[TaureanBull]

I think the discussion is drifting more towards a mutual fund. Let me add few things about my financial planning. Below are my Golden Rules:-

1. Not more than one loan. (i.e. car or home) or in if the loans are more in number than never more than 30% of my pay. Keep the home loan purposefully even if I have money to pay in order to save my tax. At present, i have only home loan which is abt 25% of my salary.

2. An amount equal to my three months salary as liquid (available in 1-2 days if required). Invested in low risk instruments like balanced funds etc. Replace this fund as soon as possible if spent for some reason.

3. Buy gold for investment and buy as ETF. (never buy gold for investment as JEWELLERY!!!)

4. Always spend for the month from the previous month salary. (One month salary always in the bank).

5. Never count on a profit which is not BOOKED. or Dont spent from future.

How I go About It?

1. I maintain a log of all expenditures and evaluate my expenditure pattern every month.

2. I have my near future projections (4-5 years) and long term future projections (say till and after retirement) to evaluate what I may need at what point of time in my life.

3. I have life insurance. I invest in Child Gift Fund for my daughter every month.

4. Read financial section of newspaper and business magazines to keep upto date.

Some Investments to Look For

1. Child Gift Funds-Just read what it can give you and your child. It also caters for unfortunate demise of the payer (parent/guardian). Tax Benefits as well.

2. Invest in deposits in the name of your parents if they are senior citizens.

3. Invest in Company Deposits (3-5 year lock in period). Rates are upto 11%. Go for reputed companies only.

4. As told before Gold ETFs. Not at the present rates though. My wife hates me when sometimes I present her with certificate of Gold ETF.

5. Property-However small the property is, it will benefit you. It is a time tested investment. In case you dont own one, then its a must and priority ONE!!!

Some Suggestions

1. Dont compromise on quality of life. Eat healthy, take vacations, sometimes eat out and follow a hobby or two. (Eg I have seen large number of people spending thousands on their cigarette bill every month, but will hesitate to buy a good toy for the child even once a year).

2. Dream big but spent in reality. (I always dream to own a Ferrari, but started with a two-wheeler, then second hand cars and after my return to India after saving some $$$$ will buy my first new sedan/SUV).

3. Paisa khuda nahin hai, par khuda ki kasam khuda se kam bhi nahin hai. What I want to say is value the money you own or earn. Make sensible buys.

4. Always be ABSOLUTELY clear of your assets and liabilities. Dont act like an ostrich.

5. Anything which promises growth of money by unbelievable proportions (eg. double money in a year), look at it suspiciously. Stay away from it, its dangerous. It wont burn your fingers but burn you entirely.

6. Keep a immaculate record of your investments. Keep all the documents in safe-they are like money.

7. One harsh fact, most of the investments PPF, MF, Bank deposits etc will at the most beat inflation. Nothing more than that. Back to my emphasis on buying property.

8. Try and file your tax return yourself. (primarily to learn). Learn about financial instruments, tax planning etc. Its not difficult. Reading and later on following it up.

PS: All the above is from personal experience. If some one wants me to elaborate I will do so happily.

[chennai-indian]

Originally Posted by TaureanBull

I think the discussion is drifting more towards a mutual fund. Let me add few things about my financial planning. Below are my Golden Rules:-

Very nice and detailed explanation TaureanBull. I agree with most of what you have detailed except for the property (real estate) investment part. Not all real estate investments are profitable - and sometimes are worse than PPF in their returns. So eventhough real estate has given spectacular returns in recent years, always be careful in investing in real estate.

[Cayman360]

Originally Posted by TaureanBull

4. Always spend for the month from the previous month salary. (One month salary always in the bank).

This is a cool tip for all who live from paycheck to paycheck

[sanjaykk]

Originally Posted by TaureanBull

3. I have life insurance. I invest in Child Gift Fund for my daughter every month.

Some Investments to Look For

1. Child Gift Funds-Just read what it can give you and your child. It also caters for unfortunate demise of the payer (parent/guardian). Tax Benefits as well.

Nice balance approach.
Mind elaborating on the Child Gift funds? Is this some kind of a savings account or something different?

Thanks in advance.

[rvmohankumar]

guys i must write my story here...if not for anyone else's benefit it will be a good reference for me atleast when i look back after a few years.

this is going to take long time

This maybe OT or boring for many, but if you have time you can just go through and you will realise the mistakes that i did in shifting jobs, playing in stock market, investing in wrong type of properties and over commiting my self.

