Life lessons
1.Marrying the financial right person
choose a life partner who respects you understands you,has good financial knowledge and understands your financial situation.cause after your parents he/she would be a part of your life forever, effect your financial as well as personal life.so,it's important to having a good life partner.
Know his/her
•Earning
•Loan
•Money management
•Property
•Spending habits
•Dependent or independent
if you could, then discuss your money philosophy with each other,plan how many children you were gonna make,cause it will. also affects your financial situation.if you have a bunch of children but you couldn't feed them then, it will become a problem.
and here we are not considering other expenses like education,health, groceries, any service.if we add those then just think how it will be.
2.stay married and live below your means
if your partner financial philosophy is good then make sure that you don't go for divorce in small cases,try to understand the situation, things like divorce made a huge loss of money,also it will affect you emotionally and mentally.always wouldn't do any expenses on unnecessary things.most people take a debt for their wedding,which is a biggest mistake in their life, don't go for only show off.if you have that much capabilities then it's ok otherwise wedding with a debt,that doesn't make any sense.you should always discuss with your partner before having a financial decision.even, the author says that he financially retired early only because of his married life.
3.your friend circle and your 1st job
having good friends is beneficial for you.try to make new friends. if you are in college or in an institute now,Then it's a good opportunity for you, now this is the time where you can make good friends.have a good relationship with them.cause in near future might be they will be at some good position. may be a few of them are in insurance sales man,CA,real estate investors, finance consultant, financial experts.so, that would be an advantage for you.which don't mean that having friendship only for your advantage but sometime also help them , support them,help them emotionally and financially cause friendship is a great relationship more than anything else.once there could be a time in life all forget you but a true friend doesn't care what the world is going up to.
4.Spend just 1 hour each week learning about personal finance
ten hours of gyming on 1 day couldn't affect your body but one hour on every day could affect it. we need to work every day to gain our financial knowledge.
four advice to learn personal finance :
- through internet
- library
- seminar & work shop of your collage and companies
- find a mentor
5.get rich slowly and take care of your stuff
- no anybody becomes a millionaire overnight.it takes time.you should be having consistency, dedication and patience.
knowing everyday some Stuff regarding finance would make you a good financial learner, increase your disciplinary. Also it helps you to become rich mentally & financially.
Here taking care of your stuff means maintenance of your whole thing,if you have an apartment,car,bike whatever then maintain it.cleaning your clothes, furniture,have any electronic machine like tv ,fridge, laptop then rechecking them time by time.it would reduce your huge expenses.
6.set your goals
if you don't make goals & you don't track them,then it's difficult to achieve anything.A man without a goal might seem aimless or lost, as he lacks a clear direction or purpose. Without goals, it's challenging to find motivation.so, choosing a goal is important.there are two types -
Short term -
- Goal that take less than 1 year
- It should be like , I'll increase my income by 15-20% in less then 1 year.
- Saving 30% of my income &put it in to my saving account.
Long term -
- Goal that take more than 1 year
- e.g I'll buy a car before i turn 30 with my own money,finish all of my loan before turn 30.
Why are we learning it ?
The majority of people would have heard about that stuff like he/she has X millions of net worth ,the net worth of the company is that much.but nobody knows what it really is.actully these are nothing but a financial statement who tells us how wealthy it is.
The simple formula is -
Asset - liabilities = net worth
List Assets:
Cash and Cash Equivalents: $10,000
Investments: $50,000
Real Estat: $300,000
Personal Property :$20,000
Other Asset: $15,000
Total Assets = $395,000
List Liabilities:
Mortgage: $200,000
Car Loan: $15,000
Credit Card Debt: $5,000
Student Loans: $10,000
Total Liabilities = $230,000
Calculate Net Worth = $395,000 - $230,000 = $165,000
Budgeting & saving lessons
1.develop a written budget & evaluate it every month.
you need to know how much money you spend on and on which stuff.if you don't know how to manage money then how you could think that you're gonna be rich.earn money is not important but important is how you can keep it up to you,how you spend this .so you need to do that.
E.g monthly budget
Monthly Budget Report for August 2024
Income:
Salary: $5,000
Freelance Work: $800
Total Income: $5,800
Expenses:
Fixed Expenses:
Rent/Mortgage: $1,500,
Utilities: $300
Health Insurance: $250
Car Insurance: $150
Loan Repayment: $400
Total Fixed Expenses: $2,600
Variable Expenses:
Groceries: $600
Dining out:$250
Transportation: $200
Entertainment: $150
Clothing: $100
Miscellaneous: $150
Total Variable Expenses: $1,550Total
Expenses: $4,150Savings and
Investments:
Emergency Fund: $500
Retirement Savings: $400
Investments: $700
Total Savings and Investments: $1,600
Summary:
Total Income: $5,800
Total Expenses: $4,150
Total Savings and Investments: $1,600
Remaining Balance: $1,050
2.save / invest 50% of every salary increased
mostly when our salary is increased our expenses automatically increase,we spend more then what we thought and also on unnecessary things.so we would have to keep in mind that forget about how much our salary is increased just to have to do that is invest it on assets. you can invest it in stocks, mutual funds and also if you could then save it on any saving account which give you some % yearly.
