Increase the Level of Living with Happiness (Seventh Phase)
Md. Asaduzzaman
Learning & Development || Personal and Professional Coach || Fleet Management || Facility Management || Administration || HR ||
4.3 Money-Making Habits:?
Money is a fundamental aspect of human life, providing the mobility and stability necessary for personal growth. Financial stability is a universal aspiration, and the absence of it often leads to stress, impacting both physical and mental well-being. Achieving success in life is closely tied to financial self-sufficiency, a goal attainable through the cultivation of specific habits. These habits, crucial for future financial independence, revolve around the effective management of expenses, astute investment practices, and prudent handling of loans.
4.3.1 Expense Tracking and Control: A well-known adage advises us to "cut your cloth according to your cloth." However, a more contemporary maxim might be, "Arrange your clothes as per your needs." This underscores the importance of aligning income with the essential expenses required to meet basic needs. Regardless of income, financial solvency remains elusive without control over expenditures. Consider a scenario where an individual earns 40 thousand per month but struggles in the last week due to inadequate planning. If the income suddenly increases to sixty thousand without a corresponding spending plan, expenses might escalate, leading to recurring financial stress. This cycle is often referred to as the "rat race," a predicament prevalent in middle-class households where unmet desires, fueled by increased income, result in a loss of spending control.
To regain control over expenses, it's vital to avoid the trap of artificial comparisons. Often, the desire to match the lifestyle of others prompts unnecessary purchases that contribute to inflated costs. Additionally, major purchases like cars or air conditioners can significantly impact income if operating expenses are not accounted for in advance. Hence, it's crucial to plan and assess whether the operating costs of such purchases align with the available income. Expense control is contingent on meticulous recording, and categorizing expenses facilitates this process. The following categories offer a comprehensive breakdown:
Beyond these predefined categories, individual-specific expenses may be documented separately. After a few months of consistent recording, a comprehensive analysis of expenditure patterns enables individuals to identify areas where spending is excessive and where adjustments are needed to regain control. This meticulous approach ensures a balanced financial lifestyle and fosters the habit of mindful spending, steering individuals toward financial independence.
4.3.2 Investment Management: Building Wealth Strategically
In the realm of personal finance, a fundamental equation governs the financial health of individuals: Income - Expense = Savings. However, a pervasive lack of control over spending renders many incapable of saving. While savings play a supportive role, they alone cannot fortify one's financial position or confer financial freedom. For those aspiring for financial self-sufficiency, a shift in mindset is required: Income - Invest = Expense.
The crux lies in a constant commitment to investment, with a recommended allocation of 15% to 20% of monthly income. By curbing expenses and proactively investing a portion of income, individuals set in motion a powerful mechanism. Investments act as a shield, fostering economic prosperity, fortifying personal economies, and paving the way toward self-sustainability.
4.3.2.1 Choosing the Right Investments: The wisest investments are those in assets poised to appreciate over time, generating consistent income. Prime examples are real estate assets, such as land, houses, flats, and shops. These assets not only appreciate steadily but also offer monthly or yearly income through rental yields.
While these investments often demand a substantial upfront sum, strategic financial planning can make them more accessible. It's worth noting that those who inherit such properties and leverage them for regular income tend to have superior financial positions.
Another avenue for valuable investment is precious metals like gold and silver. Their intrinsic value tends to remain resilient, making them a reliable choice for wealth preservation.
Investing in government bonds, notes, or debentures, including savings bonds, is a secure option. For instance, a five-year savings bond, coupled with disciplined monthly deposits, can almost double the initial investment.
4.3.2.2 Demystifying the Stock Market: The stock market, though perceived as daunting by many, stands out as an accessible and potent investment option. Unfortunately, common misconceptions and fears often deter individuals from exploring this avenue. Yet, with careful research, thorough analysis, and an understanding of market dynamics, investing in stocks can be a game-changer.
4.3.2.3 Insights into the Stock Market: Investing in shares essentially involves owning a fractional part of a company, with profits or losses distributed accordingly at the year's end. "A" category shares, belonging to companies consistently turning profits and paying dividends, are the safer bet. On the contrary, "Z" category shares, pursued for higher profits, often lead to losses and lack substantial existence.
A long-term investment approach, holding shares for ten to fifteen years, significantly mitigates the risk of losses. Diversification further reduces risk; creating a portfolio with shares from at least fifteen companies ensures that gains from some offset losses from others.
The most perilous aspect of the stock market lies in determining whether the current market price is at its zenith or nadir. Buying shares at the lowest market price nearly eliminates the risk of losses. Gaining knowledge about fundamental aspects like company capital, net asset value, earnings per share, and technical analysis is pivotal. Platforms like the internet and YouTube provide accessible resources for acquiring this essential knowledge.
In conclusion, strategic investment management involves a holistic understanding of diverse investment avenues, from tangible assets to the dynamic stock market. By navigating these waters with prudence and knowledge, individuals can not only protect their wealth but also foster its growth over time.
4.3.2.4 Opting for Shares Over DPS: When considering long-term wealth creation, investing in shares presents a more lucrative option compared to the Monthly Deposit Scheme (DPS) offered by banks. For instance, envision a scenario where an individual channels Rs 5,000 per month into a DPS for ten years. However, this same monthly investment in shares can potentially yield significantly higher returns over time, which could subsequently be leveraged to invest in real estate properties.
