kdp amazon by Manjunath kawadi

SIMPLE WAY TO RICHNESS

Towards Financial Freedom and Wealth Creations This Book is Special for Poor, Average wealthy people and those who want themselves Rich

By Manjunath Kawadi MBA,PGDBA,PGDSA&CP

This book is dedicated to my beloved guru’s Heavenly father, Heavenly mother , Saints of All religions ,Mahavatra Babaji, Lahari Mahaseya , Sri Yukteshwara Giriji ,Paramahansa Yogananda, Family, friends and Those who are Striving for Richness from inside and outside.

CHAPTER ; 1 Introduction Wealth Creation: Meaning, Importance, and Strategies What are the Personal Finance Principles? Importance of Personal Finance 5 Key Aspects of Personal Finance

CHAPTER:-2 Process of Financial Planning What Does Financial Planning Include? Steps Followed in Financial Planning? The Financial Life Cycle Macro-Economic Factors and their Effect on Personal Finance Components of a Financial Plan

CHAPTER : 3 Sources of Income What Is Income? Three Types of Income Passive income 18 passive income ideas to help you make money What is passive income? How many income streams should you have? Passive income ideas for beginners

Chapter: 4

Rich Dad’s Cash flow Quadrant Rich Dad’s Cash flow Quadrant The Fundamentals of the Cashflow Quadrant Final Review and Analysis

Chapter : 5 SAVINGS Savings of money – A weapon to fight against poverty What is Saving and Why is it important ? How much money should be saved?

Where Can Money be saved? The Importance Of Saving Money: 15 Reasons to Start Saving

“Magical Formula 50-30-20 ; Weapon to beat poverty’’ What Is the 50/20/30 Budget Rule?

Chapter 6 BUDGETING An easy seven-step monthly budget plan for you.

Chapter: 7 Emergency Funds The Importance of an Emergency Fund. Why to keep emergency funds. How to Build an Emergency Fund. How much should your Emergency Fund have? You may even choose to divide your emergency fund into 2 categories.

CHAPTER 8 Inflation What is Inflation? What are the effects of Inflation? Who measures Inflation in India? Who measures Inflation in India? Inflation Explained: What is Inflation, Types and Causes? How is Inflation measured ? What are the main causes of Inflation? Is Inflation bad for everyone?

CHAPTER :9 ASSESTS Assets That Will Make You Rich And Wealthy What is an asset & when a person is known as rich? So, Which are those five assets that can make you rich?

CHAPTER : 10 Habits Simple money habits that will help you build wealth

CHAPTER: 11 Debt How to Get Out of Debt What if You Still Need Help?

CHAPTER : 12 Investment What Is an Investment? How an Investment Works 12 best investments How Should You Invest? What are the Objectives of Investment? Reasons to Start Investing Today Categories of Investments What Is Investment Meaning in Comparison to Savings? When Should You Invest? Why Should You Invest? Understood ‘What is Investment?’ Now Get Started SAVING VS. INVESTING – WHICH IS BETTER?

CHAPTER : 13 Power of compounding Benefits of Compound Growth Things to Consider THE RICE AND THE CHESS BOARD STORY — THE POWER OF EXPONENTIAL GROWTH Lessons from this story: RULE 15-15-15 Know The 15*15*15 Rule In Mutual Funds What is Compounding? Power of Compounding 15*15*15 Rule

CHAPTER :14

Retirement

Your Step by Step Retirement Planning Guide Monthly Expense at 6% Yearly Inflation Rate Planning for regular monthly income is important Retirement Planning: 10 golden rules

CHAPTER: 15 Thumb Rules of Finance

CHAPTER 16 Meditations to create wealth

Law Of Attraction 5 SUREFIRE WAYS TO ATTRACT MONEY USING THE POWER OF YOUR MIND How To Attract Money Using Mind Power. Powerful Meditation for Manifesting Money Can Money Meditation Help Manifest Money? Meditation and Manifestation The Money Meditation Techniques and the Steps The key to success in Money Meditation Suggestions for Better Success with Money Manifestation Meditation A very Special Million Dollar Meditation

CHAPTER 17 Quotes on money

CHAPTER 18 Qualities of Rich people and Qualities of poor people

CHAPTER ; 1

Introduction Wealth Creation: Meaning, Importance, and Strategies

If you look at the dictionary meaning of wealth, it is abundance. When you talk about wealth with respect to money it means an abundance of money and wealth creation focuses on making this abundance a reality. For you and me, wealth can be defined as the sum total of assets we own, be it real estate, cash, gold, stocks, mutual fund units, etc. after deducting any liabilities such as outstanding loans. But wealth is also a relative term. Whether an individual is wealthy or not depends on the benchmark we set for ourselves based on our dreams. So, you may call yourself wealthy if you have enough to fulfill all your dreams.

For example, you might dream of owning an apple orchard in

Shimla or a 4-BHK flat in South Delhi. Achieving these dreams would require a substantial amount of wealth. So, if you don’t have enough wealth to fulfill these dreams, you have to focus on growing your wealth, to get closer to achieving your financial goals or dreams.

In this Chapter, we will discuss what wealth creation actually means, its importance, and some strategies that can help in the successful creation of wealth.

What Is Wealth Creation? One cannot create wealth by just earning more money. You have to invest your savings to create a parallel stream of income. This process of investing your saved money to grow your wealth by choosing investments that align with your financial goals is called wealth creation. For sufficient wealth creation, apart from choosing the right investment, you also have to give your investments sufficient time to grow. You need to maximize the benefit of compounding by investing as early in life as possible. Early starters have the opportunity to stay invested longer, which makes it easier for them to reach various financial goals.

What are the Personal Finance Principles? When a person thinks to manage his/her money, one of the finest approaches is “saving”, it can be strictly followed, “more you save, more you have”. However, principles that help to maintain success in business are discussed below;



Prioritization: By examining our finance, we can determine what forces the money streaming in, and making efforts to be assured and focused.

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Assessment: The key requirement for professionals that resist them spreading too much. However, enthusiastic persons have always listed various ideas and ways that touch their financial needs; either it is a side business or investment idea at the appropriate time.

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Restraint: For instance, if a person is sending too much then his annual income it is not a good approach towards managing his financial goals as it won’t let him do better.

Understating to restraint expenditure on non-profitable assets until a person has secured his monthly savings or debt-reduction aims is important in keeping net worth. Restraint is simply the way of managing a successful business, applied to personal finance as well.

Besides that, one should follow the saying, “never work for money, make your money works for you”, therefore, produce multiple, but legitimate, ways to have more source of income. Also, it is advisable to make you educated with financial terms and keep updating yourself to have a precise understanding of your financial matters and make accurate decisions for yourself.

Importance of Personal Finance Personal Finance has become an integral part of human life, and in the present COVID-19 world, it has become more necessary than ever before.

Below are some of the imperative aspects of finance at a personal level;

1. Personal Finance has a great role in determining the direction and essence of human life in the prevailing economic and social circumstances.

2. For personal growth of an individual and his family, personal finance plays a key role by looking at the opportunities and keeping upgraded across the globe through keeping aware of any sort of risks.

3. It has become more crucial to enrich the financially literate in order to acquire most of the income and needed savings where the study of personal finance assists in distinguishing amid favorable and cheap financial decisions and also help in making savvy conclusions.

4. Some of the seminaries are providing classes about managing money, therefore, it is important to have basic knowledge through free online courses, articles, blogs and podcasts.

5. In addition to that, a novel concept, small personal finance incorporates augmenting strategies, these strategies consist of budgeting, preparing emergency funds, clearing off debt, carefully leveraged credit cards, saving for retirement, and etc.

In addition to that, knowing the fundamentals of personal finance from savings accounts to budgeting can help us in constructing a better future by eliminating the various risks.

5 Key Aspects Of Personal Finance One of the major reasons we fail to secure ourselves financially is because we are unaware of the things that should be done for it. We do what we feel is the right thing to do but that might not always be sufficient. Hence, it is essential to know what are the key components that you need to focus on while creating a road map for your financial well being. In this blog we will talk about different aspects of personal finance to give an idea about how your complete financial picture should look like. Before delving deeper into the topic, it is essential to point out that there are 5 contours to one’s complete financial picture. They are saving, investing, financial protection, tax planning, retirement planning, but in no particular order. Here are the 5 aspects of a complete financial picture: 

Savings: You need to keep money aside as savings to cover any sudden financial need.

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Investing: Investing is important to grow money so that you can achieve what you aspire.

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Financial protection: Now, financial protection through insurance ensures you and your family are able to sail through during the hard times.

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Tax planning: With proper tax planning, i.e. making adequate expenditure/investment, you can bring down your taxable income, eventually saving a lot of money every year.

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Retirement planning: Finally, retirement planning is crucial to ensure that you have a big bank balance meant solely for your needs during the twilight years.

And now, we will discuss each of the 5 aspects in further detail:

#Number 1: Saving

The need for sudden money can come anytime. It can be as mundane as a car breakdown or as serious as losing your job. However, such emergency events can be dealt with if we have enough savings to cover the need. As a thumb rule, the fund for your emergency needs should be three to six month of your expenses. Debt instruments like Liquid Funds are excellent options for parking the money meant for emergency needs.

And the 3 reasons to back that

thought: 

First, liquid funds give slightly better returns than your savings account, even though there is no guaranteed return.



Second, these funds are highly liquid, hence you can withdraw the money after seven days.



Third, they carry negligible credit and interest risk, and hence your money is safe.

#Number 2: Investing We often confuse investing with saving, or consider them to be synonymous. While saving is about setting money aside, investing is putting money/purchasing assets like – stock, bond, mutual funds etc. – in order to make your money grow. Now talking in terms of investment, mutual funds are an excellent investment option if it is done right. However, while investing in mutual funds it is essential to be mindful about choosing the right fund for your investment, otherwise it might turn counterproductive.

Hence

it is essential to make your investment as per your investment requirement and horizon. So here the thumb rule is, turn your dreams into financial goals and set a timeframe around it. Then pick a mutual fund that matches your investment timeframe.

Now what funds should one pick as per their financial goals?

1. Short term goals: The goals that need to be achieved within three years are short term goals. From saving for a trip to saving for a phone, there are multiple things for which one needs to arrange funds within this timeframe. Best investment options: Liquid Funds, Ultra short-term funds. 2. Mid-term goals: If you have set a goal for yourself that needs to be achieved within three to five years, for example down payment for 14

a house, it can be termed as midterm goals. Best investment options: Hybrid Funds, ELSS, Short Term Debt funds like Banking and PSU Debt Funds 3. Long term goals: Milestone events like retirement, children education, their marriage, i.e. the goals for which the timeframe is minimum of 5 years are termed as long term goals. Best investment options: Multi Cap Funds, NPS (only for retirement), Large Cap Funds

Financial goals, its timeframe and investment options Financial Goal

Number of years

Investment option

Short-term goals

Up to three years

Liquid Funds, Ultra short-term funds.