3.Save 90% of every bonus or non -planned income
if you get any bonus,gifts, rewards, any non -planned resources of money like winning by any game.wining lottery then Don't spend this on for short term desire,save 90% of it & utilise it to get a new income source.
4.always have an emergency fund
you should always have an emergency fund.because nobody knows what will come to our life,what type of problem we could have to face. it might be regarding jobs,health or any emergency.so that's why we need it.and it's one of an important point to discuss because at that emergency time if you If you are not prepared for the situation then you will lose everything.
5.Offers and discounts
shop around discount on products and services,use coupons if you have.
Spending lessons
1.don't go for show off
If one of your neighbours bought a bmw .it doesn't mean that you'll win if you buy a better car then them,Even if it is with a loan?
don't copy any other lifestyle.forget the comparison,no anyone could satisfy by doing it
2.buy last year model of things which you really want to buy
High ticket items like
- Car
- Tv
- Electronic
- Other app
These types of companies even if they would create a new product then there is nothing any major changes then the previous one model.so,even if you go for the one year previous model,then it's fine and also you got that by a less price cause the company decreases their price for inventory of the new product.
3.spend now to save later
it doesn't mean that you would spend on anything,it means spend this on those things which will give your return in the near future.actully it tells about investing in assets.
Debt & credit card lessons
1.debt is bad
always remember debt is bad,and those who said it is good they just want to live their life in a profitable way they don't care if you are gonna financially destroy or not.don't buy things which you can't afford,many people buy things just to show off and also with the loan amount which is the biggest wrong decision in their life.
2.credit card
say no to credit card,and if it is important for you then you should have only one but pay the balance on time, don't pay the minimum.it change your buying habit.always maintain a good credit carding.as a result if you need any loan in the future you could get it easily.loan always depend upon your credit score ,so make sure you maintain it properly.
Investing lessons
1.manage your own money
educate yourself and manage your money,here the author suggests don't take advice from financial advisors.as a beginner it would be possible that they cheat you.
2.buy 3-4 stocks,index, mutual fund
Start investing
Diversifying a portfolio with multiple stocks reduces risk and volatility, provides exposure to various sectors, and enhances the potential for more stable and improved returns.
Stock market:
- Higher return
- Higher risk
Mutual fund:
• stable return
Index fund:
- Portfolio is predictable
- Risk is very low
3.Don't invest with family and friends
don't put financial relationships in between family relationships and friends.it would destroy your everything.help them financially, give money to them as a gift don't live in the hope that even they would have to pay it to you.puting money related issues in relationships could destroy your healthy relationships.
Housing lesson
1.rent it, don't buy until you are settled
if you are at a young age(growing phase , unmarried, recently in job )then you shouldn't have to go for that.after your wedding or if you settled well, then you could be concerned about that.cause if you buy it, then you not only pay for this,but also you pay for decor expense,agent commission, property tax and maintenance charge. it will break you financially at that age .
2.before buying a house
check the location and price ,also check the locality,crime rate,local living traffic, education.
3.distances
Check what is the distance of your house from your work place, restaurant, shopping mall.Is your chosen house located in a friendly area for educational purposes? Are schools, colleges, and institutions nearby, and if so, what is the quality of education there? This could be valuable for your children in the future.
5.value of your house
Compare the current price with the resale value,try to having good negotiation
Insurance lesson
1.term life insurance
term life insurance works best for young adults ,but take these types of insurance which are renewable and non - cancelable.it will give financial stability to your family after you die.
2.Deductible insurance
always choose high deductible insurance for home and automobile stuff.but use it only on big problems.
[A deductible in insurance is the amount of money you pay out-of-pocket before your insurance coverage kicks in. It helps manage risk and reduce the number of small claims.
Example:Let's say you have a car insurance policy with a $500 deductible. If you get into an accident and the repair costs $2,000, you'll pay the first $500, and your insurance will cover the remaining $1,500.
This system helps lower insurance premiums because you share some of the financial risk with the insurer.]
Quick tips
1.take the house down payment instead of spending too much on the wedding.
2.learn how to fix things by yourself.
3.read every line of every contract you sign.
4.read book
5.use cash as often as possible
6.approach your job by following 3P that is
(Passion, politeness & persistence)
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