as a  major tailwind towards our financial freedom if we play it right and not spend away the savings because the bank balance seems nice.

Here are a few tips for parents and children to really think through and execute.

1. Be clear on how much saving the child has by staying at home.  Expenses saved can be in so many areas... house rent, food, using the car and not buying a new one. Depending on the city this could be anywhere between 25 to 30 thousand Rs a month!

2. Have a pact with the child to force/ influence them to invest in the right financial products.

3. Make them aware how much this can support them and you as they go ahead in life.

With what savings i was able to make , i actually was able to put down the initial deposit for my house vs asking my dad for money.

All thanks to my parents for giving me a head start.. helping me get a tailwind!

Offense vs defence in financial planning

Financial planning is not a game it is a serious business which defines how well you and potentially your future generations will live.

Why future generations? Well take a good look at the example of the Ambanis. Both the brothers started out with the same really large wealth .. in billions of $ and look at where they are now.

Mukesh Ambani has grown his wealth many fold with his foray into reliance retail , Jio.

Anil Ambani has withered away his entire fortune with his brother having to pay 500 cr for reliance comm else he would have gone to jail.  ( The brothers don't get along very well and the property had to be divided ).

So definitely there will be a difference in the next generations of wealth for the Mukesh and Anil Ambani groups.

So what do we learn from this... as a corollary with a game play.. we need to learn how to play not only offence ( earning more) but also how to play defence ( ensuring we keep , save and invest the money ).
There is NO use of attempting to fill a large bucket with a large hole at the bottom .

The method that people use to grow wealthy are usually how to play offence.. which means how to earn more money.. bigger job... bigger risks etc.  They believe that with increasing income one can easily be wealthy.

However when one looks at people who came into money very quickly one would find that they also very quickly lose money- perfect example of filling a bucket with a hole under a waterfall.

Look at people who made a lot of money through sale of land, winning a lottery or sports people.

We will look at in the next few posts how to create a both offense and defence strategies for you to make wealth AND keep it.

Understanding this .. it's simplefinancialsense.

New goal.. child head start

A really long time ago ( thats because of my age) just after i was born, my dad got me started down the road to financial freedom. He started investing in my name in the public provident fund.

A few months ago, while he was looking at my passbook for the ppf account.. he made a comment which really hit me at a subconscious level.

He said.. wow.. "who would have thought .. all those small Rs would have added upto such large numbers".

He of course saved in my name , but never really for a specific goal like education or marriage. It was a saving that could be utilized when required. 

In those years my parents contributed to our grandparents, to getting siblings married and of course for our own family. But every year as a force of habit.. he put in some money in the ppf..

What did that do for me... it has given me a head start.. made my life that much less stressful financially, more secure.. secure enough a buy a small house in a tier 2 city of required.

It is a huge gift.. a gift that i will be always thankful for because that one gift allowed our future generations a head start of many many steps vs others who did not have parents who did this.

Why am i saying and writing all of this.. its because you should create a goal for your children called as head start

There are some simple ways to fund something like this...

Small savings that one may get every month.. invest in your childs name

Any gifts from parents and grand parents on their birthdays and festivals

Any gifts from uncle and aunts

Any savings from their pocket money

The important part of this entire story is put it in their name, in their folios and not combine it with your other folios.

Giving your children a financial head start will help them tremendously in their future years... and every Rs you save will give them great cushioning for their future.

New goal .. child head start.

Its simplefinancialsense

Overconsumption: The urge to splurge

I am in the market to buy a jacket . Its wintertime here in northern India and i want to get a jacket that looks good and one that i can also use in my travels to Minnesota in the US where my company is based.

I checked last week and i have, different varieties of almost 7 jackets fully occupying my cupboard... but still everytime i go to a mall .. virtual or brick..i keep searching and am on thr lookout for jackets... its the urge to splurge.

Todays advertisements and fashion force the buyer decision making to conform to their mesaages... not only at conscious but also at the subconscious level. Its very frightening.

Its an urge to collect more and more stuff even though you may not need it.

Marketers have perfected this art .. with the right placements and the right positioning .. blaring their products right into their customers mind.

How to control this.. in a rational manner is the name of the game... and remember.. control doesnt mean abstinence... it means spending in the right places.

Here are some thoughts that i use when trying to control these urges..

