Some tips to manage your finances in a better way.
I am good with money, at least that’s what I thought before reading Rich Dad Poor Dad by Robert T. Kiyosaki. I learned that plenty of my financial decisions were not right. It was an eye-opener for me and then I started to focus on my personal finances, started taking financial decisions in a right direction to make more out of it. In simple words:
Started sending my money to Gym
Which means making more with the money that I have by managing risks and diversifying my investment portfolio. In this article I am going to share some of my tips with you all.
So let’s get started:
One of the most important tip given in the book Rich dad Poor dad is Pay yourself first. After receiving the bills all we do is start clearing all the bills first, have some luxury, and then we try to save the remaining amount. What the book suggests is first save the money (my recommendation at least 50%) and then live your remaining month based on the remaining amount. The bills have due dates and you can use that period to multiply your money by investing it.
Money in Bank is useless
Oh, that is a heavy statement, Please don’t get me wrong here, having money is bank is good, it is easy to liquidate but don’t keep all your saved money in Bank. Instead invest that amount in Mutual Fund, Stocks, Gold or any other investment that you understand.
Bank gives you around 2–3% annual interest. FDs give you 5–6% interest, Mutual Funds can give you up to 7–8%, Stocks can give you 10–15% returns if invested in the right stocks where as Gold or any other assets can increase that value to 30–40% returns. Still think money is bank is useful???
But before removing all your money from your Savings account and investing it, let me tell you, You should be ready for emergencies and money is bank keeps you ready for that. Say for an example, there is some health emergency. In such cases you need quick money, that’s why keep aside some moeny for such emergencies.
Invest in what you understand
Your Dad says FDs are the best investments, Mom says Gold is the best, your friend says Mutual Funds are great, some other techie friend says, BitCoin is the best investment.
I am not saying that any of them is wrong in fact all the investment options are great so where should you invest. I would suggest that, Invest in what you understand, You understand how gold prices are increasing, then invest in gold. You know value of a land then invest in land, You understand stock market well then invest in stocks. Invest in what you understand, don’t simply follow the advice given by people.
If you do understand anything, learn, do some research, talk with experts.There are plenty of resources available online to literate you financially. You can start with small at the beginning and then slowly learn and understand your ways to maximize your returns and minimize risk.
If you want to become rich, you must take some risks with your money. But before making some risk heavy investments read the previous point, invest in what you understand. Before taking any risk with your saved money you must fully understand the investment. You should be knowledgeable enough to take those risks, rather mitigate those risks. Let me tell you a fact:
Risks are directly proportional to returns.
Yes, that’s true for most of the investments.
Diversify your investment portfolio
As the old saying goes:
Don’t put all your eggs in one basket.
Keep your portfolio diversified. Learn more investment options, and invest in various places. Don’t just invest in one particular option. Explore different options, take suggestions from people, do some own research and diversify your investment portfolio. Check different investment options and be ready to lose some money in the learning process that can not be avoided completely, your job is to minimize to loss.
Money is fungible
Screenshot of DuckDuckGo Search
Fungible simply means replaceable by substitution.
Confused, let me give you a real-life example:
I saw one of my friends wearing a cool t-shirt. I liked it.
He said, “I just bought it just because I got some cashback on PayTM.”
“So, did not want to buy it but bought it just because you received the cashback”, I asked.
“Obviously…”, He said.
You must have also been through the situation where you simply buy stuff just because you have some extra cash in hand but you fail to understand that, the extra money that you have is fungible/replaceable so instead of spending that money on something that you don’t want/need. You could use that money is something you actually need. In my friend’s case, he could have used that money to pay electricity bill or any other bill payment on PayTM.
There are many people who fail to understand the money game. Money is a great tool, yes, you read it right, it’s a tool which can be used to buy Time, buy freedom. Most of the people fail to understand this simple concept and instead of using money as a tool they become slave of the money, losing their health, freedom and relationships in the process.