10 Quick Personal Finance Rules

1. It's all about the habits.

No matter how little you're earning initially, make sure that a certain percentage of your income goes into your savings.

How much money to save? That's up to you and your expenses. A safe number is 30% of your income, but the higher this number, the better.

2. You don't have to be an expert.

Finance can be a very intimidating subject for many of us. But not everyone has to become a hardcore finance professional. Only worry about 3 things :

i. Am I serious about my 'financial habits'?

ii. Is my money growing?

ii. Am I getting advice from the right people? If not, where can I find them?

3. Savings account = Safety, but no growth.

- Yes, your money is safe in your savings account.

- Yes, it's good to have 'liquid cash' (digital money that can be withdrawn by you for your expenses), especially during situations like the coronavirus pandemic.

- No, this is NOT how you multiply money 

- No, this is NOT how you will achieve your financial goals in life.

4. What can I do with my money?

Low risk, low return options : Fixed deposits, Government Bonds

Medium risk, medium return options : Mutual Funds, Systematic Investment Plans (SIP)

High risk, high returns : Start Up Investments, Cryptocurrencies, Real Estate.

5. Physical Assets are important.

A very old school, but important financial strategy. Invest in something REAL. Even your money in a savings account is NOT REAL. It isn't in your hands.

Suppose there's a worst case scenario like a Zombie Apocalypse tomorrow and the concept of banks becomes irrelevant it's your physical assets that will come to your rescue.

From early on, make sure that a portion of your savings is invested in gold or silver. Another useful physical asset that can be purchased (eventually in life) is commercial real estate.

6. Real estate? Really?

Honestly, it totally depends on you and your priorities. 

Are you a nomad who'd want to live all over the world and shift bases regularly? Or are you someone who aims to buy that dream house in the city of your choice? OR do you just not know what you want yet?

In all 3 situations, the answer is : Aim to invest in commercial real estate. Pieces of property that can eventually be rented out by businesses/banks/offices. 

Even though the real estate market has taken a big hit because of the coronavirus situation, it will bounce back. Real estate has stood the test of time, through the course of human existence. 

While it may seem like a MASSIVE investment right now, start saving up in that direction. I know countless wealthy families that earn a big chunk of their monthly income from the rent derived from real estate investments of the past.

It's a shaken market. But it's a tried and tested market. Real estate will bounce back. Keep an eye on the opportunities.

7. How to divide my money?

- Completely up to you. But remember that you'll only be able to take big financial risks before you get married and settle down.

- So while you're young, play more high risk, high reward games. 

- At the same time, ensure that you're regularly playing low risk, low return games throughout your life.

8. How can I figure all this?

- Later in life, consider working with portfolio management services, wealth managers & financial advisors. The downside is that you need a huge amount of money to begin working with the reputed finance professionals out there.

- For now, use your parents' network and your own network to learn more about finance. Get good advice from people who've done it before you.

9. Good advice. 3 kinds :-

i. Smart, older people : The beauty of India is that we have different communities with different character traits. Identify communities that are good with money (Gujju, Marwaris, Baniyaas, Sindhis, Parsis, etc). Ask elders from these communities for money advice.

ii. Older, but young people : The advantage of taking advice from uncles/aunties is that they will give you tried & tested techniques of money multiplication. The disadvantage is that many are not familiar with modern investment options like crypto currencies & start up investments. You MUST network with younger, successful folks as well. Most young & successful people will readily share knowledge if asked the right questions.

iii. Finance podcasts : This will be your greatest weapon if you invest time here. Lots of good finance podcasts out there. Lots of good business podcasts (like #TheRanveerShow), that will teach you finance & money hacks. If you wish to multiply your money, invest your energy in the correct learning sources. Books are great, podcasts are FAST & great.

On the latest episode of #TheRanveerShow, we hosted Nithin Kamat, founder of one of India's biggest FinTech (Finance Tech) companies, Zerodha. This will be an easy-to-understand masterclass for you. Utilise the FREE knowledge out there.

10. Start today.

It doesn't matter how old you are. 

It doesn't matter how much money you earn every month.

Multiplying money through personal finance games is much more about habit formation than it is about your salary/age. Get into the correct financial habits early on.

Bitter truth : If you have to sacrifice a bit on your lifestyle or on your material desires, accept the sacrifice. It will pay off.

Pleasant truth : The investments of today will become the luxuries, vacations, fancy cars, experiences & safety nets of tomorrow.