I will try to do the impossible
Will try to convey a Financial awareness message in 01 blog covering everything (almost) you need to know.
Point 1. Do you save money.
You are an idiot of first order if you are NOT saving any money out of your income.
The usual excuse we hear is that I don’t earn enough.
That is BULL Shit. Your saving has nothing to do with how much you earn. We are not talking about quantum, we are talking percentage.
No matter what happens, you should SAVE 20–30% of your monthly income.(A lot more If you are well off).
The household expenses need to be run on remaining 70–80% of the money.
If you are not able to run your household with that amount, you are doing SOMETHING WRONG. You are living outside your means.
This may sound curt and rude, but somebody has to do it, Pull ur kid out of that fancy school (Apparently Kejriwal has turned around the govt schools). Stop gifting him from Hamley’s, go to a local toy shop.
Stop gifting your wife that costly jewellery, Sex is a lot cheaper outside ;) (that was a joke, please don’t get any STD and blame me later)
Stop Smoking, you are just burning money to hurt your body.
All this advice may sound Stupid, but who started it, You did when you said something as dumb as I don’t earn enough to save.
Your prosperity has lot less to do with how much you earn but how less your wants are.
If you don’t earn enough, don’t want enough, its that simple.
Stop living your life on an external scorecard, what your neighbor has bought. Your neighbors salary is different than yours.
If you are poor, make poorer friends.
Point 02. What do you do with that 30% saving.
You are an idiot of the second order if you put it in an FD. Warren explained it better than anybody with the hamburger example.
You have 100 bucks which can buy you 5 burgers. Instead you put it in a FD. 03 years later they give you 150 bucks. Wow, not bad at all right!!! but NOW the problem is that this 150 can buy only 03 burgers.
Inflation ate 02 of your burgers!!
As famously said by the red queen
You need to invest your money in something that moves faster than inflation. The answer is ………..no not real estate you dumb fuck, (in any event you can’t afford it remember) its EQUITY.
Point #3 Do you know how much are you paying to your advisor.
You are an idiot of the third order if you are investing in Equity without realizing how much is it costing you.
Charlie said it beautifully
Mathematically illiterate people DO NOT REALIZE that if u make 5% and give 2% to your advisor. You are not losing 40% of your future, Its 90%.
You know the power of compounding. Know that its a POWER. It works equally well on expenses as well. Everybody knows about the death spiral of a credit card debt. Consider this…
Rs 5000 SIP invested monthly for 25 years, you end up paying almost Rs 30 lks as commissions, almost 20% of your corpus. (assuming you make 15% p.a compounded returns, paying a modest 1% as upfront and 1% as trail)
These are not assumptions, you actually pay this commission to your friendly advisor. You don’t see them as it gets deducted from your mutual fund’s NAV.
And for what!!!???
No advisor is capable of knowing in advance which of the 50% mutual funds will perform better than its benchmark index. (This %age is slated to go further down as Indian markets become more and more efficient and Indices more and more robust)
Solution: Buy the index itself and buy it via ETF which has its expense ratios at 0.1–0.5% unlike mutual funds who have to pay IIM/IIT passout fund managers for Not beating the benchmarks.
So to sum it up. Follow these 03 simple steps and I have covered in a NUTSHELL the entire day’s workshop.
Point 1. Save 20–30% of your income.
Point -2. Equity is better than FD/Gold and real estate and
Point 03. Within equity, save cost as much as possible. Simplify everything and Do a SIP on Nifty50 and Nifty next 50 ETFs.
And with that your Financial planning is taken care of.
As you do it you can concentrate on Other things in life and say what Tom hanks said in Forrest Gump.
“ That Fruit company, Apple keeps giving money. One less thing to worry about”
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