Mid-term goals

Three -five years

Hybrid Funds, ELSS, Banking and PSU Debt Funds

Long-term goals

More than five years

Multi Cap Funds, NPS (only for retirement), Large Cap Funds

#Number 3: Financial protection We might weave several dreams in life and create investment plans to turn those dreams into reality. But unless we protect them with a safety net, the same can turn into a liability. That safety net is insurance. There are 4 kinds of insurance we all need. And these are: 1. Term insurance: It is a kind of life insurance that ensures that your family or dependents do not have to go through financial hardship if you die early. As compared to other health insurance products, the sum

assured for term insurance is higher as against the premium amount. Now if you calculate it correctly, then you can account for day-to-day expenses of your family, a retirement corpus for your spouse, cover for your liabilities like – home loan, and children’s education in the sum assured. 2. Health insurance and Critical Illness insurance: Having health insurance ensures that you do not have to pay from your pocket in case you or any of your family members have taken ill. Health insurance covers all costs for treatment of the insured like hospitalization, medication, pre and post hospitalization expenses etc. Meanwhile you can opt for critical insurance along with your basic health policy. In case you are diagnosed with one of the critical illnesses mentioned in your policy, the insurance company will pay you the sum assured. 3. Mortgage Protection insurance: Mortgage protection insurance pays off your mortgage if you die during the term of the mortgage. It ensures the loan or mortgage for home, car, property etc. does not become a liability for your family, in case you die early. 4. Personal Accidental insurance: In case you meet with an accident and get seriously injured, or become partially or fully injured, the insurance company will pay the sum assured to cover the expenses for treatment and also loss of income. Meanwhile, if you die during the accident, the lump sum amount will be paid to your family. The payable amount, however, is dependent on the fatality of the accident.

#Number 4: Tax Saving Though we are required to pay taxes as per tax slabs, with the right kind of investment/purchase we can reduce our taxable income to a certain extent. In fact, there are as many as 70 exemptions and deduction options through which we can bring down our taxable income. Here are the 2 most popular sections for deducting taxes: 1. Section 80C: The biggest pool for tax deduction is Section 80C. Under this section, you can claim deduction up to Rs 1.5 lakh for making various investments and expenditures. Some of the prominent tax saving instruments under this bucket are EPF, PPF, NSC, NPS, ULIPs, children’s tuition fee, life insurance premium, 5-year tax saving FD, ELSS, Senior Citizen tax saving instrument, Sukanya Smriddhi Yojana, home loan principal amount.

2. Section 80D: Also, you can claim deduction under Section 80D, for the premium amount you pay for you and your family’s health insurance policy. Popular tax saving instruments Section for deduction

Schemes EPF, PPF, NSC, NPS, ULIP, LTA, children’s tuition fee, life insurance premium, 5-year tax saving FD,

Section 80C

ELSS, Senior Citizen tax saving instrument, Sukanya Smriddhi Yojana, home loan principal amount

Section 80D

health insurance policy

Apart from these two, there are other avenues to reduce your taxable income, to know about them read: Beyond Section 80C: 10 ways to save taxes.

#Number 5: Retirement planning: Retirement is one of the most crucial life stages, and it can be as blissful or as miserable depending upon how you have planned for it. It holds true for financial planning too. Now, planning finances for retirement is a two step process. First, is saving for retirement and second is, generating income from your assets during retirement. And, here are the two steps – 

Step 1: Building a retirement corpus: Saving for retirement is crucial for two reasons majorly – loss of income and increased life expectancy. Let’s assume that you retire at 60 and live upto 85. How do you plan to fund your expenses for 25 years after retirement, at a time when you do not have any steady income?

Plus, considering inflation, i.e. the rise in prices of goods and services for regular use, your expenses will be much higher after retirement than it is today. For example, if your monthly expenses are Rs 35,000 right now, it would be Rs 80,000 per month in 20 years, considering you would want to maintain similar living standards.

Now, building a fund as large as a retirement corpus is a lifelong 18

process. So, the earlier you start saving towards, the better it is.

Investment option to build retirement corpus: EPF, NPS, and Mutual Funds 

Step 2: Generating income during retirement: As much as it is important to ensure that you are saving enough for your retirement while you are working, it is equally important that you channelize that corpus correctly after retirement. Making the right investments will ensure that you have a steady income as long as you live.

Investment option for generating income during retirement: STP withdrawal/transfer from Mutual Funds, life insurance annuity and rental income.

Objective

Investment option

Building a retirement corpus

PF, NPS, Mutual Funds and Pension Plan

Generating income during

STP withdrawal/transfer from Mutual Funds, life insurance

retirement

annuity and rental income.

Bottom Line: Being in control of your finances and having the power of making a life choice without worrying about money are two things that we assume to be tougher than attaining Nirvana. However, having all the aspects of a 19

complete financial picture in one frame ensures that your financial future is just picture perfect!

CHAPTER:-2

Process of Financial Planning The financial goal of most people is to become wealthy. This is the reason why a lot of people are seen chasing their dreams of higher income. This is because, in their mind, a higher income correlates with being wealthy. A lot of the time, it negatively affects their health and happiness also. The normal assumption is that if a person has a higher income, then they will also have a higher net worth in the future. However, this is not the case. The stories of many high-income earners going bankrupt later on in life are not uncommon. These stories can be found in the high earning professional class as well as amongst celebrities. The reality is that long term wealth has been associated with a long term tendency to consistently engage in financial planning. People who pay attention to their finances and take regular action on a month on month basis to end up being wealthier as compared to their peers. In this article, we will have a closer look at the process of financial planning and how it helps maximize wealth over the long run.

What Does Financial Planning Include? The goal of financial planning is to ensure that the financial resources of a person are channeled in an optimum way. The objective is to ensure that a person has whatever amount of money they need at a certain point in time. It is important to note that financial planning is related to 21

life goals. It is not related to maximizing the net worth of a person at the end of their lives. Instead, if they want a certain sum of money ten years from now, the goal of the financial plan would be to ensure that they have the money at the required time. Human beings tend to have different types of financial goals. Hence, it is no surprise that financial planning is itself internally composed of many different disciplines. Some of them have been listed below: 

Planning to acquire assets



Investment planning

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Insurance and medical planning

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Tax planning



Planning for retirement

Steps Followed in Financial Planning? There are certain predefined steps that need to be followed in order for effective financial planning. The steps have to be carried out in the sequence mentioned below: 1. Step #1 - Decide on Your Life Goals: A typical financial planning session starts with goal alignment. When people are asked about what they would want from their lives, they often tend to start narrating their financial fantasies of several cars, big mansions, etc. It is important to be realistic at this step. The idea is to segregate the needs from the wants. The first goal of financial planning should be to make sure that all the needs are met. If excess money is leftover, it can be used to fulfill wants. The typical 22

needs expressed by people are a house, a car, provision of education, and marriage for kids. The ability to be financially independent during retirement is also one of the biggest life goals expressed by people. It is important that each goal has a specific time frame attached to it. 2. Step #2 - Know Your Current Situation: The goals should be created, keeping in mind the current financial situation. For instance, if a person is already deeply in debt, then they should try to first get out of debt before they can plan their finances effectively. The current incomes and the possibility of change in these incomes should be looked at conservatively before coming to the goals. At this step, the investor has to find out how much money they have leftover for investment. It is also important to keep in mind that as the income will rise, so will the income taxes. This is the reason that tax planning often becomes a part of this step. 3. Step #3 - Evaluate Investment Alternatives: The next step is to allocate the disposable income to life goals. The idea is to use the best investment vehicle which will provide maximum returns. For instance, if life goals are retirement, using individual retirement accounts is one of the best ways to save money. This step involves evaluating different debt, equity, and real estate options in order to finally select the investment vehicle. It is advisable to run projections at this stage and see how the desired net worth changes if the market performance changes. The transaction charges and the managing fees should also be taken into account at this point.

4. Step #4 - Set Up The Investment Plan: Finally, after all the alternatives have been considered, the investor reviews the final portfolio, which has been decided. This money is then allocated and paid on a month on month basis. It is common practice for investors to set up an annual meeting with their investment advisors in order to review the performance of their portfolio. Based on the performance in the past periods as well as expected performance in the future, portfolio allocations may be changed. The bottom line is that financial planning is a complex discipline that includes several other disciplines like retirement planning, tax planning, asset acquisitions, etc.

The Financial Life Cycle A lot of young people are not aware of what their financial goals ideally should be. Most of them fall into the habit of trading time for money. This contract wherein one person trades their time, money, and effort for an income is called employment and is generally viewed upon favorably by the world. It is considered good to be employed. However, many youngsters make the mistake of thinking that they will remain employed for their entire life. The fact of the matter is that the average life expectancy is now increasing beyond 75 years, whereas an average individual is likely to be employed for about 30 years of their life. Hence, they have to make 100% of the money in only 40% of the time. In order to help the average middle-class person plan their financial goals, financial planners have developed the concept of the financial life 24

cycle. It needs to be understood that these concepts may not be applicable to very rich or very poor people. Instead, this is the aspirational life cycle of most middle-class people around the world. In this article, we will have a look at the stages that an investor has to pass through. Stage #1: Financial Dependence Everyone who is born in this world is financially dependent upon their parents. Most people did not use to make big financial decisions before they are 18 years old. However, nowadays, a lot of middle-class students take college loans in order to further their education and prepare themselves for the job market. It is important to realize that these loans have to be repaid by earned income later in life. Hence, education loans should be taken only if they are financially viable. This is the reason why parents should undergo financial planning training so that they can aid their kids by preventing them from starting their life on the back foot. The objective of the financial dependence stage should be to accumulate minimum debt. Stage #2: Solvency Assuming that the students have passed the first stage, they move on to the next stage. The objective of this stage is to remain solvent. This is the stage wherein the individuals have just finished their education. As a result, they get entry-level jobs. These entry-level jobs pay them just enough to maintain a basic standard of living as well as to pay their old debt. It is important that the person maintain solvency during this stage

and not accumulate excessive credit card debt because of frivolous spending. This stage lasts for about five to seven years. Stage #3: Financial Dependence This stage is where financial planning really becomes important. This is because, after five to seven years, the person is no longer in an entrylevel job. Instead, they are likely to be in a mid-management position in the firm that they work in. Hence, their income is significant. Also, this is the stage that most people get married, meaning that two incomes become part of the household. This is a substantial increase from the subsistence existence mentioned in the earlier stage. However, this stage is also marked by some of the biggest expenses in the life of an individual. This is because this is the stage wherein people buy houses, cars, vacations, etc. A significant amount of money is also spent on the wedding expense. The most common mistakes of financial planning are also made at this stage. It is very easy for individuals to assume that life will continue the same way. However, for many, it does not. As the age of a person increases, they often have kids. Hence, the education and medical expenses of kids also increase a lot. However, income doesn’t increase proportionally. The end result is that people are left living paycheck to paycheck. About 70% of people spend their entire lives at this stage because of improper financial planning.

