SEQUEL TO EAST WEST LOVE STORY-

EARLY MARRIAGE YEARS, FAMILY LIFE AND POST RETIREMENT LIFE  

Wrote East West love story a few months back but sent it only to some and now to link it up with the sequel sent it to others, may be some got it twice, my apologies. Had not posted it on the blog as did not want to mix it with the personal management series blogs but have now put it up as Blog 31 and this sequel is Blog 32.

Last few months I have been busy with the launch of my web site and mission for Financial education, inclusion and freedom as well as blogs on the same subject. On sending it to some and probably on face-book too,I was a little surprised to get one request from a follower to elucidate it further and another asking if and how it related to my mission purpose and “Moneymonk”.These together made me think and this sequel is the result of it. First the elucidation

Passion stage

In an arranged marriage as it starts with commitment as the base ,some initial amount of passion is natural but the fire needs to be sustained for a long and happy married life. Taking the commitment for granted may make this passion short lived if gender issues are not understood and appreciated quickly enough. Differences can come up due to different needs and views of partners for quality,frequency and variety for these passionate interactions. Finding a middle path which is enjoyable to both is highly desirable.It is simple but surely not easy to find this path as a team.

Intimacy Stage

In the next stage of intimacy, successful solution of passion stage differences if any will help a lot. Staying and living together will help explore and discover each other’s likes and dislikes, as well as strong and weak points. This can result in both or one trying to change the other person to his or her ways,to some extent this is desirable and is an essential part of adjustment in the intimacy stage. Excess of it is to be avoided by accepting each other as it is. Finding some common areas of agreement and disagreeing to agree on some others will help.Realizing that a complementary relationship is the essence of why nature and God created male and female genders. God and nature never intended genders to be competitive but only complementary to each other.In today's world the two equally credible issues of equality and gender are often get mixed up creating a lot of confusion in our minds.

If these two stages are manged well couples can earn a happy family life for themselves and deserve it too. Perfection is neither desirable nor achievable but some thing to look up to. As the degrees of success in the first two stages will vary from couple to couple so will their level or index of happy family life.This is the base required for a happy family and bringing up the children.

Commitment for starting a family

This phase is likely to be the longest and expected to last till death does the partners apart in any successful marriage.This phase can be further divided in two parts first when bringing up children and second after they become independent and leave the home.In the first part success in earlier phases will help in deciding to start a family. This is a giving phase more than taking things from life or each other. It can get routine, boring, taxing and at times very challenging too. This is more so if both parents are working and support from grand parents is not available at home. Joint families are more of an exception these days. Sacrifice will be required too. Parenting is learning on the job in most cases except for memories from own childhoods and likes to adopt or use it as experience for bringing up their child.

Child is the purpose of marriage but only when the couple is sure of their long term commitment initially at least till the children grow up become independent and self sufficient. Marriage is a sound human construct evolved in the best interest of the future generation. There is no western construct for life after this stage but in the ancient Indian culture you have these two constructs of “Vanprastashram” and “Sanyasashram” recommended after student and family life stage.May be some thing similar to suit the modern world will evolve in times to come.  

Commitment for Life as senior citizens post Retirement

After successful completion of Family Life stage with commitment and children leave the home after becoming independent couples continue to be together but in different ways.Some of the ways in which couple are found living their post retirement lives are some just put up with each other, some live together and some can not live without each other. A few lucky ones stay in joint families and enjoying spending time with the grand children.Giving and getting care and attention from their near and dear ones.Your level of success or performance in these earlier three stages will determine how you settle down and which way you adopt and level of happiness. Its also the time to realize that happiness much less depends on action or inaction each other but is to be found independently by deciding to be happy, sound spiritual? Yes its time to move towards spirituality.   