I started working in 1999 for a monthly salary of 4000 Rs and at that time my family did not have any need for my money since my dad was earning and running the family with my 2 younger brothers studying.
so i did not have any idea of saving or investment. i was just out of college and at that time my only passion was my RX100 bike and i would spend lavishly on that.

this went on for a few months then my mother realised that i am blowing all my earnings hence she wanted me to get committed to something and forced me to go for a chit fund where atleast i will save some money.
i purchased a PC from that money for 48000 Rs !( they were way too costly in that era).

Later i shifted some jobs and was getting around 9000Rs per month till 2003 and since i was into mechanical industry i dint get huge pay packages like software engineers.

In 2004 i decided to plan for my marriage and i decided that my current company salary would not ideal and hence i changed a job for 16000 Rs.
But the catch was that i had to pay a bond amount of 50000 to my last company because i was exiting a 4 year bond. It was a loss but i dint care at that time.

LAter after getting more money i hand i started getting involved in too many things to blow money.
1) I would go for trips and treks atleast 2 times a month.
2) i purchased SLR camera and spent so much money for that passion
3) i purchased a used maruti 800 car
4) Blew off my previous company PF money too.
5) Had many credit cards and paid so much as penalty and late fees

MY mother kept on insisting me to save some money for my marriage but that never went to my head and i was always putting it off by saying i can get 2-3 lakhs personal loan in just 3 days.

and later the time came for my marriage and i dint have a single rupee as saving till now. ( After 7 years of working).

hence i took a personal loan of 1 lakh and my parents spend 2-3 lakhs.

After marriage i got some increments in salary and it was just enough.
my wife started pestering me to plan my life properly and to be a little more safe. i never was giving her also more money.

At this point of time i started getting tax deductions and to avoid that i invested in some MF's and Insurance policies. even after that the tax deductions were huge hence just for tax savings i purchased a flat in Ittina neela, near electronic city bangalore.

again i dint have a single rupee in my pocket. The flat costed 11.5 lakhs ( economy flats) and bank approved 9,2 lakhs. the remaining was to be filled in my me.

My friend gave me 1 lakh and i borrowed remaining from my mother.
the EMI's started and i started feeling too much pressure of money.

at this point i decided to change my job for a better pay and again i had to pay 20K as notice period amount after all settlement.

The new salary was 60% more and my monthly expenditure had already reached my new salary even before i had joined.

here too i did not plan for any savings or investment.
office was 20kms far and i was travelling by car hence more expenditure and daily we would have lunch in some hotels.

then i went to USA for onsite work and in the allowance money i went to New york trip 2 times and went to Niagara once and purcahsed so many electronics, gifts for friends and relatives again no savings.

next time i went to Germany and by this time i had plans to start a family hence i became little cautious and saved some money.

as soon as i returned, my friends were purchasing some sites near bidadi.
they just took me once to show the plots and i got influenced and i forced my younger brother to purchase a site thru loan. totally 15-16 of my friends have site in that layout and there was a corner site available only for cash purchase and we 5 friends pooled in 1.5 lakhs each and purcahsed it and registered in 2 partners names (me and my friends name).

real estate was good and we all got a good appreciation in just 2 months.

Now again i changed my job and a better hike and since i could now afford i too purchased 1 site in loan.

just then the real estate fell badly and the sites that were bought at 6.5 lakhs had appreciated to 8 lakhs and suddenly fell to 4 lakhs.

My Flat which was purchased at 11.5 lacs fell to 8 lacs and also due to increase in interest rates and other things, even after paying 9k EMI's for 3 years my principal was only reduced by 20k.

exactly at this point of time did i get my financial englightenment and suddenly on one night i started writing down all my commitments and investments on paper.

i realised that
1) I had not paid LIC insurance premiums for over 1 year
2) I had not Withdrawn or transfered PF's from my old companies.
3) I had not rented out my flat for 3 years and was paying monthly maintenance charges.
4) I had not paid some cheque bounce charges of a loan account
5) Had not cleared a credit card due for over an year
6) again, did not have a single rupee as saving.

and right at this stage we saw the global recession and we got a flat 30% pay cut.

i was shattered, was not ready, also i got a baby now.
that 1 year of my life was the toughest 1 year and i was over committed
without any saving and no future plans.

