Something again About Philosophy of Life and Investments
Yesterday I posted a 50-point checklist ( On Financial Mistakes that we make) on this group which was copied from somewhere and not that I agreed with completely. Rajeev S Devasthali advised that what is the point of mentioning the mistakes when I'm not suggesting corrective actions.
Now again, since I have published a list of Do's and Dont's a million times and said it from the seminars, I found that there is nothing much left to say in that direction. Such a list is now increasingly being floated around by various Financial Advisors - and I'm sure the people are sick and tired of reading it- even though they may not like to follow it ( in the sense still our major wealth is in bank FDs).
Around 8 years ago I started a blog with the name holisticrajeeve.blogspot.com .That was because I believe in the approach of leading a complete life. It all would come from having a self sufficient life which is backed by optimum wealth which has the spirit of not being ostentatious or showy. The life must have the essential elements of compassion for others, charity for the deserving and not only the needy.The life should have the main aim at acquiring knowledge rather than information.It should have a detached attachment towards your worldly acquisitions , not only your own but also those inherited by you.
With a view to such a life Rajeev S Devasthali and other distinguished Ladies and Gentlemen of the group and the world here is my offering:
The following list if for those who do not consider wealth generation as the only motive of life but want to be assured that they will not go hungry if their employment ceases or any calamity befalls . In case you are looking forward to double your money overnight, please stop reading further on.It's NOT FOR YOU.
Let's start...
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1. Earning your living and saving for a rainy day should be the aim - not acquiring wealth. As the latter makes us lose our perspective and goal of life.
2. Whatever you can save must be invested in assets and avenues that have the sanction and approval of the law of the land.i.e. it should not only be legal but also be tax efficient.
3.In your pursuit of making your savings and investments grow- CUT your taxes by making use of laws available, not avoid it by hiding your income , savings and investments.
4. Remember , what is not on paper and does not have the sanction of the Law of the Land is not only UNSAFE, but may also be ILLEGAL. e.g. ponzy schemes like chit fund, MLMs, Committees, kitties.
5.There are always sufficient provisions in the laws for you to grow your investments that you do not have to resort to unconventional methods.
6.Like other schemes, till Real Estate comes entirely above board, i.e. entire proceeds are paid off in white or tax paid; it will never be profitable .The newer laws prohibit you from doing anything with cash.
Till such time Real estate will never give sufficient returns as compared to equity.
7. The real reason of the skyrocketing of Real Estate prices in the last decade were not some god sent , but due to the Greed of the investors. If everyone had bought a house only for their needs and stuck to equity for investments the Real Estate prices would have been more realistic.
Hence please buy real estate only for consumption and not investment .
8. Modern Idea of a bank is to keep money for your needs and regular withdrawal. Please let your Banker know that .He should not pursue you for any investment and /insurance.
9. The basic idea of ANY insurance is Risk Coverage and not earning money out of it. This is true for House, Car and even Health insurance. Accept the fact that the settlement of Insurance in case of a mishap will NOT be able to completely cover your loss.
10. Risk coverage also applies for life . Hence you should ONLY buy the TERM LIFE INSURANCE with a sum assured to sufficiently last your family for at least 10 years . It is assumed in 10 years your dependents will learn how to live life on their own.
11. Having covered your life as a bread winner and your assets like house, car, health you should endeavour to keep at least 6 months of expenses as EMERGENCY FUND untouched.
The method of keeping this EMERGENCY FUND can be a Bank Fixed Deposit or even Liquid Mutual Fund.
Since you will not use this fund in regular expenses A LIQUID FUND will mostly give a return higher than a bank deposit and more tax efficient if it stays there for minimum 3 years.
12. Wealth creation is a very tedious and boring job. Just because your shares doubled in a year is not exactly wealth creation. You have to recreate that plan every day, every week for every penny of your savings being diverted to your investments.
13. Those who are professionals in their respective fields or employed in other offices - please remember your main job is the one at hand not reading the PINK paper every morning and being glued to the TV whole day long.
The Mutual Fund managers have a whole staff to look after your money and take informed decisions. Select a good fund and trust your fund manager to do the buying and selling. You just do a consistent job of putting your hard earned and well deserved savings into the funds.
I have often thought about the value of money in different forms and at different stages. I've written the article " Colour Of Money" twice but somehow was not able to get to the root of the complex question.
It is something like this...
What is money and what does it represent? What does money look like?
Just 300 years ago it looked like Gold and Silver100 years ago it looked like pieces of paper.
So what do my bygone years of life and labour represent today? Is that just a few figures on a L.E.D. screen.
I will again attempt to write an article on it
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