Personal finance: Golden rules (India)
My horoscope says I could be a good financial advisor but may not be very good at managing my own finances. However, it was not an astrologer who told me that. Of course, it’s non-sense! But, is it?
Anyway, back to the topic: Personal finance. Not long ago, there was a desire in me to become financially independent — thanks to the Mr Money Mustache.
A few entries in that blog put the initial seed (a few months ago). It started the on-going endeavor to transform myself from a financially illiterate to a more informed and intelligent investor (Yes! the Graham’s one).
I read a few books — good books — and subscribed to a few top rated blogs in India. I plan to continue it.
The summary of my current understanding:
(Disclaimer: I will keep breaking and updating these rules as my understanding in investments and personal finance grow with time)
- Buy cheap, sell dear: Reverse of it is a financial suicide.
- Take ownership of your finances. Seek advice from experts but don’t depend else you’ll learn the hard way. Nobody else can be more concerned for your financial health. Educate yourself about money and market. Even basic knowledge would ensure that you don’t end up in a financial pit.
- Invest. Read about time value of money. Invest in yourself too, else like money, you’ll loose your worth too with time.
- One’s gut is more important than one’ mind in investing. Stay on the principles of long-term investing (Golden rules!). Don’t let the butterflies chain you in financial insecurity in future.
- Don’t be in a hurry. Never. It’s a long journey — a marathon. It may even continue when one’s body had ceased to exist. When one has time, common sense prevails. Review at least 3 times over atleast a month before making any major financial decision.
- Be prepared for the worst. What are you waiting for? Hurry! (Oh! You took Rule No 5 too seriously). Go get a bloody term & medical insurance today!
- Plan your retirement (and other financial goals). If you’re still below 40, read ahead. If not, get a team and rob a bank. I am not serious. Well, age doesn’t matter as long as you know what you’re doing. Two important retirement tips: a)Accumulate 35 times your first year expenditure post retirement (Ex: Say you intend to burn Rs 5 Lakhs in the first year of your retirement (and increase every year to match inflation), accumulate Rs 1.75 Crores — disposable savings!) b) Plan & execute Point a)
- Never underestimate small savings. Earn more, spend less. Give special focus to recurrent expenditure. Perhaps, you may not need it. Read about lifestyle creep, hedonic treadmill on wiki. Read about power of compounding.
- Say ‘Yes’ to SIP, ‘No’ to trading: Read The intelligent investor by Benjamin Graham.