On the other hand, if an individual is financially aware and has been planning, they can supplement their own income with passive income because of the investments made earlier. Stage #4: Financial Independence This stage is the goal that most financial planners help their clients achieve. This is the stage wherein a person has built so many investments that their lifestyle can be maintained by the passive income generated from these investments. If the person has made financially correct decisions in the past, then this stage is characterized by a situation wherein working is optional. Investors have the freedom to spend their time with whomever they want and work in order to pursue their passions and hobbies. A person who is retiring needs to be at this stage at least. Stage #5: Financial Abundance Financial abundance is for a very small number of people. At this stage, an investor has so much money coming in via passive investments that they do not care about money too much. Instead, their decisions are motivated by the need to leave a legacy behind. Most people associate this stage with billionaires such as Bill Gates and Jeff Bezos. However, this is not true. There are several people whose net worth is a few million. However, because of their frugal lifestyle, they are at this stage. Hence, the financial planning lifecycle encompasses the entire lifecycle of a person. There are different financial goals that need to be pursued at different stages. This is the reason that financial planning should be 27

taught at the teenage level before any major life decisions have already been made by the individual.

Macro-Economic Factors and their Effect on Personal Finance Personal finance is defined in such a way that it is supposed to be linked with the financial decisions of an individual or their family. Any decision which is taken at a higher level is not considered to be a part of the personal-finance domain. However, it is important to realize that decisions related to personal finance are not taken in isolation. These decisions are also influenced by the larger picture, i.e., the macroeconomic factors. In this article, we will have a closer look at the interaction between personal finance and macro-economic factors. Monetary Policy Monetary policy is the tool used by the government to vary the amount of money supply in the system. The decisions made by the government here can have far-reaching impacts on the personal finance decisions being made by individuals as well as families. When the government increases or decreases the interest rate, it basically influences the collective saving decisions of millions of families in the nation. A lower interest rate often gives an impetus to consumption, and hence it has been observed that a lower interest rate also correlates with a period wherein the savings rate is also low. In such times, people are 28

discouraged from making savings since the outcome of savings is not that rewarding. Fiscal Policy Fiscal policy is related to tax receipts as well as expenditure is done by the government. The fiscal policy of a country impacts the common man largely because it impacts the manner in which the common man is taxed. For instance, if the government decides to lower their budget, then they reduce several taxes that are levied on common people. Lower taxes mean that people will have more disposable income on their hands. A higher disposable income could mean more savings. Also, the government can influence the prices of different asset classes with its taxation policy. For instance, in many parts of the world, governments provide a tax break to people who invest in real estate. As a result, the asset class becomes more attractive for many people. Hence, larger than usual investments are routed to real estate. Similarly, in many parts of the world, earnings from the stock market are not taxed if they are held for over long periods of time. In such countries, people prefer investments in equity assets more than investments in other asset classes. Government Policies In some countries, governments have welfare-oriented policies. For instance, in countries like Canada and the United Kingdom, governments provide health care benefits to the people. In such countries, individuals do not feel a need to purchase insurance policies in

their own capacity. Hence, financial planning is taken care of at a collective level. Similarly, in many parts of the world, particularly in Scandinavian countries, college education is free. Hence, in these parts of the world, people do not have to set aside money for their kids’ college education. This is completely different as compared to countries like the United States, wherein college education is the second most common goal in financial planning after retirement. Business Cycles Business cycles such as boom, recession, depression, etc., also have a huge impact on the way in which individuals and families plan their finances. For instance, in periods of recession and depression, liquidity is extremely important. This is the reason that people do not want to lock their investments in long term investments. There is always a fear of loss of income, and hence people might want to dip into their savings at any given point in time. This makes them prefer liquid investments. Similarly, in the time of boom, people tend to become riskier. This is because they have a higher income and also a higher level of confidence. Both of these factors make them more comfortable with risk-taking. Inflation The level of inflation present in an economy has a massive impact on the financial planning process for individuals. This is because inflation has an impact on both aspects of financial planning. On the one hand, when inflation increases, the costs of goods and services increased, and the entire budget goes for a toss. This is the reason that people are left with

less money to save. This lower savings rate lowers the amount of corpus that they are able to build over their productive life. On the other hand, a higher inflation rate also means that the corpus which has been saved by the investor may be inadequate to get them through their retirement. For instance, if a person saves RS.25 million today, they might be able to live comfortably off the interest today. However, if inflation rises rapidly, then people will not be able to lead a comfortable life since the real value of Rs.25 million would have declined over the years. Therefore, people who actually live in countries where there is a lot of inflation need to save and invest more aggressively. Also, they need to allocate a portion of their portfolio to investments such as gold, which have traditionally acted as a hedge against inflation. The bottom line is that the macro factors do have a huge impact on the micro. In fact, most of the time, when adjustments have to be made to personal financial plans, it is because of the unforeseen impact made by the macro factors. A good financial planner ensures that macroeconomic factors are also taken into account before making a financial plan.

Components of a Financial Plan Financial planning is often confused with investment planning. Although investment planning is a major part of financial planning, it does not encompass the entire concept. There are several more components to financial planning as well. In this article, we will have a closer look at the various components of a financial plan.

Budgeting: A lot has already been said about budgets. It is an integral part of any financial plan. However, it is important to note that from a strategic point of view, a budget is a very short term in nature. The contents of a budget statement are generally valid for the next month or next year. After that, the old budget is compared with actuals, whereas the new budget is created once again. Hence, from the point of view of personal finances, the purpose of a budget is to provide short-term financial stability, i.e., solvency to the investor. The basic idea behind the budget is that money coming in must be more than the money going out every month. Very short term goals, such as shopping or vacation, should also be a part of the monthly budget. It is a good practice to set money aside for these goals each month and then spend the corpus when the time is right. Liquidity Management: The budget helps an investor fulfill their extremely short term goals. However, there are certain expenses for which any person does not set up a goal. These include unexpected expenses such as repair bills and other unforeseen circumstances. These things happen to everyone in life. However, if a person is not prepared for these events, then they may end up pushing a person into a debt crisis. This is the reason that another major component of the financial plan is the liquidity plan, wherein a certain amount of money is set aside to meet unforeseen events. This might seem like a very simple thing to do. However, it is surprising to know how many people are invested in long term illiquid assets without having any sort of short term liquidity. The end result is that a lot of these people end up using credit cards, and this is often the beginning of a usurious debt trap. 32

Insurance: Insurance is a very important and often neglected part of financial planning. This is because, in the short run, insurance is often perceived as an expense and hence is relegated to a lower priority. However, seasoned investors know that they are paying for financial protection in case something goes wrong with their lives. The number of people who are sick and end up in hospitals every year is increasing. Also, since the costs of medical care are skyrocketing, a lot of these medical emergencies end up turning into financial catastrophes. Ignoring insurance can be a very expensive mistake and can deplete the life savings of any person. Financing Large Purchases: Every person has to make certain very large purchases in their lifetime. These purchases include house purchases, vehicle purchases, college education, etc. The transaction value of these purchases is so high that they are often measured in multiples of their annual income. These purchases can be financed by their own money or borrowed money. Typically, they are financed by a mix of the two, with their own money being used for down payments while the rest is borrowed. Saving for large purchases typically form part of a medium-term goal. The money which needs to be saved needs to be deployed in such a way that it earns a higher rate of return than a regular savings account. However, one has to also ensure that the money saved is safe and that the return of capital itself is not jeopardized. Financing large purchases are complex, and several other factors need to be taken into account. Firstly the proportion of the monthly income 33

which goes towards paying these expenses needs to be taken into account. There are certain thumb rules about how much debt it is advisable to take. Secondly, one also needs to take into account that these payments can be variable. These payments are based on the interest rate, which fluctuates in the short and long run. Hence it is advisable to build some buffer into the financial plan. Long Term Investment: This is the part that is often focused on when we refer to personal finance. People often discuss whether they should invest in debt or equity. Also, once they choose an asset class, they also discuss whether mutual funds would be a better way to reach their goals as compared to index funds. There are many ways to achieve long-term investment goals. This is evident from the many books which have been written on the subject. However, some basics remain the same. For instance, diversification builds protection into the portfolio. Hence, an investor must not keep their portfolios too concentrated and must instead try to widen their scope. Also, any money that may be required within a period of five years should not be in the equity market. The high volatility of the market makes it worth investing only if the investment horizon is large.

CHAPTER : 3 Sources of Income What Is Income? Income is money that a person or a business receives in return for working, providing a product or service, or investing capital. A person's income may also derive from a pension, a government benefit, or a gift. To a government tax agency, income may be taxable, tax-exempt, or tax-reduced. To an economist, income may be disposable or discretionary. KEY TAKEAWAYS 

Income is the money that people and businesses receive in exchange for working, producing a product or service, or investing capital. Some derive income from pensions and government programs.

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Businesses earn income from selling their goods or services for a price that exceeds their cost of production.

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Tax authorities treat income earned through various means differently.

Understanding Income For most of us, income is the money we use to fund our day-to-day expenditures. The income may be received in the form of wages, salary, freelance payments, or the receipts of a small business. Investments, pensions, Social Security, and other government benefits programs may also be sources of income. Some receive income through trust funds or cash gifts from family. Business income can refer to a company's remaining revenues after paying all expenses and taxes. In this case, income is referred to as earnings. Most forms of income are subject to taxation by local, state, and federal governments. Individuals receive income through earning wages by working and making investments in financial assets such as stocks, bonds, and real estate. For instance, an investor’s stock holdings may pay income in the form of annual dividends. An individual may also inherit income.

Three Types of Income Financial theorists and practitioners all seem to agree on one basic principle, i.e., diversification is the most important tool which helps mitigate risks. Most investors agree on the importance of diversification while making investments. However, they do seem to be on the fence when it comes to diversification while earning income.

Some of the biggest financial experts in the world, including Warren Buffet, have advocated the need for having multiple sources of income. These multiple sources increase the chance of a person living a wealthy life. In this Chapter we will have a closer look at the three types of income as well as their impact on the financial health of a person.

