Financial Planning tips for bachelors!!!
Well well well...
Before I jump into the topic let me draw your attention to our perception about money.. Here I'm putting some of the common ideas we have about "money"..
1. Someone is "Filthy rich", "Stinkingly rich"..
2. Being rich implies being corrupt..
3. To become rich one needs to comprimise ethics/morals..
4. Those who are rich dont know what is humility.
and the list goes on..
All these ideas are put into our head either by our parents/elders or by movies we watch.. our hero with a strong character can never hail from a rich household.. He should study in governement schools, drink tap water to fill his stomach, then grows up working hard only to impress the dumbest of girls called "Heroin"..
Having grown up watching such movies its no wonder we have negative perception about having huge bank balances or even thinking about them.. we are afraid to say that we aspire to earn big money.. because we know people will call us "money minded".. Let me clarify something, a huge bank balance never implies corrupt money or unethical earnings.. there are ways to earn money which are legal,ethical and moral.. its only our myopic mindset that we dont realise them..
I know you are too bored reading all the above crap.. now let me give you some gyan, which, (if implemented) will give you some real benefits.. I am going to explain two methods of financial planning which I learnt from some really amazing people who implemented these and are amazingly rich (not filthy rich :))
Divide your total earnings into three groups as follows:
1. Current Expenses- about 30%- 40% of your income can be kept in this group.. meaning which you have to lead your life within this money.. I know, I sound very kanjus but remember the saying "Dont cry for the shoes, be glad that you have the legs to wear".. and within your limit you can go for shameless spending like 1MBPS internet speed, 1BHK seperate house 50K laptop, Nike shoes etc..
2. Donation: A minimum of 10% earnings SHOULD be given to the society. Always remember the primary purpose of this life is to contribute to this planet.. 'Men come, Men Die; Names remain forever' For generations Tata family spends 2/3 of their income to the society.. do you want any other reason for their wealth???
3. Remaining 50%-60% can be grouped as investments.. I dont think sensex is related to sexual abuse or explicit adult content.. so go on.. practice investing small amounts and learn how the market works.. if you think you are too busy to do this.. then go for Mutual funds which are relatively less risky.. and one time investment is always a risk.. so invest periodically. Saying which I mean that invest some amount every month/quarter.. My personal advice is, for 50% go for a bank RD or something like that which is completely risk free and with the remaining amount play with investing options..
the ultimate target of this method is to see that after 10 years 70% of your income is from non-salaried source..
Firstly list out all the expenses that you might end up with in the next 10-15 years. The list goes like:
1. Buying a car
2. Parents medical expenses
3. Kids education (if you are already married or planning to get married in the future)
4. Buying a house/plot in the outskirts of the city..(yep plan for the worst)
5. Travelling all across the globe..
now, every month invest some amount of money for every group mentioned above.. for eg. we invested a substantial sum for my niece's education.. (she is only 7months old now).. if you keep 100 bucks today good chance(if not 100%) that you get something mroe than that.. An uncle of mine envisioned that his sons should go abroad for studies and for a typical APSRTC clerk its a myth but he worked hard planned for a horizon of 10 years and now both his sons are green card holders.. so nothing is too big to achieve. And important of all dont lose hope when you get a loss.. its only the darkness before the dawn..
And finally, people never become rich by money, they become by attitude.. Recently I went across a mind blowing statement by an elderly friend of mine named Pappu Sreenivasa Rao and he wrote in his blog "One need not be our best friend to help. Normal friendship is good enough and if you can think a little big humanity is sufficient!!" Believe me, I was shell shocked by that statement.. hats off Pappu sir sorry Pappu uncle ;)
P.S: This article is like a cripple teaching athletics. Because, on 29th April 2008, My bank balance was Rs 000 ;)