1. Do more virtual shopping... so that the urge to buy.. that instant of urge dies down.
2. Remember the other stuff lying in your cupboard and the fact that your cupboard is bursting at its seams.
3. Remember that at 12% return.. the money that you don't spend and invest doubles every 5 yrs!.. and much can that become in 20 yrs (5 yrs is not great for compounding.. one must consider a time frame of 15 to 20 yrs).

So to show a calculation..

1000 rs will be

2000 in 5 yrs
4000 in 10 yrs
8000 in 15 yrs
16000 in 20 yrs.

So a jacket of 5000 rs will be 5000×16= 90000 Rs!!!

4. First take a pledge of giving away the stuff that you already have to others.. we took all of our old but good quality woolens and i gave them in 5 places when stopping at red lights.  And i had like 2 big bags. I at least know that we helped at least 25 children and adults to have a safer and warmer winters. 

5. Look at the budget of spending and then spend .. look at the money in your spending envelope .. and then spend ( i plan to use this idea more..not using it effectively enough)

These are a few of the ideas i use.. and no.. it doesnt help all of the time.. but hey some indulgence is good... but not always.

Plan your spends.. and control the urge to splurge.

What other ideas and tricks do you use..

Share .. learn together.. thats simplefinancialsense

Set your reminder this diwali

I use an "any do" reminder on my phone. It helps me remember key actions like paying for my credit card bills, phone bills and also other critical points.

Likewise during this diwali festival... let's renew our reminders from a financial perspective and ensure that we dont keep snoozing the button as we go ahead..

1. Get your life insurance done. Remember, go for a term insurance and also for a term which is at the min till your retirement. This should be at least 5 times your yearly income

2.  Set up your investment portfolio. Automate it. Dont keep money in the bank account unless really required... make your money work hard

3. Rationalize and review your asset allocation. Stick to the plan.. debt and equity are both important.

Make sure the reminder process works...

Financial planning is important and urgent... dont press the snooze button

Its simplefinancialsense

More income is not more wealth!

Imagine someone earning two crores a year fretting about money....

Yes.. 2 crores...

Yes .. 2 crore rupees

Yes... now in 2018... and its not 3018.

Ok.. stop laughing... it does happen and it is happening around us.

What is wealth.. the ability to live life without worrying about money. ...

Wealth doesnt mean that you are earning very high .income from a job... and it doesnt mean that people who have large income from jobs are wealthy!!

Today i find people little apprehensive about money even when they are earning very high incomes. They dont seem to have the peace of mind that should come with a few crores in the bank.

I remember an old boss of mine was always very  calm ( vijay sir). Never perturbed. Always smiling even in the face of adversity.
Someone one day asked him ( more senior than vijay sir) how he remains so calm... and all he said was " it helps to have a few crores in your bank account!". This was 2003. Those few crores most likely are now in 15 yrs at least 8 crores !

Money matters when handled properly get the mind free from all worries professional or personal... point is when handled properly.

When more money comes in , then there is always an tendency of spending more and spending more on stuff that is really not adding to your asset column.

This person earning 2crs seems to be spending a lot on jewellery and other fine dining activities thus causing perplexing emotional responses to lack of money in the bank.

What one does with the money one earns defines how much money one will have as time passes on...

Like monopoly whose secret is 5 green house and 1 red hotel.. we need to build assets vs losing money in expenses

Learn from other peoples mistakes and successes...

Thats simplefinancialsense

All these payment apps....

So many of these payment apps are present in the indian market today its amazing. All of them vie for your wallet and your business.

How many you ask... lets list out a few..

1. Paytm
2.mobikwik
3.payzapp ( hdfc bank)
4. Freecharge
5. Jio money
6. Airtel money
7. Vodafone wallet ( forgetting the name)
8.whatsapp
9. Google pay
10 easyday wallet
11 big bazaar and it has a few more
12. Amazon wallet

So many of them its difficult for one to remember.

These wallets have all mushroomed over the last few years.

All of them have some of your money in them. You believe you need all of them

Most of them have some money in them... all sitting there until you use them... maybe never.

These wallets need to be controlled just as you control the number of bank accounts. Just like we say dont keep money idle, dont keep money idle in wallet apps.

Apart from the issue of money being idle, there is also the issue of management of these wallets and kyc rules ( which you cannot memorize) - i have been fighting for my kyc on airtel pay for the last one month!!  ( 10 emails and copy paste responses from airtel pay)

Choose your wallet carefully.. keep only a few.. two or three at most at any point of time.

Make your life simple .. thats simplefinancialsense!

Portfolios are down 27%

Ouch ouch ouch...