How does it relate to my mission and “MONEYMONK”

So how does it relate to my subject and mission. Money and happiness are linked to each other , having enough of it is a necessity.Happiness in life depends on the degree of success a couple achieves in their marriage. In arranged marriages it is likely that their balance sheet will show initially Commitment as an asset and passion and intimacy as a liability. Later as they convert these liabilities into assets their happiness and richness both have better chances of growing too.Happiness and satisfaction in family life is essential for career or professional success and progress of both partners. Ideally speaking adequate time should be given to manage this change and period of mutual adjustment of first two phases before planning to start a family and have children.

It is just the opposite of it in case of love marriages and does not require much elucidation as the balance sheet initially will show passion and intimacy or just passion on case to case basis as an asset and intimacy and /or commitment as a liability. Adjustment in both cases will call for converting these liabilities into assets. Both the types will need to give time for this before having children.

For the first and second phase of commitment it is essential to develop the right attitude towards it even if you have enough or more or less of it. You surely need to find balance between needs and greed and time given to family and profession.Health and fitness if given due attention will help in having a healthy post retirement life.If you also have saved and planned your expenditures well and have achieved your “Financial Freedom or Independence” better and happier is likely to be your post retirement life.   

EAST WEST LOVE STORY

How easy it is to say “I love you”,but do both the parties understand the meaning, well I am talking about young adults of either gender and meaning no offence intended for aberrations intended or unintended. Psychology says that love in such cases has three aspects to it First is passion , which is natural with coming of age, second is intimacy which is more of accepting each other living together with individual strong and weak points and finding a happy balance and tolerance to live happily ever after till death does them apart. Third is commitment to each other and mutual inter dependency in times good and bad and in joy and sorrow.

So when which aspect is meant or which aspects are excluded or included is the question.Offer and response both may get mistaken intentionally or otherwise.

Eastern world lays emphasis on the aspect of commitment and hopes that passion and intimacy aspects will match or will result as a part of mutual adjustment. Thus the social practice as in India of arranges marriages which are often decided by parents and families with the couple hardly getting any opportunity and time to interact or explore the first two aspects of passion and intimacy.

Western concept of dating and living together lays emphasis on the first two aspects of passion and intimacy before finally deciding to tie the knot and get married.

Both the systems seem to work in many cases but have exceptions in both the systems. Finding common grounds and a balanced middle path is difficult and works in a few cases .Belief in marriage as an institution of social relevance for human beings seems to find a general acceptance too. Given what can be controlled and managed by human beings the evolved system has endured test of times and does not seem to face any serious challenges but improvements and better balanced middle path between the two one can hope for.   

       

Asset allocation

All savings will finally get converted into an asset; these are of four types Equity, Real Estate, Gold and Silver and Fixed income instruments. The assets portfolio will consist of these four, all of them have some characteristics like ease of liquidity or absence of it, positive or negative correlation with each other and risk associated with them. Within fixed income instruments also higher interests may be offered as returns but beyond a point the capital itself will be at risk. All of these assets have already been discussed in my earlier blogs which are available for reference  

Thus there is a need to optimize the allocation for these assets and balance it once in a while.Asset allocation needs to be balanced to suit your age and life position and situation too.

 Even if you were to make an asset allocation there are constrains which will not make it practical for small amounts of savings to be invested in assets like real estate or even precious metals. You need to understand the characteristics of these assets well in order to make timely switches and build your desired portfolio to become wealthy and achieve financial freedom, which, to me, seems like a worth a while aim and aspiration. Earlier you achieve it more time you have on hand to do what you enjoy and like without worrying about the monetary returns from your activities which then become immaterial.

Journey to this aim through assets allocation is an interesting one and enjoyable too. Initially when your savings are small, you can use fixed income instruments and equity to grow the savings at a rate higher than inflation. When you build a little kitty good enough to serve as your margin money for your first house, you can take a housing loan and pay EMIs instead of monthly rentals.

Before you do these don’t forget to build your emergency fund which can be roughly equal to six months of your monthly expenditure and it must be liquid and available easily.

As regards precious metals these are recommended to be about 10% of your net worth or total assets.