1. Income #1: Earned Income This is the primary source of income. For most people in the world, this would include salaries or the profits earned from their business. The problem with salaries is that they are can be difficult to increase. The growth of salary happens at almost a fixed rate. Also, if a person wants to increase their salary income, they often have to work more hours. As people get older, the possibility of increasing the number of hours reduces. This is because the level of their physical fitness decreases. This also means that their responsibilities towards their family and society take up more of their time. Hence, it has been observed that salaried income reaches a plateau when the person is in their middle ages. Post a certain age, salary increments only cover the rate of inflation. Also, it needs to be noted that salaried income is one of the most highly taxed sources of income in the world. In most developed nations, salaried income is taxed at almost 50%! This means that

once a person crosses a certain income threshold, their motivation to earn income also reduces because of the high rate of taxation. 2. Income #2: Investment Income This is the income that is generated by selling investments that were made earlier. In simpler words, this represents an increase in the value of the investment or capital gain as it is known in common terms. For instance, if a person buys shares and sells at a higher price or if they buy a house and sell it for a profit, the difference is called a capital gain. This income has no relation to the number of hours worked. Also, this income is not received periodically. It keeps on accruing over a period of time and is paid out when the investor decides to liquidate it. Also, this type of income is more tax efficient as compared to earned income. This is true only if the investments have been held for a long period of time. Most countries in the world separate long term capital gains from short term capital gains and tax them at a lesser rate. 3. Income #3: Passive Income Passive income is another important source of income. It shares the characteristics of earned income and investment income. Just like earned income, it is paid for every period of time. However, the quantum of income does not depend upon the number of hours invested. Rather, it depends upon the capital invested. This is where passive income is similar to investment income. Typical examples of passive income are rent, interest, and dividends, which 38

are paid by shares and debentures. The taxes on this type of income are also less as compared to the earned income. Some incomes like dividends are totally tax-free in the hands of the investor. For other incomes like rent, there are tools such as depreciation, which can be used to lower the income and, therefore, the tax payable. So, the bottom line is that the three types of income have different characteristics. These different characteristics are suited to different stages of life. A good understanding of these sources of income is important to increase an investor’s wealth over their lifetime. 

The earned income is the root of all wealth. This is particularly true in the early stages of one’s career. This is why it is important for a person to consciously increase their earned income in the early stages of their career.

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However, they should not increase their expenses in line with their income. Lower expenses with higher income would create a surplus of funds that can be invested.

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These invested funds should be used to generate the second source of income, i.e., investment income. Since investors are earning off of their primary source of income, they can afford to invest for long periods of time using tools such as equity. Since equity offers the highest rate of growth, this can help to maximize the growth potential.

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Next, as the age of a person increases, more and more money should be moved out of equities towards investments such as fixed

deposits and rental properties. This will help provide a more stable source of income when the investor finally retires, and the earned income stops. Ideally, every working person should have some knowledge about how the different types of income can be used to generate holistic wealth. However, it is surprising that many people do not focus on generating the second and third kinds of income and hence are not able to make optimum utilization of their earning potential.

18 passive income ideas to help you make money Passive income can be a great way to help you generate extra cash flow, whether you’re running a side hustle or just trying to get a little extra dough each month. Passive income can help you earn more during the good times and tide you over if you suddenly become unemployed or even if you voluntarily take time away from work. With passive income you can have money coming in even as you pursue your primary job, or if you’re able to build up a solid stream of passive income, you might want to kick back a little. Either way, a passive income gives you extra security. And if you’re worried about being able to save enough of your earnings to meet your retirement goals, building wealth through passive income is a strategy that might appeal to you, too.

Passive income ideas: 

Create a course

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Write an e-book

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Rental income

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Affiliate marketing

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Flip retail products

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Sell photography online

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Peer-to-peer lending

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Dividend stocks

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Create an app

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REITs

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A bond ladder

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Sponsored posts on social media

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Invest in a high-yield CD or savings account

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Rent out your home short-term

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Advertise on your car

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Create a blog or YouTube channel

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Rent out useful household items

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Sell designs online

What is passive income? Passive income includes regular earnings from a source other than an employer or contractor. The Internal Revenue Service (IRS) says passive income can come from two sources: rental property or a business in which one does not actively participate, such as being paid book royalties or stock dividends. 41

“Many people think that passive income is about getting something for nothing,” says financial coach and retired hedge fund manager Todd Tresidder. “It has a ‘get-rich-quick’ appeal… but in the end, it still involves work. You just give the work upfront.” In practice, you may do some or all of the work upfront, but passive income often involves some additional labor along the way, too. You may have to keep your product updated or your rental property wellmaintained, in order to keep the passive dollars flowing. But if you’re committed to the strategy, it can be a great way to generate income and you’ll create some extra financial security for yourself along the way. Passive income is not… 

Your job. Generally, passive income is not income that comes from something you’ve been materially involved in such as the wages you earn from a job.

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A second job. Getting a second job isn’t going to qualify as a passive income stream because you’ll still need to show up and do the work to get paid. Passive income is about creating a consistent stream of income without you having to do a lot of work to get it.

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Non-income producing assets. Investing can be a great way to generate passive income, but only if the assets you own pay dividends or interest. Non-dividend paying stocks or assets like cryptocurrencies may be exciting, but they won’t earn you passive income.

18 passive income ideas for building wealth If you’re thinking about creating a passive income stream, check out these 18 strategies and learn what it takes to be successful with them, while also understanding the risks associated with each idea. 1. Create a course One popular strategy for passive income is creating an audio or video course, then kicking back while cash rolls in from the sale of your product. Courses can be distributed and sold through sites such as Udemy, SkillShare and Coursera. Alternatively, you might consider a “freemium model” – building up a following with free content and then charging for more detailed information or for those who want to know more. For example, language teachers and stock-picking advice may use this model. The free content acts as a demonstration of your expertise, and may attract those looking to go to the next level. Opportunity: A course can deliver an excellent income stream, because you make money easily after the initial outlay of time. Risk: “It takes a massive amount of effort to create the product,” Tresidder says. “And to make good money from it, it has to be great. There’s no room for trash out there.” Tresidder says you must build a strong platform, market your products and plan for more products if you want to be successful.

“One product is not a business unless you get really lucky,” Tresidder says. “The best way to sell an existing product is to create more excellent products.” Once you master the business model, you can generate a good income stream, he says. 2. Write an e-book Writing an e-book can be a good opportunity to take advantage of the low cost of publishing and even leverage the worldwide distribution of Amazon to get your book seen by potentially millions of would-be buyers. E-books can be relatively short, perhaps 30-50 pages, and can be relatively cheap to create, since they rely on your own expertise. You’ll need to be an expert on a specific topic, but the topic could be niche and use some special skills or abilities that very few offer but that many readers need. You can quickly design the book on an online platform and then even test-market different titles and price points. But just like with designing a course, a lot of the value comes when you add more e-books to the mix, drawing in more customers to your content. Opportunity: An e-book can function not only to deliver good information and value to readers, but also as a way to drive traffic to your other offerings, including audio or video courses, other e-books, a website or potentially higher-value seminars.

Risk: Your e-book has to be very strong to build up a following and then it helps if you have some way to market it, too, such as an existing website, a promotion on other relevant websites, appearances in the media or podcasts or something else. So you could put in a lot of work upfront and get very little back for your efforts, especially at first. And while an e-book is nice, it will help if you write more and then even build a business around the book or make the book just one part of your business that strengthens the other parts. So your biggest risk is probably that you waste your time with little reward. 3. Rental income Investing in rental properties is an effective way to earn passive income. But it often requires more work than people expect. If you don’t take the time to learn how to make it a profitable venture, you could lose your investment and then some, says John H. Graves, an Accredited Investment Fiduciary (AIF) in the Los Angeles area and author of “The 7% Solution: You Can Afford a Comfortable Retirement.” Opportunity: To earn passive income from rental properties, Graves says you must determine three things:

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How much return you want on the investment

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The property’s total costs and expenses

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The financial risks of owning the property

For example, if your goal is to earn $10,000 a year in rental cash flow and the property has a monthly mortgage of $2,000 and costs another $300 a month for taxes and other expenses, you’d have to charge $3,133 in monthly rent to reach your goal. Risk: There are a few questions to consider: Is there a market for your property? What if you get a tenant who pays late or damages the property? What if you’re unable to rent out your property? Any of these factors could put a big dent in your passive income. And economic downturns can pose challenges, too. You may suddenly have tenants who can no longer pay their rent, while you may still have a mortgage of your own to pay. Or you may not be able to rent the home out for as much as you could before, as incomes decline. And home prices have been rising quickly of late due in part to low mortgage rates, so your rents may not be able to cover your expenses. You’ll want to weigh these risks and have contingency plans in place to protect yourself. 4. Affiliate marketing With affiliate marketing, website owners, social media “influencers” or bloggers promote a third party’s product by including a link to the product on their site or social media account. Amazon might be the bestknown affiliate partner, but eBay, Awin and ShareASale are among the larger names, too. And Instagram and TikTok have become huge platforms for those looking to grow a following and promote products.

You could also consider growing an email list to draw attention to your blog or otherwise direct people to products and services that they might want. Opportunity: When a visitor clicks on the link and makes a purchase from the third-party affiliate, the site owner earns a commission. The commission might range from 3 to 7 percent, so it will likely take significant traffic to your site to generate serious income. But if you can grow your following or have a more lucrative niche (such as software, financial services or fitness), you may be able to make some serious coin. Affiliate marketing is considered passive because, in theory, you can earn money just by adding a link to your site or social media account. In reality, you won’t earn anything if you can’t attract readers to your site to click on the link and buy something. Risk: If you’re just starting out, you’ll have to take time to create content and build traffic. It can take significant time to build a following, and you’ll have to find the right formula for attracting that audience, a process that itself might take a while. Worse, once you’ve spent all that energy, your audience may be apt to flee to the next popular influencer, trend or social media platform. 5. Flip retail products Take advantage of online sales platforms such as eBay or Amazon, and sell products that you find at cut-rate prices elsewhere. You’ll arbitrage

the difference in your purchase and sale prices, and may be able build a following of individuals who track your deals. Opportunity: You’ll be able to take advantage of price differences between what you can find and what the average consumer may be able to find. This could work especially well if you have a contact who can help you access discounted merchandise that few other people can find. Or you may be able to find valuable merchandise that others have simply overlooked. Risk: While sales can happen at any time online, helping make this strategy passive, you’ll definitely have to hustle to find a reliable source of products. Plus, you’ll have to invest money in all of your products until they do sell, so you need a robust source of cash. You’ll have to really know the market so that you’re not buying at a price that’s too high. Otherwise you may end up with products that no one wants or whose price you have to drastically cut in order to sell. 6. Sell photography online Selling photography online might not be the most obvious place to set up a passive business, but it could allow you to scale your efforts, especially if you can sell the same photos over and over again. To do that, you might work with an organization such as Getty Images, Shutterstock or Alamy.