Yes thats the feeling as of now, with my portfolio down over 27% since the last one months carnage. Right now my cost of sips is same as value... over the last few years.

The equity markets have dropped significantly as well as the debt markets .. long live the financial dream... yes thats how a lot of people feel when they see their portfolio .. and yes that includes me.

The recent drop has a lot to do with the macros and mostly because of the price of oil reaching 85$ and the meltdown due to the liquidity concern of IIFL.

Today the price of oil is 80$ ... and hopefully the impact of oil remains at this level for a sensitive economy such as India.

All of the above caused our CAD to become worse and that added to the impact of the Rupee depreciating to 74Rs/$.. and that making the CAD become worse ... and that making the FII sell their stocks since they bought in $ .. and that making the Rs depreciate further and that...

You get the drift.

In the next few months we Also have elections in five states and the lok sabha elections in may 2019. The trend of the market will get defined  from dec onwards post the state elections.

So what to do now. Deploy money in SIPs... for mutual funds or for portfolio stocks every month. Blue chips are down and they will jump up first.

When the markets are down and when the going is tough.. its best to keep your head down and continue with your investment plan

Add to the near future... thats simplefinancialsense!

An amazing Rags to Riches story..

One of the biggest ways to learn is to learn from others successes and also their mistakes. Which is why the emergence of executive coaches has become a phenomena of its own.

Like in professional life an executive coach helps one , there needs to be coaches ( not financial advisors) that you can turn to for advice in the most unspoken matter...personal finance.


Recently i met someone who is  senior to me in the professional world who shared his life with me. It was unofficially his teachable point of view (TPOV) from a life and financial perspective.

His story is immensely courageous and inspiring. He came from a poor family and lost his father when he was 16 yrs old. They had little to no money and used to sleep on the ground on newspapers. Sometimes they had no money to eat.

When he was 22 years old he got his first job for a salary of 600 Rs. From there on he made life changing decisions and effort and today he is extremely comfortable and has money in crores. His effort shines through as a person who is frugal, humble and extremely business savvy ( him being from gujrat for the last three generations helped him wire his brains right).

From his first salary he tells me that he bought shares ..even though it would have been in the early 90s and with such small amounts he bought shares. He has consistently invested in shares ever since . He does his own analysis , doesn't invest in shares below a market cap of 10k crores and says he has a reasonable expectation of 15% CAGR.

Most of his stocks are in the financial sector with the likes of hdfc bank , SBI , BOB , Reliance  etc.

While i discussed my financial strategy with him he said that you must look at a min 15 yr horizon. He never checks his balance but only looks at it once in 6 months. His guidance is that the power of compounding really comes through post 15 yrs and one must be patient. I told him that i was in the 8 yr frame.. he said.. continue investing... wait for the magic jump at 15 yrs.

Some of his stocks he says over the last 25 yrs has gotten him more than 500 times returns!! With dividends and bonus shares.

On dividends he uses a strategy of reinvesting that in the same share.. hence driving he says the real benefit of compounding.. basically he made it a growth fund.

Now what has this gotten him... today over the last 10 yrs he has taken his family and travelled to over 44 countries as part of his vacation plan. He says this is one place where he likes to spend his money because life is about " Experiences ". Now he is of course quite a senior person and makes quite alot of money from his job...but he is not dependent on it for his financial future.

His needs are small.. stays ina decent home , is humble and always reminds his son from where he came from and how he conquered poverty. Ensures that his son remains humble and continues  to fight the battle against poverty.


I cannot tell you all how much simplicity he has brought  into his life... in all spheres. 

Life is a learning.. Learning from others experiences is tremendous opportunity..

Learn learn learn.. listen to people who have made it big... thats simplefinancialsense

Keeping your balance sheet updated

As people who are bothered about our personal finance there is one metric that you should bother about.... What are the numbers in your balance sheet.

First I find that a lot of people in the salaried class do not have a balance sheet. Businessmen mostly have that and a lot of them have these small books which have even the black balance sheets available !

For a salaried class they should create and maintain a balance sheet which shows and maintain the status of all of their investments.

For investments this would mean all of the below

All stocks and shares with their present value

All mutual funds calculated for their present value ( debt and equity)

Any ppf or epf

Any money lying in bank accounts ( all accounts!)

Any fds with any banks

Any loans given to anyone ( friends and family or even faircent p2p platforms)

Any real estate with present value ( apartments , land etc)

Any investment bonds ( NcDs etc)

Any jewellery

Any loans taken for which emi is being paid

All of these together will add up to your balance sheet.