In the long term the assets which help to build your net worth and wealth are likely to be Real Estate and Equity.Level at which you aim for your Financial Freedom will depend on your needs and life style; everyone has to define this Financial Goal for himself.

There is no asset which always appreciates or depreciates but over a longer period equity serves the purpose and depending on your choice of real estate that asset can complement too.

This is my last blog in this series on Personal Financial Management. I thank all the readers who read it and tried to benefit from it.I am happy I could write one every week regularly and complete the task. Now it will be available as reference material for the future.

Any questions or queries are welcome on my email id prakunda@yahoo.co.in. I plan to now write randomly on different topics as and when I think of one and get down to write.  

HOW TO START INVESTING IN EQUITY AND GROW YOUR SAVINGS FASTER THAN INFLATION WITHOUT SPENDING TOO MUCH TIME, WITH REDUCED RISK TO ACHIEVE YOUR GOAL OF FINANCIAL FREEDOM AFTER YOU ARE READY TO START !!!

Characteristics of Equity Investments

1. Equity is risk capital so risk is inherent, skill lies in managing it to minimize it.

2. Risk and returns are co-related to a point, where this point is crossed risk is of losing the capital and not merely a question of returns.

3. Equity as an asset class give best returns over longer periods of over 10 years and more.

4. Patience and discipline along with a carefully selected strategy is required.

5. Better returns will follow if you can stick to your strategy, ignore the clutter and noise created by the media, brokers and vested interests.   

I have discussed at length various subjects understanding which is essential for preparing yourself to be ready to start making equity investments. These preparations,I am delineating again for emphasis,  will provide you with a strong base and reduce the risk.

1. Making a budget

2. Keeping a record of daily expenditures and comparing it with the planned budget at the month end to make course corrections.

3. Focused savings, sustaining the savings and increasing if possible.

4. Creating an emergency fund

5. Taking term insurance for both spouses

6. Buying your first house

7. Planning for retirement - Pension Scheme or PPF accounts for both

8. PPF accounts for children -(PPFs are NOT for NRIs.)

9. Separating business finance from personal family finance if doing business.

10.  Developing correct attitude towards money,giving away a part to more needy ones and being disciplined and patient with the savings and investments.   

Once this is done you are ready to make equity investments which are in the form of SIP meaning they are made regularly every month. These are expected to grow over a long period and are not to be withdrawn.

Now we come to the key issue of how to start investing and continue investing in a disciplined manner.

Personally I am of the opinion that this is best done taking help and learning from some one like me as it is simple but not easy and is better done with such help. This reduces the risk and learning will help you to teach others as well as make you more confident and in complete control of your money and lead you to your Financial Freedom goal.

However some may be able to do it by themselves (DIY) hence this blog is meant mainly for them.

Sequential steps

1. Decide how much you want to invest every month in equity investments

2. Understand the basics of finance if you do not have this knowledge

3. Select your criteria for making equity investments like debt equity ratio, PE ratio,book value, dividends pay out etc. There are many of them you will need to understand them and then select a few. Say 5-6.

4. Select companies which meet your criteria again say 5-6.

5. Divide the amount you want to invest in these companies every month or at a planned frequency. This will depend on your criteria selection as well as companies selected, money you want to invest and the market prices of selected shares.

6. Invest only in companies whose business you understand or get to know it if you do not understand and are keen to invest in them.

7. Explore to get an insight into the management of these companies

8. Decide a risk percentage you are prepared for every scrip you have selected. This is your stop loss for that company.

9. Shift the stop loss if market price goes up and sell if it hits your stop loss. If both of these do not happen then continue making investments as planned.

10. Stop reading or watching all media unless it is related to these selected scrips in your portfolio.

11. Focus on your work and career and plan to spend only a 10-15 minutes every day or an hour per week to have a look at your investments. Watch for the margin of safety your scrips generate as time passes.