To get started, you’ll have to be approved by the platform, and then you license your photos to be used by whomever downloads them. The platform then pays you every time someone uses your photo. You’ll need photos that appeal to a specific audience or that represent a certain scene, and you’ll need to tease out where the demand is. Photos could be shots with models, landscapes, creative scenarios and more, or they could capture real events that might make the news. Opportunity: Part of the value of selling or licensing your photos through a platform is that you have the potential to scale your efforts, especially if you can provide pictures that will be in demand. So you could potentially sell the same image hundreds or thousands of times or more. Risk: You could add hundreds of photos to a platform such as Getty Images and not have any of them really generate meaningful sales. Only a few photos may drive all of your revenue, so you have to keep adding photos as you search for that needle in the haystack. It may require substantial effort to go out and shoot photos, then process them and keep up with the events that may ultimately drive your revenue. And motivation could be hard to maintain: Every next photo might be your lottery ticket, though it almost certainly won’t be. 7. Peer-to-peer lending A peer-to-peer (P2P) loan is a personal loan made between you and a borrower, facilitated through a third-party intermediary such as 49

Prosper or LendingClub. Other players include Funding Circle, which targets businesses and has higher borrowing limits, and Payoff, which targets better credit risks. Opportunity: As a lender, you earn income via interest payments made on the loans. But because the loan is unsecured, you face the risk of default, meaning you could end up with nothing. To cut that risk, you need to do two things: 

Diversify your lending portfolio by investing smaller amounts over multiple loans. At Prosper.com and LendingClub, the minimum investment per loan is $25.

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Analyze historical data on the prospective borrowers to make informed picks.

Risk: It takes time to master the metrics of P2P lending, so it’s not entirely passive, and you’ll want to carefully vet your prospective borrowers. Since you’re investing in multiple loans, you must pay close attention to payments received. Whatever you make in interest should be reinvested if you want to build income. Economic recessions can also make high-yielding personal loans a more likely candidate for default, too, so these loans may go bad at higher than historical rates when the economy worsens.

8. Dividend stocks Shareholders in companies with dividend-yielding stocks receive a payment at regular intervals from the company. Companies pay cash dividends on a quarterly basis out of their profits, and all you need to do is own the stock. Dividends are paid per share of stock, so the more shares you own, the higher your payout. Opportunity: Since the income from the stocks isn’t related to any activity other than the initial financial investment, owning dividendyielding stocks can be one of the most passive forms of making money. The money will simply be deposited in your brokerage account. Risk: The tricky part is choosing the right stocks. For example, companies issuing a very high dividend may not be able to sustain it. Graves warns that too many novices jump into the market without thoroughly investigating the company issuing the stock. “You’ve got to investigate each company’s website and be comfortable with their financial statements,” Graves says. “You should spend two to three weeks investigating each company.” That said, there are ways to invest in dividend-yielding stocks without spending a huge amount of time evaluating companies. Graves advises going with exchange-traded funds, or ETFs. ETFs are investment funds that hold assets such as stocks, commodities and bonds, but they trade like stocks. ETFs also diversify your holdings, so if one company cuts its

payout, it doesn’t affect the ETF’s price or dividend too much. Here are some of the best ETFs to choose from. “ETFs are an ideal choice for novices because they are easy to understand, highly liquid, inexpensive and have far better potential returns because of far lower costs than mutual funds,” Graves says. Another key risk is that stocks or ETFs can move down significantly in short periods of time, especially during times of uncertainty, as in 2020 when the coronavirus crisis shocked financial markets. Economic stress can also cause some companies to cut their dividends entirely, while diversified funds may feel less of a pinch. Compare your investing options with Bankrate’s brokerage reviews. 9. Create an app Creating an app could be a way to make that upfront investment of time and then reap the reward over the long haul. Your app might be a game or one that helps mobile users perform some hard-to-do function. Once your app is public, users download it and you can generate income. Opportunity: An app has huge upside, if you can design something that catches the fancy of your audience. You’ll have to consider how best to generate sales from your app. For example, you might run in-app ads or otherwise have users pay a nominal fee for downloading the app. If your app gains popularity or you receive feedback, you’ll likely need to add incremental features to keep the app relevant and popular.

Risk: The biggest risk here is probably that you use your time unprofitably. If you commit little or no money to the project (or money that you would have spent anyway, for example, on hardware), you have little financial downside here. However, it’s a crowded market and truly successful apps must offer a compelling value or experience to users. You’ll also want to make sure that if your app collects any data that it’s in compliance with privacy laws, which differ across the globe. The popularity of apps can be short-lived, too, meaning your cash flow could dry up a lot faster than you expect. 10. REITs A REIT is a real estate investment trust, which is a fancy name for a company that owns and manages real estate. REITs have a special legal structure so that they pay little or no corporate income tax if they pass along most of their income to shareholders. Opportunity: You can purchase REITs on the stock market just like any other company or dividend stock. You’ll earn whatever the REIT pays out as a dividend, and the best REITs have a record of increasing their dividend on an annual basis, so you could have a growing stream of dividends over time. Like dividend stocks, individual REITs can be more risky than owning an ETF consisting of dozens of REIT stocks. A fund provides immediate

diversification and is usually a lot safer than buying individual stocks — and you’ll still get a nice payout. Risk: Just like dividend stocks, you’ll have to be able to pick the good REITs, and that means you’ll need to analyze each of the businesses that you might buy — a time-consuming process. And while it’s a passive activity, you can lose a lot of money if you don’t know what you’re doing. Like any stock, the price can fluctuate a lot in the short term. REIT dividends are not protected from tough economic times, either. If the REIT doesn’t generate enough income, it will likely have to cut its dividend or eliminate it entirely. So your passive income may get hit just when you want it most. 11. A bond ladder A bond ladder is a series of bonds that mature at different times over a period of years. The staggered maturities allow you to decrease reinvestment risk, which is the risk of reinvesting your money when bonds offer too-low interest payments. Opportunity: A bond ladder is a classic passive investment that has appealed to retirees and near-retirees for decades. You can sit back and collect your interest payments, and when the bond matures, you “extend the ladder,” rolling that principal into a new set of bonds. For example, you might start with bonds of one year, three years, five years and seven years.

In a year, when the first bond matures, you have bonds remaining of two years, four years and six years. You can use the proceeds from the recently matured bond to buy another one year or roll out to a longer duration, for example, an eight-year bond. Risk: A bond ladder eliminates one of the major risks of buying bonds – the risk that when your bond matures you have to buy a new bond when interest rates might not be favorable. Bonds come with other risks, too. While Treasury bonds are backed by the federal government, corporate bonds are not, so you could lose your principal if the company defaults. And you’ll want to own many bonds to diversify your risk and eliminate the risk of any single bond hurting your overall portfolio. If overall interest rates rise, it could push down the value of your bonds. Because of these concerns, many investors turn to bond ETFs, which provide a diversified fund of bonds that you can set up into a ladder, eliminating the risk of a single bond hurting your returns. 12. Sponsored posts on social media Do you have a strong following on social media such as Instagram or TikTok? Get growing consumer brands to pay you to post about their product or otherwise feature it in your feed. You’ll need to keep filling your profile with content that draws in your audience, though. And that means continuing to create posts that grow your reach and engage your followers on social media. 55

Opportunity: Leveraging your social media presence is an attractive business model. Draw eyeballs and clicks to your profile with strong content and then monetize that content by setting up sponsored posts from brands that appeal to your followers. Risk: Getting started here can be a Catch-22: You need a large audience to get meaningful sponsored posts, but you’re not an attractive option until you get a meaningful audience. So you’ll have to focus a lot of time first on growing your audience with no guarantee that you’ll be successful. You can end up spending tons of time following the trends and building content, in the hopes that you eventually get the sponsorship that you’re aiming for. Even when you’ve got the sponsored posts you’re looking for, you’ll need to keep posting to draw in your audience and remain an attractive option for advertisers. That means committing to more time and monetary investment, even if you do have a lot of autonomy on exactly when to do it. 13. Invest in a high-yield CD or savings account Investing in a high-yield certificate of deposit (CD) or savings account at an online bank can allow you to generate a passive income and also get one of the highest interest rates in the country. You won’t even have to leave your house to make money. Opportunity: To make the most of your CD, you’ll want to do a quick search of the nation’s top CD rates or the top savings accounts. It’s

usually much more advantageous to go with an online bank rather than your local bank, because you’ll be able to select the top rate available in the country. And you’ll still enjoy a guaranteed return of principal up to $250,000, if your financial institution is backed by the FDIC. Risk: As long as your bank is backed by the FDIC and within limits, your principal is safe. So investing in a CD or savings account is about as safe a return as you can find. However, while these accounts are safe, they’re returning even less these days than before. And that return can pale in comparison to inflation, which hit mid-single digits last year, hurting the real purchasing power of your money. Nevertheless, a CD or savings account will yield better than holding your money in cash or in a non-interest bearing checking account where you’ll receive nothing. 14. Rent out your home short-term This straightforward strategy takes advantage of space that you’re not using anyway and turns it into a money-making opportunity. If you’re going away for the summer or have to be out of town for a while, or maybe even just want to travel, consider renting out your current space while you’re gone. Opportunity: You can list your space on any number of websites, such as Airbnb, and set the rental terms yourself. You’ll collect a check for your efforts with minimal extra work, especially if you’re renting to a tenant who may be in place for a few months.