Keeping these in a list is great for a few things

1. Ensuring you know your true networth
2. Ensuring you have a consolidated list which ensures that in case of any emergency your family is well protected in at least knowing what is left behind

Make a balance sheet.. it's the first step to having a simplefinancialsense

Raksha bandhan gifts

Its a great time for families, with Raksha Bandhan  being tomorrow. The festival is the celebration of brother sister relationship in Hindu families.

A day when the brother promises to protect the sister all his life while the sister wishes for his long life.

Nowdays both children pass on gifts to each other and its no longer restricted to the brother giving gifts for the sister  ( we have started that in our family ).

 

While we always give gifts that can be consumed now, it is time for us to evaluate some gifts which are financial in nature, which provide the brother or sister to build financial independence as the years go by.

 

Here are some ideas that can be used .

 

Gold

Getting your sister some gold jewelry is always useful from two aspects, it can be used now and it can be sold off later if required to buy new jewelry for her marriage. These days gold is declining in value , but still one never buys gold for short term. If it is for actual usage, it is a great gift because it solves for both financial as well as consummation value! Hence go to a Tanishk, or other jewelers and buy her a nice necklace or earrings ( maybe take her along - so she can choose! )

 

 

Health Insurance

If your sibling is not working as of now and is not covered by anyones health insurance, it is a great gift. It also forces her to think about carrying the insurance forward . Of course do consult her/him before to ensure you are not duplicating the health insurance.

 

Mutual funds

An awesome way to protect future. Take a slice out of your gift and put it into a mutual fund in his/ her name, with the promise taken from them to not remove it for the next 10 yrs! Even better if you invest in their name in an ELSS if it enables them to save more tax!

 

An Educational course

Investing in yourself is critical for your personal and professional growth. A gift of a course can be thrilling to the sibling making them more employable or even the ability for them to become an entrepreneur.  

 

 

These are all great ways to show affection towards our siblings and help plan for their future. A heady mix of consumerism and financial prudence- now that's simplefinancialsense!

 

 

The Investment Tax

I was listening to the financial planner on BTVi and the Investment Tax was mentioned on the programme.

The word rang a bell in my mind and has been running through my mind for the last few weeks as to what does it really mean to me. This post is an attempt for me to write things down and provide clarity to myself to its meaning in my life ( please do send in your comments .. would be great do hear from you all )

1. Invest before you spend

This is the same thing as pay yourself first.. which basically means that as salaried people as our tax is cut before it reaches our hands , we should also consider investment as a TAX and cut the investment amount before we start spending.  If there is no money to spend... one will not spend.

2. Investment of your time to learn new things

Every professional career needs replenishment. Honestly none of my companies have given me the fuel by themselves to help me to think and learn something new through a training program. Usually the training programs are not what i would like to attend.

So , we need to make investment in ourselves to remain relevant to the organization and the markets. So we need to from our investment pie keep some money separate to be able to spend on learning experiences.

3. Invest in insurance

Insurance is a must. There is no two ways about it. Insurance cannot give you wealth or make you bankrupt, but it can definately save you from bankruptcy.

Make the investment in insurance before you spend on mutual funds

What do you think... i feel understanding and discussing such concepts makes people much better than what they were before..

Sharing and learning. . Co learning

Thats simplefinancialsense

Early retirement.. some thoughts

Now days I see lots of articles in business magazines about people wanting to retire early.. or having retired early.

It's facinating to read their stories and how some people are living their dreams. All great things.

But let's understand when they say retirement what does it really mean. When I read some of these articles the people are not in a full time job but are still working but with their choice of roles and timings.

Getting financial freedom depends on a lot of things and some of them are below..

1.  Being clear on needs vs wants. Financial freedom means using the money one has saved or is earning passively is enough for keeping the family able to service the needs

2.  Defining what the family will pay for children's education . Outside of India usually education loans are taken by the children themselves since they are so expensive. In India parents usually want to save money and not let the children invest from their future cash flows

I have had a few friends who wanted to retire at the age of forty but never did.. not sure they want to now.

One of my acquaintances lost his job sometime back.  I spoke to him a couple of times . He initially did some calculations and said his networth was 6mn $ ( he was us based)... so he did not have any urgency to find a new role. He was financially  free  However a month down the line he was trying his hand at multiple interviews and pushing to find a job. He was 43 yrs old!