12. Increase your savings for equity investments as your income increases along with your confidence.

13. Note that results may take at least a few years to be visible so be patient. This is a method to reduce your risk and get enough returns to achieve your goal of Financial Freedom over a prolonged period of time.You will be richer slowly but steadily. Do not discuss your success or failures as regards your investments with bankers, brokers, friends who do not know your life position and situation.They will not be able to give you any better holistic solution. In fact they will like all media confuse you and challenge your discipline and shake your confidence. All the best !!!

With one more blog on assets allocation next week, I will be closing this series of Personal Financial Management.This is what I wanted to share with those interested and also to serve as reference material for those who are learning and taking support from me on www.moneymonk.me  as well as others. In this process I have made new friends and well wishers to whom I am grateful.

GOLD AND SILVER AS INVESTMENTS

High investments in gold is another reason why even high salaried people with many years of long service still do not have high net worth. Historically gold and silver in India have served well as prudent investments because of their rising costs, high relevance for marriages as an absolute essential a “Streedhan” or girl’s own kitty and use as ornaments. It was not only an investment but seen as something investment plus.

Times have changed and a rethink is thus required. Wearing of jewelry has reduced as its risky and out of fashion too.Prices of gold in recent past have fallen rather than increased and are rather volatile.     

Investors bought precious metals earlier for two primary reasons. First, they hoped that prices will continue to increase (desire to gain money). Second, they believed that other investments will decrease in value (desire not to lose money).Real estate and banking was out of reach for many for various reasons and very few people had even heard of equity as an investment option and investing in equity was not easy before technology made it so. Scope to regulate and monitor better still exists though.

Beyond that, a gold coin or silver bullion sits on your shelf and collects dust. Any value it gains is independent of its existence. It's just a lump of metal. It can gain or lose value due to circumstances outside of your control. Year after year, a gold or silver coin keeps sitting around, and there's nothing you can do to affect its price.

Here is what Warren Buffets, the iconic investor behind Berkshire Hathaway said in a talk he delivered at Harvard in 1998,

"(Gold) gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

The idea is simple: There is no use for gold.

“it’s a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that.”

More importantly, holding gold does no value or service to the world. Value is created by producing something or giving some service. No additional value is produced by holding something of value and not making any money from it. An investment is something which pays you money.

Depending on your appetite for risk, sometimes precious metals make sense. Their prices tend to move in directions opposite of the market. If there's a market drop (like in 2008), gold prices tend to rise. You can't count on that happening, but diversifying your investments can help you avoid losing everything

Practically in India it will still take some time before people reduce their traditional attachment to gold but in the mean time except for the jewelry which ladies want to use even occasionally at weddings and other alike traditional functions and occasions, one choice is to keep the gold in pure form as deposit if you know and trust a jeweler and he is willing to give you interest on it and better still if this interest is in gold form and is compounded. Realizing the huge amount of gold with people in India Government too has offered gold bonds which give low interest but risk of keeping gold is eliminated   

Despite all the above those who still want to and keep some gold as an asset class I will recommend not more than 10% of their overall assets but more about asset allocation later in this series.

APPRECIATING AND DEPRECIATING ASSETS!!!

Appreciation

Refers to the increase in the saleable value of any asset over a time period and

Depreciation

Refers to the loss in such value due to usage over a time period.

There are no assets which always appreciate of depreciate but their types and characteristics are discussed in brief. Wrong or incorrect or untimely investments in assets have a considerable effect on the net worth of an individual. These figure as reasons why even high salary people do not have high net worth after working for many years.

Types of assets are :

1. Real Estate

2. Bank deposits

3. Retirement funds

4. Gold and Silver

5. Equity Investments

Note:While I plan to write another blog on asset allocation later stage once my investment strategy and process has been explained in brief. A point to be noted is as regards personal finance, one house, life long needed to stay in, is not considered an asset. Rest assets are just to be taken note of at present as some of these have been discussed in earlier blogs and those not discussed so far are on the agenda for the future blogs.