Risk: You don’t have a lot of financial downside here, though letting strangers stay in your house is a risk that’s atypical of most passive investments. Tenants may deface or even destroy your property or even steal valuables, for example. 15. Advertise on your car You may be able to earn some extra money by simply driving your car around town. Contact a specialized advertising agency, which will evaluate your driving habits, including where you drive and how many miles. If you’re a match with one of their advertisers, the agency will “wrap” your car with the ads at no cost to you. Agencies are looking for newer cars, and drivers should have a clean driving record. Opportunity: While you do have to get out and drive, if you’re already putting in the mileage anyway, then this is a great way to earn hundreds per month with little or no extra cost. Drivers can be paid by the mile. Risk: If this idea looks interesting, be extra careful to find a legitimate operation to partner with. Many fraudsters set up scams in this space to try and bilk you out of thousands. 16. Create a blog or YouTube channel Are you an expert on travel to Thailand? A maven of Minecraft? A sultan of swing dancing? Take your passion for a subject and turn it into a blog or a YouTube channel, using ads or sponsors to generate your income. Find a popular subject, even a small niche, and become an 58

expert on it. At first you’ll have to build out a suite of content and draw an audience, but it can create a steady income stream over time, as you become known for your engaging content. Opportunity: You can leverage a free (or very low cost) platform, then use your great content to build a following. The more unique your voice or area of interest, the better for you to become “the” person to follow. Then draw sponsors to you. Risk: You’ll have to build out content at the start and then create ongoing content, which can take time. And you’ll need to be really passionate about the product, since that can help you maintain the motivation to continue, especially at the start as your followers are still finding you. The real downside here is that you can outlay a bunch of your time and resources, with little to show for it, if there’s limited interest in your subject or niche. Your area of expertise may be too niche to really draw a profitable audience, but you won’t be sure of that until you experiment. 17. Rent out useful household items Here’s a variation on renting out an idle car: Start even smaller with other household items that people may need but that may be collecting dust in your garage. Lawnmowers? Power tools? Mechanics tools and tool box? Tents or large coolers? Look for high-value items that people need for a short period of time and where it might not make sense for

someone to own the item. Then put together a way for clients to discover your inventory and a way for them to pay for it. Opportunity: You can start small here, and then scale up if there’s interest in a particular area. Do people suddenly want a tent for weekend camping when the weather gets warmer or cooler? Figure out where the demand is, and then you could even go buy the item, rather than having it right on hand. In some cases you might be able to recoup the value of the item after a few uses. Risk: There’s always the possibility that your property is damaged or stolen, but you can mitigate this risk with contracts that allow you to replace the item at the client’s expense. If you start small here, you’re not exposed to much risk, especially if you already have the item and you’re not likely to need it in the near future. Pay particular attention to liability issues, especially if you’re renting out equipment that has the potential to be dangerous (e.g., power tools.) 18. Sell designs online If you have design skills, you may be able to turn them into a money maker by selling items with your printed designs on them. Businesses such as CafePress and Zazzle allow you to sell items such as T-shirts, hats, mugs and more with your own designs. Opportunity: You can start with your own designs and see what the market is interested in, and expand from there. You may be able to capitalize on surging interest in a current event and design a shirt that

captures the spirit of the times or at least a snarky take on it. And you can also set up your own web storefront through a site such as Shopify to market your goodies. Risk: Printing partners allow you to ship items without directly investing in the merchandise yourself, avoiding one of the biggest risks of tying up your capital. But you may be able to get better pricing if you invest in some of the inventory yourself. Another big risk here is that you could invest a lot of time with little payoff, but this avenue might be interesting if you’re already doing the design work for another purpose, such as personal interest.

How many income streams should you have? There is no “one size fits all” advice when it comes to generating income streams. How many sources of income you have should depend upon where you are financially, and what your financial goals for the future are. But having at least a few is a good start. “You’ll catch more fish with multiple lines in the water,” says Greg McBride, CFA, chief financial analyst at Bankrate. “In addition to the earned income generated from your human capital, rental properties, income-producing securities and business ventures are a great way to diversify your income stream.” Of course, you’ll want to make sure that putting in effort into a new passive income stream isn’t causing you to lose focus on your other

streams. So you do want to balance your efforts and make sure you’re choosing the best opportunities for your time. Passive income ideas for beginners 

High-yield savings account. A high-yield savings account can be an easy way to get an extra boost on your savings beyond what you’d receive in a typical checking or savings account. It won’t be much, but it’s a simple way to get started with passive income.

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Certificates of deposit. CDs are another way to generate some passive income, but your money will be tied up more than it would be in a high-yield savings account.

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Real estate investment trusts. REITs are a way to invest in real estate without having to put in all the effort that comes with managing properties. REITs typically pay out the majority of their income in dividends, making them an attractive option for investors looking for passive income.

Chapter: 4 Rich Dad’s Cash flow Quadrant

will explain why some people can work less yet earn more. This ability is the difference between employees and business owners. It reveals why certain investors are successful while others are not. This book also focuses on how some of the brightest graduates end up working for college dropouts. The Cashflow Quadrant explains why some people are making significant money and others are struggling financially.

“You will never know true freedom until you achieve financial freedom” – R OBER T K I Y OSAK I

The Fundamentals of the Cashflow Quadrant The Cashflow Quadrant is a simple model designed by Robert Kiyosaki. It shows there are four different paths to becoming wealthy. Importantly, some of these four paths are more efficient. The quadrant that you belong to depends on where you acquire most of your income. Either you are an employee (E), a small business owner or self-employed (S), a big business owner (B), or an investor (I). An E works

for the system. An S is the system. A B creates, owns and controls the system. An I invests money into the system.

The Employee The employee wants financial security. They seek the safety of a longterm contractual agreement. Kiyosaki describes the word ‘secure’ as being a response to fear. Employees look for financial success through climbing the corporate ladder. They work in someone else’s system to earn money. A typical employee will say something like, “I am looking for a secure job with nice colleagues and great benefits.” Most people are in the employee quadrant because they are programmed to be from childhood. They are told from a young age to work hard and be careful with their money. That said, children are taught not to take financial risks. Children are also not taught about starting their own business or investing. You can become rich in this quadrant, but it is tough. 64

Pros and Cons of Being an Employee Despite the purpose of this book, there are still some pros of being an employee. Firstly, there is reduced financial uncertainty. Paid vacation and health insurance are also often included. That said, if you are a successful employee, you often have less free time. Your performance is usually higher than the salary you gain. With the other quadrants, you are generally paid according to your performance. This is not the case for employees.

The Small Business Owner or Self-Employed The small business owner or self-employed strives for control. Kiyosaki calls this group the ‘do-it-yourselfers.’ These people want to be their boss. Unlike the employee, a self-employed person responds to fear by taking control, not by seeking security. They gain financial success by becoming highly specialized in a demanding field. A typical small business owner will say something like, “I am looking for a job where I can be compensated well for my skills and time. I want to be in charge.” They are hardcore perfectionists. It isn’t about the money for this group. Money is a bonus, but what they want is independence. Self-employed people have to devote more time to their work if they want to earn more. Their income is directly dependent on how much work they can do. So, you can say that self-employed people’s time is money.

Pros and Cons of Being a Small Business Owner Being a small business owner has benefits when compared to an employee. For example, you have control over your business’ direction. That said, it is less secure and you might even lose money. There are no benefits of being a small business owner over being a big business owner or investor. Self-employed is the riskiest quadrant. Nine out of ten small businesses fail within the first five years. The main reasons for small business failure are insufficient experience and capital.

The Big Business Owner The big business owner strives for freedom. They gain financial success through creating a profitable business system. A typical big business owner will say something like, “I am looking for people that are smarter than me to run my business for me.”

Pros and Cons of Being a Big Business Owner As a big business owner, you can have time-based and financial freedom quite quickly. Also, a more significant proportion of your profits go to you, compared to small businesses. But, as with any business, there is always the possibility you lose money. Being a big business owner also takes a different and broader set of skills than being an investor. For example, you have to lead effectively. 66

The big business owner quadrant is one of the best quadrants for becoming rich. This group of people owns the system or process where people work for them.

How a Small Business Owner (S) Can Become a Big Business Owner (B) One of the most significant differences between an S and a B is the reliance on the owner. True Bs can leave their business for a year and return to a more profitable business. True Ss would return to a nonexistent business. An S owns a job; a B owns a system. Robert describes two characteristics that Bs require: 1. The ownership or control of a system 2. The ability to lead people For S to transition to a B, they have to change themselves and their knowledge into a system. The issue is most people struggle to do that.

The Investor The investor also strives for freedom. Unlike the big business owner, the investor gains financial success from allocating money where the money has the highest expected return. They make money with money. A typical investor will say something like, “I am looking for a place where my money can work for me in the most profitable way.” An investor 67

does not have to work as their money works for them. To become genuinely wealthy, you one day have to reach the I quadrant. Getting an education or saving money in a retirement plan are not investments that belong in the I quadrant. Instead, the I quadrant is about investments that generate income on an ongoing basis. You cannot jump into the investor quadrant without being successful in one of the three other quadrants.

Pros and Cons of Being an Investor You can achieve financial freedom very quickly as an investor. You have all the strengths of being a big business without the limitations. You can also build a passive income stream. The only limitation of being an investor is financial uncertainty.

OPT and OPM OPT stands for other people’s time and OPM stands for other people’s money. As well as being broken down into four quadrants, the quadrant can be broken down into two sides. The left side rarely gets the opportunity to use OPT or OPM. The right side does get this opportunity. This suggests one of the drawbacks of not moving towards becoming a B from an S. The more successful you are as an S, the more hard work you will have to put in. If you can become a B, you can benefit from OPT and OPM. 68

OPT and OPM of Big Business Owners (B) A person from the B quadrant uses both OPT and OPM. When designing a business system, B needs to hire people in the E and S quadrants. They typically hire these people using the money of people from the I quadrant. That said, a B also spends significant time starting the business. They move away from using their time as the business grows.

OPT and OPM of Investors (I) A person from the I quadrant will use OPT to generate income from his money alone. More experienced investors will also use other people’s money (OPM) and their own. This means they can scale up their investment profits.

What Happens to Those Who Do Not Become Investors “We learn the most about ourselves when we fail, so don’t be afraid of failing. Failing is part of the process of success. You can’t have success without failure” – R OBER T K I Y OSAK I Kiyosaki describes investing as the key to financial freedom. Five things happen to people who do not invest or invest poorly: 1. They work hard all their lives 69

2. They worry about money all their lives 3. They depend on others to take care of them, e.g., the government or family members 4. The boundaries of their lives are defined by money 5. They will not know what true freedom is Real investors don’t just park their money. Instead, they move their money. This approach is called the velocity of money. A top investor is always moving their money, acquiring new assets and moving onto the next up-and-coming asset.

The Five Different Levels of Investment 1. Zero-financial-intelligence – These people have no financial intelligence and will not invest their money at all 2. Savers are Losers – Placing your hard-earned money under a mattress or in a low-interest bank will put you in the top 50% of people financially. That said, it will not make you wealthy. 3. I’m too busy – Many people are too busy with their careers, family and friends to dedicate their time to invest. So, they hand their money over to other people who invest their money. 4. I’m a professional – This person uses his own money and makes his own decisions. They are educating themselves constantly to improve as an investor. 5. Capitalist – This type of investor has come from the B quadrant and has learned how to use these concepts for investing. They have advisors to help them gather information about markets and are 70

not investing alone. This is the person who will reach financial freedom.

How to Become Rich “No matter what anyone is saying to you from outside, the most important conversation is the one you are having with yourself on the inside” – R OBER T K I Y OSAK I Doing what everybody else does will not make you rich. Common sense is uncommon when it comes to money. Working hard also won’t make you rich. The hardest workers are not the wealthiest people in the world. To become rich, you need to think independently. People focus too much on what they have to do rather than who they have to be. It is essential to set goals continually. Robert states the Cashflow Quadrant is all about being, not doing. You should be aiming to strengthen your thoughts (being) so that you can take the appropriate actions (doing). Once you are being and doing, you can then become financially free (having).

