Gain control over your money ...with personal finance prudence
A powerful quote by Dave Ramsey that really jolts one into action
Money may not grow on trees, but we CAN influence how it grows…
Basic Finance skills applied over time can work like magic even for Non- Finance professionals!
Here are a few things to consider:
1.?? Analyze your salary/perks.
Understand your salary breakup/components carefully.
?(before taking up an offer/ looking for a new one or negotiating)
Subsidies on loans:
Home loans generally eat up a big chunk of salary, so check how much you save on the EMI v/s market rate. This is mostly a perk when you join Banks/ NBFCs (a part of the CTC)
Company guest houses:
Some companies have their guest house network available at nominal charges that can be money savers.
Variable performance linked pay
Dig in and find out how achievable the company makes this for employees to earn. What percentage of employees earn this and at what percentage of their salary.
ESOPS (Employee Stock options)
These can be a real wealth generator, especially if joining a growing organization. Find out whether you are eligible. Many companies generously distribute these even to performing junior executives.
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2. Analyze Personal debt
Credit cards/ Personal loans / Car loans
These are a boon especially during a crisis.
But they are also the fastest way to accumulate a ballooning debt. Most credit cards charge around 3% interest per month (not per annum!) so best to clear dues on or before time to avoid the ‘revolving balance.’
Personal loans too become tempting when we are short on cash.
If you must go for them, then ensure you clear payments on time to maintain a good credit score.
Fancy car loans tempting you? then remember you are ‘investing’ in a depreciating asset. In fact, luxury cars lose a sizeable value in the resale market in the first year of purchase itself.
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Home loans
Home loans can be a potent tool for an appreciating (mostly) asset as well as helping you give your family the comfort of an owned home.
But there’s one thing you need to be aware about them
The instalments have both interest as well as principal components but most of the instalments that you pay in the first few years will be towards the interest component.
?So, when you try to foreclose a home loan midway, you might get a rude shock, realizing that you haven’t repaid as much of the principal as you thought you had.
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Plus, a large home loan becomes extremely restrictive when you think of changing careers or taking another investment bet.
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3. Analyze Personal Investments
Things to keep in mind while investing:
1.?? Inflation – the silent killer
Simply put inflation is what reduces your purchasing power.
?So, let’s say today you can buy
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?So if you invest in instruments that give you less than the inflation rate, you are eroding your capital even beyond the inflation rate!
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2.?? Power of compounding
Einstein said, ‘Compound Interest is the 8th wonder of the world’!
Check this:
Compounded at 10% p.a. for 20 years.
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3.?? Analyze Risk v/s Return
Equities though uncertain are a potent tool to beat inflation but only over the long term. If you cannot take short term volatilities, then its best to stay away.
A thumb rule would be to decide your asset allocation as per your age:
·????? If you are 30, then go for 30% debt, 70% equity allocation.
·????? If you are 50 then 50% debt, 50% equity allocation and so on
?Again real estate investments, alternative investments, exposure to international scrips can all be made via premium funds for less risky more secure exposure.
4.?? Investment goals
There are 2 major financial goals that most people have
Retirement planning and Kids education
For both these use a ready- made calculator helps to know how much you need to start investing now – many are available on the internet.
Here’s a general logic of how this work (Do skip this part if you find it hard to understand, the calculators on the many premium investment sites will help you just right)
Kids education goal ?
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Retirement Planning
Retirement calculators can get much more complex.
Insurance:
Term insurance is an absolute must!
Term insurance simply compensates your family with the life cover you are insured for, in case of death.
Insurance is best used for life term cover. Because other plans have elements of charges that are quite heavy.
General Insurance
Again, Health cover is an absolute must.
No one wants to scramble around looking for funds when some dear has a medical emergency…
Nor even when you have incurred a loss on something precious , so go ahead and insure all valuables
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These are the broad 3 aspects of Finance that can help you transform your life into a more stable and financially secure life.
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Hope this helped! Do add your views and points that I may have missed
Absolutely love the energy in your post! As Albert Einstein once said, Strive not to be a success, but rather to be of value - a perfect reminder that the impact we make is what truly lasts. Keep shining bright! ???