1 withdrew money from PF's and was sitting with liquid cash.
during recession we did not have much work at office hence my colleagues were regular players in stock and i got influenced too.

started with 20K with equities with intra day and also with a good portfolio. it was begineers luck and i made some profit which made me blind and greedy.

i soon learnt all the tricks and was now at the gates of Option trading.

i soon started playing in future and options and no one will believe it that i started making good profits.

by this time i had convinced my brother and mother to invest in equities and on their behalf i had purchased tata motors and other good stocks( all of which are now 300%)

but i went with the flow and played options like addiction, lost some money and soon sold all equities and transfered that money to option trading and in just one week i blew 1.5 lakhs.

it melted in front of my eyes and i could not do anything. i was broke financially and mentally.
i had blown off my mothers and brothers money also ( around 60K)
i had blown off my metlife investment premium of 40K and some PF money.

soon the company affairs got bad. Salaries were delayed, and by this time i had 3 EMI's worth 35k per month and all cheques and ECS started getting bounced.

for 2 months i dint get salary and i was ashamed to live by the money given by my dad more ashamed that i was not able to take care of my baby.

and at that point i decided to change my lifestlye and approach.

survived the recession, slowly started clearing off all debts one by one.
dint invest on anything new.
our salaries got revised and company paid some amount of deducted salary as arrears.

i have saved around 5 lakhs till now and i am planning to close all my loans in next 2 years ( around 15lakhs).

have made 1 lakh FD in my daughters name for school admissions.
started purchasing jewellery for my baby and wife.

started cutting down on unwanted expenses and now i am a bit more financially educated and disciplined and have planned for next 1 year.

if i am in the same salary for next 2 years then i can repay all my loans completely and then lead a peaceful and debt free life.

what i have learnt from my mistakes are that

1) Life is never the same and we can never be too sure about our jobs and salary.

2) NEver commit yourself to more than 60% of your salary.leave some breather.

3) always keep some min amount of savings for bad times.

4) Never ever PLay stock market with borrowed money or all your money.

5) Respect money and do not ignore or neglect it.

6) other than your regular jobs, keep some other avenues for regular and small incomes.

7) start planning in advance and once you list down your priorities in life you will realise that you were targeting something useless over something essential.

8) Prices and costs rise faster than your salary and increments. Hence never feel relaxed that you are getting a good hike whereas the expenditures also would have risen.

9) Always keep track your income and expenses. This way you can target some areas where you feel you are overspending.

10) Finally, we must learn from our fathers and grandfathers about how they used to run such big families with less income and yet they all led a happy life and a peaceful life compared to our existing way of life.

[aargee]

@Mohan - You'd guts admitting things; for people who've undergone your experience, it will be a flashback, for the one who haven't its a good learning for sure. This is one of the most worthful, meaningful & useful contribution in this thread.

Like you, I started working from 1997; however, I learned my lessons in 3 years. From 2001, I was a regular saver, but not an investor. Ever since then, I keep saving, but I'm more of conservative & take risk very less.

All the points you've said are more than true & its quite common for everyone in life. I always think, I've wasted too much of money & curse myself. But your experience is really comforting to people like me.

But again, one should never keep saving all the money nor spend away all the money. My policy on money is to respect the money, but never worship so that, it takes control of one's life.

I trust, your post is going to be a real eye opener for many of us here.

[ElantraGT]

@mohan Kumar, thats a eye opener for me. I stared working from 2000 and I have been through most of your phase except for the share trading. Touch wood it never interested me and I dont save till now. Thanks for your inputs.

[mobike008]

@RVMohankumar, a salute from the support team

It takes a lot of guts, diligence and accuracy in self assessment which most people lack to admit and open up your personal life on a public forum. Appreciate your total transparency in which you outlined your experiences ( mostly lessons) that surely will help youngsters and others alike who will be cautious and chalk out a safer route and not tread the path that you went through.

Personally IMO, if it's possible, everyone should save atleast 25% of their salary (every month). I am touching close to 40% since last 2 years and been trying to hit 50% from a long time but, unable to achieve that feat due to a lavish lifestyle.

Your post has given me a renewed enthusiasam and hope to hit 50% from Jan'11 which will also be my new year resolution for 2011, Priority #1.

[aargee]

Originally Posted by mobike008

@RVMohankumar, a salute from the support team

+1; truly deserved.

Originally Posted by mobike008

Personally IMO, if it's possible, everyone should save atleast 25% of their salary (every month). I am touching close to 40% since last 2 years and been trying to hit 50% from a long time but, unable to achieve that feat due to a lavish lifestyle.

Do it; its possible & still enjoy the lavish life style. No I'm not talking out of my mouth, rather...talking it out of my own experience

I forced myself making smaller commitments like, RD (PO or Bank), chits with smaller amounts such as 5K, then SIP 5K until 50% of my income is touched upon. This is again not on the gross, but on the net take home after tax.

