SAving for your child's future

Are you getting married? Congratulations!

Oh! Not yet married? No problemo! You will soon / someday.
Oh! You are already married and have children too? Wonderful.

Have you thought of your child's need 18 years down the line? No?
Then I recommend you do.

I know a few people who start accumulating shares and gold (especially, if they have daughters).

There are other ways also. A really low risk mechanisms (but with the magic of compound interest thrown in) is opening a recurring deposit. Force yourself to save so that in 18-20 years time, when your kid is ready for higher education you have sufficient amount. Saving Rs. 2000 per month for 20 years at 6% interest will fetch you Rs.7,20,000. (Not sure of the prevailing interest rates; I think the maximum period for which you can open a recurring deposit is 5 years. Feedback the matured amount into some other low-risk investment and open yet another recurring deposit till you reach 20 years).

This does not stop you from going for medium risk investments. We will talk about those some day.

It's all about enjoying life

Are you obsessed with money?

Do you desperately want to become rich?
Then you have come to the wrong blog.
The 70-10-10-10 rule is all about the 70% and not the other 10%'s.

Set goals. (I will talk about this in my next few posts)
Put a plan in place (It doesn't have to be my recommendation - any good plan will do).
Set up mid-course correct points (basically don't look at the results of your investment everyday).
Enjoy life.

Buy that dream house

"Homes are now most affordable since '05" scream today's headlines in Times of India. "Wow!" you say and dive into read more. It turns out that the average housing prices have dropped from 4.6 times the average annual income to 4.5 times the average annual income. Big deal!

The fact remains that houses - good houses, those that you would love to stay in - will remain out of your reach. Always.

So if you are waiting to buy / build that dream house when you have enough money, it will remain just that - a dream house.

Here are some tips:

1) Start Young.

2) Set up a low-risk investment plan that will get you sufficient returns in say 3-4 years. Banks give up to 80% (in some cases 90%, or so I have been told). The rest has to come from you. So, if you are looking to buy or build a RS 800,000 house, at least Rs. 160,000 has to come from you. a well planned SIP will fetch you that amount in 5 years or earlier.


3) Always look for a house that you would like to live in 5-10 years from now. In 5-10 years your income will grow and you will not feel the pinch so much.

4) Another way to obtain the money you need to build a house. Buy two plots of land. Sell one. Use that money to build on another. I haven't done this myself. But I have heard of others who have done so.

5) Some people I know have done this. Four of them pooled money to buy a biggish plot of land and later on constructed a house with four independent flat.

6) Look out for bargains during economic downturns. I purchased my house just after the software bubble burst.

7) Unless you can afford it, do not buy house in a central location. It will cost you more. Cities have a habit of expanding. That house in the outskirts of the city will one day become a hub.

8) Also read Before You Take a Home Loan and After You Take a Home Loan

Plan your death

Just read an interesting piece of news. The Apollo 11 heroes had planned their death. Identifying that their journey to moon was hazardous, aware that the government compensation would be meager and since no insurance company was willing to insure them, they worked out a sort of 'family-pension' plan. Read more here.

My advise: take this lesson to heart. Plan for your death, even if you are not planning to go to moon any time soon. You have a family to look after. Look after them even after your death.

Enhance your skills

When was the last time you enrolled yourself for a class to upgrade your skills. And I don't mean a 2-day course where someone speaks and you listen. I mean a course that is aimed at enhancing your skills. Any skill that you have identified as something that is essential for you to do what you love doing the most.

You see, the formal education you get at college is just adequate to get you a job. That is not sufficient. All those who have some work experience will know that very little that you have studied in your college is of any use at work. Almost certainly, nothing that you studied at college is of any use to you to do what you love most. Yes, the extracurricular activities that you were involved in is of greater use. But is that sufficient?

Do you love to paint?
Do you think you can become a great author some day?
DO you love coding?

Get yourself enrolled into an evening course. Now!

And how is this relevant to becoming rich?

All investment schemes I have suggested in this blog and all advise that I give you in this blog are force-multipliers. These schemes ensure a comfortable life, at worst, and a prosperous life, at best. But these are, as I said, force multipliers; not the force themselves. Your income is still the source of supply to these schemes. You still need to feed these schemes. For that you need to improve your earning capability. If your present job is something you love, good. But if you think you will do better in an entirely different domain, then you need to try that as well.

I do not advise you to drop that day job of yours. You will find many people advising you to break away, take that risk, and try a new possible future. I would advise against it. Do all this if you are extremely confident, are willing to slug it out and do not have any additional responsibility. This can be done, perhaps, when you are still young, unmarried and do not have to look after your parents.

An easier way is to enroll into a evening course and find out if you are really that good. These evening courses will bring in the discipline you need to learn a new skill. (Unless you are really driven I do not advise correspondence course; the discipline is lacking). And when you do find out you are good, go all out for it. Till then keep that day job.

The Indian Woman

Perhaps I have been a little unfair to the women readers of my blog. You see, I have been writing from my perspective. But when I look back at the 40 odd posts in this blog I am not at all surprised to conclude that all of these apply to women. In fact more so. Being financially well-off is a goal that every women should strive for. An old woman is more vulnerable that her male counter part.

The Indian woman who always - almost always - puts family before self. I am pretty confident that the 70-10-10-10 rule will help them as much as it will help the family. The male ego may put up a little resistance, but once the benefits are apparent, you will see the change.

In fact, every post on this blog applies to the family as a whole. The unit for financial prosperity is the family not the individual.

On my part, I will keep the family in mind in all my future posts.

Financial Independence

My father was in AirForce. So after he retired he had a good pension and after his death my mother gets family pension. My mother is 64. The money she gets is sufficient. And she has never had to ask money from me. When she goes to visit her brothers and sisters, she travels by air or comfortably in air conditioned compartment in train. I don't have to buy a ticket for her. In fact, she insists in paying for the tickets herself. In other words, she is financially independent.

Being financially independent in old age is a good goal to shoot for.

When you retire, will you be financially independent?
Will you have a house - your house - to live in?
After you die will your wife be financially independent?

It doesn't matter what your age is today. But are you thinking about your old age?
Some day you will become old, won't you?
Time to prepare for this is now.