On Assets in Brief

Assets in general get acquired by the prudent savers and investors who invest in learning and making themselves worthy of owning and preserving such assets. Some times these are also inherited.Entrepreneurs create assets for their organizations and their personal by leveraging bank loans too. Individuals mostly take loans only for a house.

1.Real Estate

Investments in real estate and related factors or variables on which appreciation or otherwise depends have been discussed in Blog No- 21.

2. Banks Fixed Deposits again has been a subject of my Blog No-11.

3. Retirement Funds- one important avenue for this is Public Provident Fund (PPF) which has been discussed in Blog No-20

4. Gold and Silver and Equity Investments will be discussed in the blogs to follow.

Their characteristics as regards appreciation or depreciation are in brief as under

1. Real Estate - Real estate is generally considered as an appreciating asset but it is not always true and depends on locality or area and other factors discussed in Blog-21.Appreciation must consider the inflation factor and be better than that to be really beneficial. Fairly secure but less liquid.

2. Bank Deposits- These generally give appreciation as interest earned which is lower than the inflation rate.However these are very liquid, secure and serve well as an emergency fund.

3. Retirement Funds- PPF is a very good Compound interest scheme and has been discussed in Blog-20. National Pension Scheme is another essential scheme which must be used by the salaried class as well as others to save for retirement. Backed by the state these are most secure but less liquid.  

4. Gold and Silver. I plan to discuss this in a future blog but easy liquidity globally is its main characteristic as its utility as “Stridhan” is a lot less with changing times but its appeal to women continues.

5. Equity Investments. Direct equity investments is the best course for investments and its simple but not easy. They are liquid, appreciate given long time and grow and beat inflation and are tax friendly too.

It is not time consuming once mastered but developing the right mind set and skill to make such investments requires one on one sustained support and guidance. My aim is to exactly do this and make a difference to the lives of those few who are worthy of learning it.In this we are our own enemies I am discovering mainly because of procrastinating and getting psyched and confused by the media promoted by vested interests in many cases diverts learners away from real learning.    

I plan to share my leanings, in brief, in future blogs for those who can by DIY (Do It Yourself)method and teach to those who are keen to learn it after getting prepared.

Thumb rules for investing in these assets

1. Pre-pone buying an appreciating asset.

2. Take a loan for appreciating asset like a house especially the first one

3. Postpone buying a depreciating asset

4. Never take a loan for buying a depreciating asset - most common mistake is buying a new car on sizable installments or EMI in early stage of the career. As this affects their savings and net worth in the long run by loss of compounding effect.

5. Equity investments have inherent risk so never take loans to invest in equity.

6. Equity investments require initially making investment in learning and developing right attitude as well as making some preparations before starting. This is required to minimize risk.

HEALTH AND MEDICAL TREATMENT EXPENDITURE AND ITS EFFECT ON PERSONAL FINANCES!!

Expenditure on treatment of a family member young or elder is the last but surely not the least reason, besides wrong investments is depreciating assets, for high salaried people not having high net worth even after working for long years. Such expenditures have a very severe and drastic long term effect in case of poor and those earning modest salaries. This expenditure for this class forces them to take debts many times at high interest rates which make them bankrupt or force them to sale their assets be it land , house or gold.This is a major reason for a large majority of poor people remaining below poverty line or adding to it.

As many poor people starve due to hunger and suffer from various diseases as the rich who suffer due to over eating or drinking and other excessive indulgences.While rich pay from their wealth poor pay a very heavy price.

Better late than never after seventy years of independence present  government has addressed and faced the issue head on by making poor people bankable, giving very small premium accident and life insurance cover and now the health insurance of five lakh to these families below poverty line.Its called PM Jan Arogya Yojana (PMJAY).These policy actions alone are deserving of  people’s support for such a government for future development of the nation. A project of this magnitude and relevance will take some time to mature and overcome the initial issues or problems.