“Remember that anything important can’t really be learned in the classroom. It must be learned by taking action, making mistakes, and then correcting them. That’s when wisdom sets in.” –

– R OBER T K I Y OSAK I Kiyosaki also explains the most significant cause of financial struggle. This is the fear of losing money. We learn at school how to pass exams, but we are not emotionally prepared to take financial risks. This is why so few teachers are rich. They are working in an environment that encourages people to be safe and secure. Instead of focusing on financial knowledge and education, Robert describes financial IQ as 90% emotional IQ and only 10% technical information. You don’t become rich by working hard, to then spend money. Robert explains he lived modestly for years and worked hard to invest rather than spend. One way to encourage this approach is to write down where you want to be financially one year from now and then five years from now. Draw up personal income and balance sheet statements that include your income, expenses, assets and liabilities. Finally, make sure you eliminate your debt. Put aside $150-$200 per month to pay off credit cards and mortgages. Once your debt is paid off, you should use your money to invest and generate income. Robert explains he played Monopoly as a child. The game taught him that the way to win is to buy four green houses and then trade up for a large red hotel. The book suggests this can apply to real life. Start with many small investments. As you start earning more money, you can purchase larger investments.

“If you want to be a leader of people, then you need to be a master of words” – R OBER T K I Y OSAK I

Final Review and Analysis Rich Dad’s Cashflow Quadrant argues that moving away from the employee quadrant is essential for wealth acquisition. Most people assume they can become wealthy by working hard. The reality is that employees never receive the amount of money their work deserves. So, the only way to align your effort with the money you receive is to become a business owner. Like Kiyosaki’s Monopoly analogy, start with small investments and grow toward bigger ones. If you adopt this approach you can start benefiting from other people’s time and money.

Chapter : 5 Savings of money – A weapon to fight against poverty WHAT IS SAVINGS AND WHY IS IT IMPORTANT? Savings is the portion of income not spent on current expenditures. Because a person does not know what will happen in the future, money should be saved to pay for unexpected events or emergencies. An individual’s car may breakdown, their dishwasher could begin to leak, or a medical emergency could occur. Without savings, unexpected events can become large financial burdens. Therefore, savings helps an individual or family become financially secure. Money can also be saved to purchase expensive items that are too costly to buy with monthly income. Buying a new camera, purchasing an automobile, or paying for a vacation can all be accomplished by saving a portion of income.

HOW MUCH MONEY SHOULD BE SAVED? To be considered financially secure, an individual or household should save at least six months’ worth of expenses. For example, a household that has Rs2,000 per month of expenses should have at least Rs12,000 in savings (Rs 2,000 multiplied by 6 months). To reach this amount, it is recommended that 10- 20% of net income should be saved until the appropriate amount of savings is reached. Net income is the amount of an individual’s take-home pay after taxes and other deductions have been taken out of a paycheck. 75

WHERE CAN MONEY BE SAVED? Some savers place their money in a jar, coffee can or a piggy bank. For short periods of time and small amounts of money, the piggy bank method may work, but long-term savers should use a safer method. It is wise to store money at a depository institution. A depository institution is a business that offers financial services to people, such as savings and checking accounts. Unlike money stored at home which could be lost to a fire, burglary, or some other type of disaster, money stored at a depository institution is protected from loss. Depository institutions offer accounts that earn interest, allowing customers to take advantage of the time value of money. The time value of money means money paid out or received in the future is not equivalent to money paid out or received today. Interest is the price of money. When depositing money at a depository institution, an individual may earn money from interest. The amount of interest earned is determined by calculating a percent of the total amount of money deposited. This percentage rate is known as the interest rate. Savings accounts, money market deposit accounts, and Certificate of Deposits are the most common depository institution accounts that earn interest. A savings account is an account with a depository institution that holds money not spent on current expenditures. Money can be kept in a savings account until the owner needs to use it for emergencies or to purchase expensive items. 76

A money market deposit account is a type of account that pays a higher interest rate than a savings account. However, money market deposit accounts usually require more money to open and have limits on the number of times money can be withdrawn from the account every month.

HOW TO BEGIN SAVING MONEY? To help a person choose saving over spending money, money should not be viewed as what is remaining after current needs and wants have been satisfied. Pay yourself first is a popular and very effective saving strategy that can help individual’s choose saving over spending money. Paying yourself first means to set aside a portion of money (10-20% of net income is recommended) for saving each time a person is paid before using any of the money for spending. To successfully practice the pay yourself first strategy a person should set personal goals. Setting goals helps a person choose to save rather than spend money. A goal is defined as the end result of something a person intends to acquire, achieve, do, reach, or accomplish. Financial goals are specific objectives to be accomplished through financial planning and include saving money. Setting goals helps an individual identify and focus on items that are most important to them and then make decisions that help obtain those items. While in the process of setting goals, an individual should consider the trade-offs to those goals. A tradeoff is giving up one thing for another. Every decision involves a trade-off. Being more financially secure in the

future by saving is a trade-off to spending money in the present. If a person clearly understands what they are giving up in exchange for the benefits of saving money, then their saving goals will become more attainable and realistic. When considering the trade-offs to achieving savings goals, an individual should examine their current spending as well. Spending may have to be adjusted in order to reach a financial goal and practice the pay yourself first strategy. Explore the value of saving money and learn strategies that help people choose to save money over spend money. Learn the advantages of saving money at a depository institution.

The Importance Of Saving Money: 15 Reasons to Start Saving

The importance of saving money cannot be understated. In fact, with so many proven benefits, saving money is one of the best financial habits you can adopt. But, if saving money doesn’t come easy to you, or you just don’t see the point, it’s natural to ask yourself, why is saving money important? First and foremost, saving money is important because it helps protect you in the event of a financial emergency. Additi onally, saving money can help you pay for large purchases, avoid debt, reduce your financial stress, leave a financial legacy, and provide you with a greater sense of financial freedom. Truthfully, there are countless reasons to save money.

So, if you’re in need of a little money-saving motivation, or just want a further explanation as to why saving money is so important, you are in the right spot.

Freedom To Pursue Your Dream Career Have you ever known somebody that was stuck in a job they hate, because they didn’t have the financial freedom to quit and pursue something they enjoy? Well, if they had enough savings, I’m willing to bet that wouldn’t be the case. One of the most important reasons to save is to provide yourself with the freedom to pursue a career you love. When you have ample cash sitting in your savings account, and a pile of investments earning interest, there’s absolutely no reason to endure a situation you hate. In other words, a big pile of savings gives you the freedom to quit a job you hate and pursue your dream career. Long-Term Security No matter how hard I try, I can’t predict the future; and neither can you. And for that reason, saving up a safety net is a really good idea. Think about it — without savings, how will you weather any financial storms? Without investments, how do you plan to make money when you’re too old to work? If you lose your job, will you be able to pay your bills? 79

Saving money is important because it provides you with financial security. And the more you save, the more secure you will be.

Saving For Fun Additionally, many people think you have to make a choice between saving money and having fun, but this is a poisonous mentality. In fact, fun is a critical part of personal finance, and it is essential for your financial and physical well-being. Truthfully, you should always set a little money aside for enjoyment. And when you have savings, you can do this guilt-free, and without any worry that you are harming your financial future. Once again, saving money gives you the freedom to do what you want to do. And sometimes that means having a little fun.

Emergencies It’s inevitable that throughout life, there will be some emergencies. From a family emergency that requires you to fly across the country, to less emotional emergencies like a broken down car, having a decent amount of money saved up keeps you from adding financial stress to the pile. Seriously, money is the last thing you need to be worrying about in an emergency. So do your future-self a favor and save up an emergency fund. Hopefully you’ll never need to use it, but if you do, you’ll be beyond grateful it’s there. 80

Stress Reduction There’s nothing like financial stress to keep you up at night; or worse, wake you up in a cold sweat. (If you’ve ever experience d it, you know how unsettling that feeling can be.) The good news is that there’s a great way to eliminate financial stress… just have more money. You might be thinking, “Umm…duh!”, but it’s the truth. You see, everybody wants more money, yet very few people work hard to save it up. And, unless you win the lottery–which is beyond unlikely–the only way to have more money is to save it over time. It’s as simple as that. Let me put it this way, would you rather pay your bills and have Rs.20,000 in savings? Or, would you prefer to pay your bills and with Rs.0 in savings? I’m not a doctor, but I’m pretty sure the Rs 20,000 option would be less stressful.

Helping Others Do you know what happens when you save money wisely and invest intelligently? Your money grows. And when your money grows, your opportunity to help others financially grows with it.

Consider this: if you give 10% of every Rupees you earn to charity, and you don’t have any savings or investments, your ability to give is limited by your annual salary. In contrast, if you save and invest your money, your ability to give will grow exponentially with compound interest. Remember, money is just a tool you can use to accomplish your goals. And if your goal is to help others as much as possible, you need to b e saving and investing your money consistently. Can you imagine all the people you could help with the interest earned on Rs 74 million? Just saying…

Your Marriage I don’t think it’s a big secret that money problems are one of the leading causes of divorce. And if you’re married, you’ve probably experienced a money fight or two. And let me tell you, they are no fun. But I can also tell you from experience that the more money you save, the less frequent those arguments occur. In short, saving money is good for your marriage. Don’t believe me? Try it.

Leaving A Financial Legacy If you died tomorrow, what kind of financial legacy would you be leaving behind? Would your story be one of debt and financial burden for your family? Or, Your financial legacy is important to the people around you. Whether you’re 20 years old, or 90 years old, the way you handle your money will leave lasting effects—positive or negative—on your loved ones. So, for goodness sake, get out of debt, trim your expenses, and place a priority on saving and investing your money. It’s one of the best ways to honor your family and friends.

Education Do you know what’s expensive? College. (Though, to be honest, elementary, middle, and high school are pricey little endeavors these days as well) Growing a money tree–you know, the kind dads always talk about– the only way we will be able to afford it, is if we start saving now. Education is important–whether it’s your own, or your children’s. Ipso facto, saving money so you can pay for education is important.

Big Purchases From cars to boats, to furniture, to big-screen TVs, big purchases have a way of wiggling into the lives of the financially unprepared. 83

Then, when the dust settles and the monthly payments kick in, that thing that cost so much money transforms into an annoying roommate named, Buyer’s Remorse. Big purchases are fun, and at times, necessary. You need a car so that you can drive to work. Living in a home without any furniture is uncomfortable at best. Watching football on a 12-inch tv with rabbit ears is not ideal. But going into debt for a big purchase is worse. Rather, saving money so that you can pay for them outright is the way to go.