4.3.2.5 Benefits of Shares Over DPS: The issue with DPS lies in its taxable nature. The income generated through DPS attracts taxes, and premature withdrawals result in losses. Conversely, investing in shares not only offers potential profit without taxation but also grants the flexibility to withdraw funds whenever necessary. Furthermore, profits from investing in shares can be utilized to offset income tax liabilities, providing an added advantage over DPS.
4.3.2.6 Accessibility and Convenience: Today, investing in the stock market has become remarkably accessible and convenient. Gone are the days when visiting a brokerage house was a prerequisite for trading shares. Now, one can engage in share trading from the comfort of their home or workplace. Moreover, electronic fund transfer systems have streamlined the process, eliminating the need for physical visits to banks for transactions.
4.3.2.7 Strategic Portfolio Construction: Crafting a well-balanced investment portfolio by diversifying across companies with different financial year cycles can result in dividend payouts at multiple points throughout the year. For instance, companies often close their annual accounts at various times, some in June and others in December. By strategically holding shares across these varying timelines, one can secure dividends at two fixed intervals annually. This approach not only boosts the frequency of income but also fortifies an individual's financial standing.
4.3.2.8 Bolstering Financial Independence: Taking advantage of these benefits, investing in shares emerges as a viable strategy to augment income sources and achieve financial self-sufficiency. The absence of taxation on profits, coupled with the flexibility and convenience of share trading, positions shares as an appealing avenue for expanding one's financial horizons.
In summary, choosing shares over conventional investment schemes like DPS presents an opportunity to harness the potential of the stock market, optimize returns, and pave the way for a more robust and diversified investment portfolio. This strategic approach sets the stage for enhancing financial stability and independence in the long run.
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4.3.3 Navigating Loan Dynamics: A Blueprint for Financial Freedom
In the intricate dance of personal finance, the specter of loans often looms, influencing the delicate balance between income and expenditure. Prudent loan management is not merely a financial necessity; it's a linchpin for achieving economic freedom. Let's delve into the various facets of loan dynamics and unveil strategies to break free from the shackles of debt.
4.3.3.1 Debt: A Hindrance to Financial Soundness: When expenditures exceed income, the natural recourse is often loans. However, this seemingly innocuous solution can morph into the antithesis of economic freedom. A person entangled in debt finds it challenging to attain financial soundness. Every loan, a pact with a fixed repayment deadline, introduces stress into the debtor's life, fostering unhappiness. Tragically, the weight of overwhelming debt has driven some to drastic measures, including suicide.
4.3.3.2 The Vicious Cycle of Poverty: For those caught in the perpetual cycle of borrowing to meet basic needs and repaying with subsequent income, a 'vicious cycle of poverty' ensues. Social mobility becomes an elusive dream as dependence on others becomes a way of life. The stigma associated with perpetual borrowing leads to strained relationships, adding a layer of inferiority. Unfulfilled desires and tastes linger, casting a shadow over the quality of life.
4.3.3.3 Credit Cards: A Double-Edged Sword: While credit cards amplify purchasing power, they harbor a subtle danger. The illusion of ownership over the borrowed money often lures individuals into unnecessary expenditures. This unchecked spending, driven by credit, inflates costs and intensifies pressure on income. Wisely, some opt for debit cards, avoiding the pitfalls of debt-driven purchasing.
4.3.3.4 Banking Dynamics: The Profit Motive: Behind the scenes, senior bank officers meticulously analyze and plan economic strategies, translating them into products for the public. Credit cards and personal loans, tantalizingly presented by sales teams, serve the dual purpose of seeming beneficial to the consumer while enhancing the bank's profitability. In the realm of personal finance, keeping clear of debt emerges as a cardinal rule.
4.3.3.5 Escaping the Debt Quagmire: Strategies for Liberation: For those ensnared in debt, liberation is a strategic process. Tackling the smallest debts first becomes the linchpin of this plan. By systematically repaying modest debts, a psychological boost is achieved, fostering confidence to confront larger financial obligations.
4.3.3.6 Mitigating Long-Term Debt: Long-term debt, often a formidable foe, requires nuanced strategies. Increasing monthly payments beyond the minimum installments accelerates the repayment process. Windfalls, such as annual bonuses, can be strategically allocated to dent long-term debt, reducing the burden on future income.
4.3.3.7 The Path to Debt-Free Financial Freedom: The ultimate goal is to break free from the chains of debt, alleviating the strain on income and achieving financial freedom. Strategic debt management involves a meticulous interplay of repayment, psychological boosts, and judicious use of windfalls.
In conclusion, navigating the labyrinth of loans requires foresight, discipline, and strategic planning. By embracing these principles, individuals can pave the way to financial liberation, unshackling themselves from the burdens of debt and achieving true economic freedom in their daily lives.
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First Phase: (Introduction) https://www.dhirubhai.net/pulse/increase-level-living-happiness-first-phase-md-asaduzzaman
Second Phase: (Health and Fitness)
Third Phase: (Work efficiency and Communication Skill)
Fourth Phase: (Managerial and Leadership Skill)
Fifth Phase: (Family and Friends)
Sixth Phase: (Goal Settings and way to Achieving)