Another acquaintance who is 49 yrs has all but finished his children's education etc and is financially free. While he keeps saying that he doesnt need to work, one doesnt see him slacking off.

Even when a person is financially free one must understand that there is another component that helps decide what the person does with his or her time. In India one always has the push to be utilizing their time vs staying at home and relaxing. That could happen in the western countries but most likely not in the asian cultures.

So... in the end.. financial freedom is about being free from financial worries and not really about deciding to stop working and taking a VRS.

Learning from others.. thats simplefinancialsense

Impact of the Rupees fall

The Indian Rupee has been falling and recently reached levels of 69. The pundits were predicting a fall to 70 very soon.

This depreciation impacts our daily lives quite significantly especially because our country has a net trade deficit which means they import more than they export.

The stronger $ means that we need to pay more for petrol and diesel which again impacts our transportation costs and hence our inflation.

These high $ also impacts us if we plan to take international holidays and or send our children for higher education overseas.

This 8% depreciation can significantly impact our planning and can actually derail some of them.

These market changes will continue to come as surprises over the period of your long term financial plans and needs to be factored into ones planning.  One should not just take standard numbers ... but factor in a contingency of 10%.

When these changes hit you , you can plan to do two things..

1. Delay the expenditure... ( you cannot do that for education but of course you can delay a travel plan)
2 spend the money and improvise with your emergency funds and fill it up later with savings

Its not easy... to manage changes is life... but to try and plan for it...

Thats simplefinancialsense

Giving children exposure vs saving for a child

Today i read a post from moneyhabit.org where the writer who is in the twentys is already retired with 2.8m $ in savings ( wow!).

Basically the writer talks about that in the us the education and other activities for a child is almost 20k usd per annum . She also says that by investing 30% of this, one can provide almost a million $ for the child towards a college education.  The saving she says comes from cutting on some wasteful expenditures ( eg buying only second hand electronics... interesting ideas) but also by not sending them for too many courses through the years.

While i agree with the nice cut in the wasteful expenditures i am not fully convinced about the cutting of the different courses through their growing up period.

These courses enable personality developments and strong social bonding and skills .. all which will hold the child in good stead when they grow up. A lot of these are NOT wasteful expenditures and enable the children to be able up to manage the issues that come up inadvertently later on in life.

Are these educational experiences better than the 1mn$ saved.... i dont know. Each of us as parents need to decide for themselves as to what is better. Its our test of parenthood .

I do believe that sometimes we pamper our children too much and they are all depending on us passing on significant money to them as they grow up. Its a great safety cushion... but only when used as a safety cushion and not when they take it for granted and dont do enough to be successful themselves.

Its not easy... but its a decision that each of us needs to make.... thats simplefinancialsense

What to do with a windfall gain!

Sometimes life plays us a good hand - a stroke of luck..some money comes our way that we were not expecting- a financial windfall.

These windfalls dont happen very often and one would be lucky to get anything like this in ones lifetime. .. its a lottery without buying a ticket every month.

When such windfalls happen it should be utilized in the right manner to ensure prosperity for yourself over the time to come.

In the time of the property boom a lot of farmers made many crores when they sold off their land - i remember a hard working taxi driver who i used to use to go to the airport  who got 6cr as a part of his share of sale of land. He was going  to start something else. At that time i recall wondering wow... with all of my education and effort i could never reach that stage .

Recently there was an article of a person winning the lottery in the UAE for 1.6mn$.

It is reported that 95% of people who get these windfalls lose it very quickly because they dont invest in the right things.

Investment in the right thing means investing in assets that generate income ( referring back to rich dad poor dad definition).

So here is a list of things one can do if there is a windfall gain in order of priority


1. Pay off any credit card debt.  With such high rates of 30%+ this should be top priority.
2. Buy and invest in life insurance and health insurance for the family.
3. Create your emergency reserve. Keep half of the reserve in bank deposits which can be broken in times of need ( or open an account where you can have high saving deposit rate like kotak or yes banks) and the other half in liquid funds.
4. Pre pay any housing loan. With high interest rates and the markets not going anywhere it is the right time to pay back and save on interest rates. Also with  the deduction on interest now at a max of 2l per annum this will serve you well later. ( ensure all loans are paid off before you are 50)
5. Invest for your goals . Do a stp into mutual funds basis your risk appetite. These can be equity or debt.


Of course  it is not all about investing.  Use some of the money  upto a max of 10% to relax and enjoy.


Simple rules .. important rules... applicable to all .. you and me..

Its simplefinancialsense!!