How To

How to build your first CRORE

How to build your first CRORE?

Deepak was a daydreamer. He often used to dream of living a life free from 9 to 5 work life, pursuing his passion and creativity, spending time with family, doing social work etc. He wondered how much amount of wealth or bank balance is needed so that interest earned could take of his living and give him enough time to live life on his terms. He figured out that One crore kept in mutual funds could take care of his monthly expenses with some surplus to take care of contingencies. So, creating a wealth of one crore became his driving force to earning as well defining economic discipline. He also understood that just savings is not enough; the saving has to be utilized to create further wealth.

Deepak took a job as this was the only source of income possible for him. Savings from salary became his source of capital. The focus was on increasing earning and saving every month. He started studying various avenues for investment like equity markets, mutual funds, gold, real estate, business etc. He realized that aggressive equity mutual funds could help him to start with to get higher returns. In a year, he also invested a small percentage in blue chip companies. He also started side business during weekends to increase his income. To create his wealth, he had to budget his income and prioritize his spending when others of his age were spendthrift. This not only made him financially wise but helped him to get maximum value for money. Starting with monthly savings of Rs 10,000 he increased it by 25% every year. His early age gave him the opportunity to take higher risk with higher returns. Though the initial 2-3 years were trying, the accumulated capital grew faster and he was able to achieve his goal in 7-8 years. This may sound simple and achievable only requirement is financial discipline and proper investment strategy with balanced risk.

 

Pay hike or Bonus – how do I Plan?

Pay hike or Bonus - how do I Plan?

There are few days when one is eager to reach office in time. It’s the day of declaration of performance appraisal or bonus. Both mean increase in take home income that could be used for various things. One will find that in almost all cases the money to be used for, is decided quite in advance and mostly for some holidays or buying some new things. Very few follow the principle of using the increased income to reduce liability like loan or invest for long term benefits. A random survey would indicate that a very small number have a financial plan in place and allocate their money according to the plan.

Let me give you another perspective of looking at bonus. It’s in way deferred salary paid at the end of year so that one gives better work performance. The lump sum amount received in bonus can be used in two ways- to clear loans and thereby reduce EMI burden or invest in asset creation by parking the money in mutual funds or other investment options.

In case of pay hike, which is certain percentage increase in monthly salary, one of the most important aspect to remember is that, part of it will be offset by rise in monthly expenses on account of inflation, education expenses etc which are basic expenses. The net surplus after adjusting these expenses is the net increase in income. A part of these could be saved in form of SIP of mutual funds. One important aspect that needs to be remembered is balance between spending for today and investing for future. If the above principle is followed any income flow will be get used judiciously.

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