The best part is, the remaining 50% is spent without having any account, no need to write anywhere as how much has been spent & how it is being spent. When spending, ensure that credit card's interference is less or being used only on vital things such as petrol, groceries & also ensure that there're no surcharges applicable at any merchant establishments.

Not sure if anyone has any such sentiments like I do; I usually do not spend money on 1st of every month. I spend it for my saving or investing my money. Now this could be a supersticious too, but I found out another great advantage in it. The moment I get my salary, first thing to do is contribute towards my savings, followed by clearing off the bills & then spend the left over money.

One example would be...
1. Savings to buy Gold - 5K
2. Savings for Insurance annual premium - 4K
3. Savings on PORD - 10K
4. SIP Investment - 10K

So by the end of year for 1 & 2, I would get a nominal interest of about 6% & also able to achieve what I want. Points 3 & 4 are long term investments.

[ampere]

Originally Posted by aargee

One example would be...
1. Savings to buy Gold - 5K
2. Savings for Insurance annual premium - 4K
3. Savings on PORD - 10K
4. SIP Investment - 10K

So by the end of year for 1 & 2, I would get a nominal interest of about 6% & also able to achieve what I want. Points 3 & 4 are long term investments.

For all your investment/savings requirement e.g Yearly premium etc, find out how much it requires on a monthly basis.
Open a National bank account (SBI e.g) to be used as a Black-Hole account (Money only goes in and never goes out of this account).

Start of the month transfer that equivalent amount to the black-hole account.
That way you will know how much you are saving on a monthly basis!


Like Aargee said start of the month transfer : All Savings/Investment amounts etc. You can also have another account,
which is only dedicated for home department. Transfer a fixed sum to that account also.
That way you force yourself to plan by structure and not by self imposition. Then after all these transfers
you "know" how much liquid is left with you to splurge or save.

[aargee]

I learned this in a hard way

Originally Posted by ampere

Open a National bank account (SBI e.g) to be used as a Black-Hole account (Money only goes in and never goes out of this account).

Ampere sir, you mean a RD account or something else? Why only Nationalized bank? Any specific reasons?

Also, I would suggest joining some chit funds, like Shriram, who're reputed in market & Post office schemes like recurring deposit or monthly income schemes for long term savings.

I'm also considering to invest in some SIP for a short period of 1-2 years.

[ghodlur]

@Mohan Kumar,

Good post and a nice retribution of your life. Good to know that now you have you head over your shoulders firmly and thinking in the right directions.

I can somewhat relate to some of your experiences. Starting from a humble beginning it has taken quite some time for me to come to my present life which had its ups and down. But being a Libran I am quite balanced when it comes to savings/investments and spendings.

I have made it a point that after my salary gets deposited within a weeks time the amount gets debited for my SIP's. A small portion of the salary goes towards saving for the Insurance policy premiums (LIC, Car, Mediclaim). Remainder goes for House EMI's, monthly house expenditures. So by the time the month ends, I am in a position to analyze the savings and the unforeseen expenditures expected like festival shoppings, jewellery etc.

These days I am contemplating the idea of going for a plot with my savings after owning two houses in Thane. Will help in retirement or in case of any emergency.

[ampere]

Because I feel that is the safest best. You can open PPF, get a locker etc.
I am not hell bent, but yes SBI is definitely a first priority.


In the bank you can then arrange funds the way you want. FD RD etc.
You can also open post-office account and put money on a MIS plan.


Use MNC banks more for the online features (I know even SBI getting there) viz bill payment, funds transfer, drafts etc.

[aargee]

Originally Posted by ampere

Because I feel that is the safest best.

But Ampere sir, I believe all the banks that follow RBI guideliness are protected upto 1Lakh or actuals per individual on their account isn't it?

Originally Posted by ampere

Use MNC banks more for the online features (I know even SBI getting there) viz bill payment, funds transfer, drafts etc.

But then, we're talking about an RD account or an account where the money flows in regularly but comes out only once right? So we don't need any of the online features to spend isn't it?

Anyone willing to discuss on pension plans as a long term investment option? I've committed for one for about 10 years with SBI. I'm completely novice in this area.

[ampere]

That is not what I meant.

1. Use an bank with good online features as your salaried account.
Use this account to pay bills, credit card payments, money transfer, drafts, loans through ECS etc.

2. Use an SBI like account for black-hole where you maintain your funds/liquid/FD etc. Use this account to pay your premiums etc.

3. That you will be very sure that you black-account is a true black hole account with all the money in there or being re-directed is only your savings purpose and nothing else.