Educated and high salaried people also need to take adequate health insurance for all family members and need to increase it as the cost of medical treatment increases. A difficult point to note is that don’t let those left behind to live with financial sufferings due to debts after the sufferings of diseased family member are over with death. No amount of money can stop a death for which time has come,people and medical faculty both have to realize it.  Along with these measures to make medical treatment available to all those below poverty line ,there is a need to promote health education right from school days. Yoga and its promotion is one part of it but much more can be done. Preventing disease and making living a healthy and balanced life a priority will reduce need for increasing medical infra structure like hospitals etc.      

To ensure good health for the future generations major reforms in education are required where basic primary education is not only free but of excellent quality and educates future generations and motivates them to lead a healthy and balanced life. Physical fitness, self discipline and sports have to form an essential part of the syllabus.Private schools may have to be closed and admissions made compulsory in schools closest to the residence of parents. Parents have to be actively involved in the management of these schools. Development without discipline in a democracy is very challenging and nation needs to be disciplined speedily as slow pace of development is not acceptable any more.

Health is not merely the absence of disease or making treatment affordable and available but a sense of complete well being which leads to a life of happiness and purpose. Less population with better health will make Bharat strong and developed.

Will our people and politicians ruling the nation realize this and act on it ?? We live with hopes and think positively.

MARRIAGES AND CHILDREN EDUCATION EXPENDITURES AND FINANCIAL PLANNING

These are two major reasons why even those who work for many years with good salaries retire with not so great net worth.While lack of planning is the reason in many cases in some cases usual planners mechanically prepare a file with very long term plan based on the inputs given by an individual. While I am all for Financial Planning I am against such long term plans as there are too many variable and in most cases these plans don’t work as planned savings or SIPs are not done due to unforeseen expenses etc.

It may be better to plan for 3-5 years ahead with goals like , I would like to contribute as much as possible for children higher education or save for marriages or giving support to children when they get married. Like charity begins at home ,one must give balanced consideration to own  needs present and future first.    

Marriage Expenses

In India many people have accepted as absolutely essential expenditures on marriages.Marriage is no doubt a big event for the couple getting married as well as their parents. Close relatives will join in to make it memorable too. Rethink is required in cases where the expenditure is excessive because it is :

1. Not affordable and not planned

2. Merely to show off wealth

3. Being made from loan taken rather than savings

4. Unplanned and beyond budget so will affect the parents’ retired life

Other reasons why expenditure in marriages needs to be curbed are:

1. It leads to unhealthy competition in society

2. Parents repay loans over a long period

3. It needs to be compared with use for the couple to settle down versus one day enjoyment

4. Newly wed couples can consider bonding better by visiting some near and dear ones rather than meeting all in one day when they don’t even remember their names but get fatigued with constant smiles.

Children Education   

This again has become an issue because the cost of private schools and higher education is rising and either such expenditure is not planned or planned amount is not enough. External factors beyond control can at times very adversely affect the finances of a family especially if the education involves going abroad.

Money and expenditure alone is not enough to educate a child well to become a good human being.

If a student takes loan for studies abroad specially in USA in present scenario then the loan is usually guaranteed by the parents. If a student is not bale to find employment and has to return to India repaying this loan with earning in India even if one gets a job is very challenging and parents too may lose their retirement funds if they have to repay this loan.

Even some young parents earning well spend a very high amount which affects their overall savings and financial planning in the long run on private coaching and private schools.    

Prudent Financial planning, saving and investments will help and can be started at any age and will lead to a happy life too.

This week’s blog deals with two major causes why people with high salaries also do not have high net worth after long service

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For those worthy few who want to learn it from me and achieve their Financial Freedom better option is to enroll on www.moneymonk.me

Why do many salaried people in India have great salaries, but not great net worth after working for many years?

This question and one answer by Mr Subramanian was brought to my notice by a friend, searching for the source of it , thanks to Google, I found out where it came from and also another answer by Sravani Ramayanam, which serves as her personal example to provide backdrop to discuss the relevant issues . Its from “Quora”. Let us have a look at these two answers reproduced below for ease of reference.

Subramanian Venkataraman, Strategy Advisor and Author at Self-Employment (2015-present)

Answered Sep 21, 2018 · Author has 293 answers and 355.1k answer views

“Following or any combination of them could be the reasons:

1. Expenditure way beyond their means on daughter’s marriage, son's sacred thread ceremony etc.

2. Taking a large home mortgage in early career that leaves almost nothing to save for future

3. Due to lack of knowledge on financial matters (including finance people), investments made in bank FD, LIC and ULIPS that gave a post tax returns barely matched inflation or even lower

4. High investments in gold

5. Almost no Investment in equity / equity mutual funds

6. For some, a lifestyle that mimicked their more well off neighbors and relatives

7. Little or no budgeting skills

8. Medical emergencies, especially on dependent elders, who are not covered by employer provided insurance policies

9. Educational expenses'0 inflation that is way beyond increase in income

10. Additional tuition expenses which, at times, exceed even the school fee

11. Too many long distance travels to attend family weddings. “If I don't attend, they won't attend my children's wedding” syndrome!”

Sravani Ramayanam, Working in Finance domain from past 3 years

Answered Sep 21, 2018

“The question seemed interesting ,i wanted to answer with mix of my experience and observations.

First thing first,

We are week on financial education.(most young engineering graduates)

The basic financial instrument like Recording deposits,fixed deposits and some Policies were introduce to me once i became financially independent. .

No clue of future investments,i kept on investing in gold(rather purchasing)

One good thing was i started PPF and some ULIP plans on my first increment.

I was not spendthrift and not frugal either.

But lack of guidance made me save very little.

After 10 years of earning and married for 7 years with kid of 1 year.

I have not been bale to have enough savings to cover basics for 6 months.we bought a car of 5.5 lakhs

We purchased a house in 2011 and other in 2016.the loans  of both still exists.(95%on first and 80%on second remaining).

The rents we get from them are 38% of what we pay emi.

We stay in a rental those rent is same as what we get on both together.

We have a reasonable lifestyle.

We have good memories on vacation.(which we take at least once in an year)

We could not build wealth in past years,on a serious note,we are looking at it.

Most of the decisions were impulsive on money matter.Due to which though we both earn reasonably well,not much wealth or assets or liquid funds present.”

While I could not find any empirical evidence to support above statement I believe it to be true from my general observation and knowledge of cases.

While I agree with the causes well summarized by Mr Subramanian I feel it may be worth while to identify the ones that have been covered in some details in my earlier blogs and those which I plan to cover in some details in the future blogs to follow.I hope that helps those interested in learning how to overcome the reasons which lead to this undesirable and surely undeserved situation for many. If you act now surely you will not fall in this category. 

1. Planning and preparations required before you invest in equity -Blog 23 refers

2. Home buying - Blog 15 refers

3. Real estate as an investment- Blog 21 refers

4. Financial Knowledge- Fixed deposits and Banking - Blog11refers

5. Budgeting skill- Blog 5 refers

6. Savings- Blog 7,8 as also 10 refers

7. Insurance and how to get out of endowment policies- Blog-2 and 3 refers

8. Mutual funds- Blog16 refers  

9. Behavioral aspects - Blog 14 refers

10. PPF - Blog 20 refers

11. Finance basics- Blog 12 refers

The following subjects merit some detailed thought and blogs on these subjects are planned and will be published in the following weeks.

1. Asset Allocation

2. Appreciating and depreciating assets

3. Investing in gold and silver

4. Marriages and expenditure

5. Expenditure on higher education of children

6. How to start investing in equity after you are ready for it

Those interested may like to follow my blogs and DIY or enroll on my web site www.moneymonk.me for one on one learning and though I am doing it as public service its not free because I believe that anything offered free is not valued.Unique aspect is you get to decide what you pay per audio video on line session after initial introductory session and the money so collected goes to charity.All the money so far collected has been already donated to Kerala floods affected people and some other needy ones.

WHY NOT TO INVEST IN A HURRY AND REPENT AT LEISURE BUT PLAN, PREPARE AND THEN INVEST TO BE HAPPY AS WELL AS WEALTHY IN LIFE !!!

I was frantically asked by some near and dear ones after the recent ongoing correction in the equity markets if they could buy and invest now. There can be no one word or general answer of yes or no , hence this blog to explain in some details.

Every individual has his own unique life position and financial situation which will govern if its right to make any investments in equity when opportunities like this present. There are other issues like are you ready to make use of such opportunities??

I recommend making and learning equity investments only directly and not through the mutual funds route only when you are ready for it. If process is right and you are ready to make investments then timing the markets or waiting for such corrections may not be required as it becomes not so relevant for you. What is more important is you remain happy and also become wealthy in life. Adherence to a process and following it thus becomes the key.

“ Happiness is nothing but a state of mind that we create by the way that we process and interpret the events in our life…”

What preparations are required before one starts to learn and practice making equity investments ? I have discussed some of the issues in my previous blogs already but here is a check list of sorts

1. Term insurance adequate to cover financial risk to the family for all earning family members

2. Health insurance

3. PPF accounts if resident Indians for all family members

4. One owned house to stay in or rent and rent one at a different place.

5. Habit of making a monthly budget , noting down expenses and reviewing the budget with the actual at the end of the month.

6. Focus on regular savings

7. Making a list of your assets and liabilities and reviewing it every quarter

8. Having an emergency funds for six months of family expenses.

9. Your monthly budget must be known to all family members except children below ten and prepared jointly.

10. Believe that giving some small part of your income to any needy person without expecting any return or benefits only helps in growing your wealth. ( Don’t know how but it works that way)

What else you need to be prepared for learning making equity investments :

1. Basic knowledge of finance and equity markets

2. Developing right attitude towards money

3. Discipline and patience required to grow your investments

4. Ability to ignore the market media hype and keeping away from vested interest advisers like banks, insurance agents, share brokers and even a few friends giving free information

5. Complete faith and trust in the process to achieve your Financial Freedom.

6. Some savings to begin investments and regular savings every month to follow up and invest as a SIP.

7. Selected list of companies in which you want to invest over long term

8. Some basic skills and techniques to manage risk inherent in equity markets like stop loss or when and how to buy and sell.

9. Believe that money is only a means which can lead you to happiness in life and hence essential to have just enough of it to achieve Financial Freedom and not an end by itself.

10. Deciding if you need a truly independent teacher to help you or you can manage it your self.

SHARP CORRECTIONS OPPORTUNITY ONLY FOR THOSE WHO HAVE THEIR STRATEGY AND PROCESS IN PLACE !!

Te answer can be yes only to those who have the strategy and process in place and are regularly investing in selected equity of companies systematically.

Such investors can invest a little more than normal and make use of such opportunities without being greedy and taking any undue risks or trading even in their own selected companies.

WHY NOT AN OPPORTUNITY IF NOT READY AS DISCUSSED ABOVE !!

There are a very large number of companies listed on the exchanges and fall in their prices at such corrections is not even and can be very risky as so will be the rise when the prices recover from the correction. Many may not recover but fall further so its not worth taking such risk which is akin to gambling.

As an example please see the fall in prices of some of the companies many of which were being recommended by vested interests and media manipulators and resulted in losses for the investors.

Probability of your buying equity at such times which will grow your savings is very less if you are not prepared and ready to make use of such opportunities as discussed above. Its only to explain and not scare you. Similar but much shorter will be the list of companies which have not fallen or have risen despite the trend. But your ability to correctly identify the winners and keep risk within control will be the same even if you were to buy from such list.

Similar is a longer list of mutual funds who have lost value but the difference is the fund houses and managers have no risk and all risk is taken by the investors who pay them too fees.