Home Ownership If you own a home, you’ve undoubtedly experienced the many expenses that come with it. Whether they’re big expenses like kitchen remodels, or small expenses, like buying filters for your furnace, they add up. And while you might be able to cash flow the majority of them, it’s in your best interest to prepare for them in advance. In fact, I recommend setting up a specific savings account just for your home expenses. That way, you don’t have to feel guilty pulling money from savings when you need to fix or update something.

Major Life Events Life is full of events, but there are a few big ones that can get particularly expensive. For instance, the two that instantly come to mind are newborn babies and weddings. So, it’s important to save for them. Here are a couple of guidelines to get you started. When that little pee stick reads positive, start a baby savings fund, and throw every last penny you can squeeze out of your budget into it. Then, when your daughter first starts dreaming about her wedding day, start saving for it. Weddings aren’t cheap.

Minimizing Financial Risk The more money you have, the less risky your financial situation will become. For instance, if you have Rs10,000 to your name, and you invest Rs 6,000 to start your own business, you just risked 60% of your net worth. Whereas, if you save and invest until your net worth crests one-million Rupees, then spend Rs 60,000 to start a company, you only risked 6% of your net worth. Plus, when you only invest 6% of your net worth, it’s pretty likely you will make up for that in interest, alone, over the next year.

Saving and investing your money minimizes your financial risk. Plain and simple.

Compound Interest If you want to build any kind of wealth, you are going to need to utilize the power of compound interest. But, if you spend all your money, and never learn to save, you will miss out on this valuable financial opportunity. Additionally, the more time you waste, the less opportunity you have. Compound interest is extremely powerful, but you need to give it enough time to work its magic. You won’t just invest one day and see amazing results the next. If you start saving now, it may be years before you start to see impressive results. But if you wait years to start saving, you won’t see any results at all. Your future wealth called: it asked you to start saving.

Financial Independence One of the best parts of being an adult is the independence and freedom to do what you want when you want. (Within the confines of the law, of course)

But the less you save, and the more debt you accrue, the less independence you will have. So, if you want to be financially independent and unshackled, you need to beef up your savings.

Final Thoughts Saving money is important because it provides security, stress relief, and freedom. And while there are countless reasons to save, you just need to find a reason that resonates with you. Whether it’s helping others, improving your marital finances, leaving a positive financial legacy, or just having a little more fun, you owe it to yourself to prioritize saving.

“Magical Formula 50-30-20 ; Weapon to beat poverty’’ What Is the 50/20/30 Budget Rule? 

50%: Needs

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30%: Wants

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20%: Savings

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The Bottom Line

Senator Elizabeth Warren popularized the so-called "50/20/30 budget rule" (sometimes labeled "50-30-20") in her book, All Your Worth: The

Ultimate Lifetime Money Plan. The basic rule is to divide up after-tax income and allocate it to spend: 50% on needs, 30% on wants, and socking away 20% to savings. KEY TAKEAWAYS 

The 50-20-30 (or 50-30-20) budget rule is an intuitive and simple plan to help people reach their financial goals.

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The rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must-have or must-do.

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The remaining half should be split up between 20% savings and debt repayment and 30% to everything else that you might want.

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The rule is a template that is intended to help individuals manage their money and save for emergencies and retirement.

50%: Needs Needs are those bills that you absolutely must pay and are the things necessary for survival. These include rent or mortgage payments, car payments, groceries, insurance, health care, minimum debt payment, and utilities. These are your "must-haves." The "needs" category does not include items that are extras, such as HBO, Netflix, Starbucks, and dining out. Half of your after-tax income should be all that you need to cover your needs and obligations. If you are spending more than that on your needs, you will have to either cut down on wants or try to downsize your lifestyle, perhaps to a smaller home or more modest car. Maybe carpooling or taking public transportation to work is a solution, or cooking at home more often. 30%: Wants Wants are all the things you spend money on that are not absolutely essential. This includes dinner and movies out, that new handbag, tickets to sporting events, vacations, the latest electronic gadget, and ultra-highspeed Internet. Anything in the "wants" bucket is optional if you boil it down. You can work out at home instead of going to the gym, cook instead of eating out, or watch sports on TV instead of getting tickets to the game. This category also includes those upgrade decisions you make, such as choosing a costlier steak instead of a less expensive hamburger, buying a Mercedes instead of a more economical Honda, or choosing between watching television using an antenna for free or spending money to 89

watch cable TV. Basically, wants are all those little extras you spend money on that make life more enjoyable and entertaining. 20%: Savings

Finally, try to allocate 20% of your net income to savings and investments. This includes adding money to an emergency fund in a bank savings account, making a mutual fund account, and investing in the stock market. You should have at least three months of emergency savings on hand in case you lose your job or an unforeseen event occurs. After that, focus on retirement and meeting other financial goals down the road. The 50-20-30 rule is intended to help individuals manage their after-tax income, primarily to have funds on hand for emergencies and savings for retirement. Every household should prioritize creating an emergency fund in case of job losses, unexpected medical expenses, or any other unforeseen monetary cost. If an emergency fund is used, then a household should focus on replenishing it. Saving for retirement is also a critical step as individuals are living longer. Calculating how much you will need for retirement and working towards that goal, beginning at a young age will ensure a comfortable retirement.

The Bottom Line Saving is difficult, and life often throws unexpected expenses at us. By following the 50-20-30 rule, individuals have a plan with how they should 90

manage their after-tax income. If they find that their expenditures on wants are more than 20%, they can find ways to reduce those expenses that will help direct funds to more important areas such as emergency money and retirement. Life should be enjoyed, and it is not recommended to live like a Spartan, but having a plan and sticking to it will allow you to cover your expenses, save for retirement, all at the same time doing the activities that make you happy.

Chapter 6 BUDGETING An easy seven-step monthly budget plan for you.

Here is the easiest seven step monthly budget plan you will ever need. Money is important. Yet not many people manage it well. Many find getting the first step on money management, “budgeting ” correct, difficult. Here is the easiest seven step monthly budget plan you will ever need. # 1. Calculate the total household earnings Calculate the earnings of each household member to get an idea of the average monthly household income. This is more important, when there are two or more earning members in the family and, multiple sources of income. Factor in the income, even if it is from a part-time job or a weekend gig. This helps one to get a consolidated view of the household median income. # 2. Maintain a record of Expenses From sundry expenses to commutation, home maintenance to medical and entertainment, calculate the fixed monthly and variable monthly expenses of the complete household. There are several ways to do so. It could be in a spreadsheet on your laptop or an expense tracking app. 93

Even the traditional paper-pencil method works. One needs to track this data, irrespective of the tracking method. # 3. Analyze spending patterns The entire family must participate in this exercise to map the joint as well as the individual expenses of all family members. This helps to maintain better accountability and identify areas where expenses can be reduced. Try to identify spending trends. Are the weekends eating out taking a chunk out of the savings or traveling with cab service apps during the week is draining the pocket fast? Divide the expenses into fixed and variable. If more than 40% of the household income goes into paying debts such as credit card dues, bike or car EMI, appliances EMI, stop using credit cards altogether, pay off the existing debt, and do not take on any additional liability. # 4. Plan Expenses Ahead in Time Plan for all known expenses in advance. Setting aside the total household expense amount along with personal expense amount for at least 3-6 months is a good start. For those with a home loan include the EMI amount as well. One can also plan for special occasions or purchases, such as the annual family trip to an exotic location or buying a new vehicle. One can invest in Liquid / Short Term Mutual Funds for collecting this amount. Try to reduce variable expenses, and the surplus can go towards the next step. # 5. Consolidate your debts 94

If more than 40% of the household income goes into paying debts such as credit card dues, bike or car EMI, appliances EMI, stop using credit cards altogether, pay off the existing debt, and do not take on any additional liability. Consolidate all your unsecured debts and pay off those first. Start with paying the highest interest rate, and no tax benefits debts and move to the lowest. # 6. Evaluate Progress By far, this is one of the most critical steps to take month-on-month till the time the family gets acquainted with the budget concept. There is a stronger possibility of slipping in the initial phases, yet it is essential to continue the exercise to maintain an understanding of the household spends.

# 7. Keep increasing Savings One should always increase savings based on the annual hike and increase the amount of savings by 10% year-on-year. This aids one to accumulate a bigger corpus towards long-term goals such as higher education for the kids, travel, and medical needs of family members, or collecting a significant retirement corpus. Whatever the case, one should try to increase saving every year as well as use the additional income such as Annual Bonus, etc. as well to boost the investments further. So, start budgeting from scratch this winter and increase your savings to fulfil your financial dreams.

Chapter: 7 Emergency Funds Preparing for sudden emergencies and securing future finances form the crux of ideal financial planning. “Emergency Fund = [Six to nine month salary saved]’’

# The Importance of an Emergency Fund. An emergency fund is an essential corpus that you must keep aside to tackle emergencies. It is a fund that you can fall back on at the hour of crisis or for unexpected and unplanned scenarios, and not for meeting your routine expenses. So, you must design it specifically to meet unanticipated financial shortfalls that may apply to you.

# Why to keep emergency funds. To be in a position to cover unexpected expenses is the reason why an emergency fund should be liquid, it is the most critical feature that you should keep in mind when you are choosing where to park your emergency fund. You should be able to withdraw the money when you need it and with no delay. At the same time, you should ensure that you do not get penalized in the form of an exit load or pre-withdrawal penalty. The value of the amount invested should not go down either and must deliver excellent returns.

How to Build an Emergency Fund.

An emergency fund cannot be built overnight but is done gradually. Set aside a particular amount every month in a different bank account. Soon it will grow into a considerable corpus that you wish to have. Say, you have decided to have an emergency fund of Rs.1 lakh. In this case, you can set aside Rs.5,000 or Rs.10,000 every month to accumulate the corpus you need. It is fine to even cut down on your investments to build this amount.

How much should your Emergency Fund have? Depending on your income and expenses, an emergency fund can be three to six months of your monthly income. For example, if you earn Rs.30,000 a month and Rs.15,000 of that goes in meeting your routine living expenses, then your emergency fund should be somewhere in the range of Rs.60,000 to Rs.1,00,000.

You may even choose to divide your emergency fund into 2 categories. Long-term emergency funds This is where you save for large-scale emergencies like a major natural disaster or a sudden medical emergency. This fund should be invested in instruments that allow you to earn a slightly higher rate of interest but may take a couple of days to liquidate.

Short-term emergency funds

This is the fund you rush to in cases of emergencies. Such a fund should offer little in terms of interest but allow immediate accessibility, which in case of extreme situations can suffice till you gain access to your longterm emergency funds.

CHAPTER 8 Inflation What is Inflation? By: FE Knowledge Desk | Inflation refers to the rise in the prices of most goods and services of daily or common use, such as food, clothing, housing, recreation, transport, consumer staples, etc. Inflation measures the average price change in a basket of commodities and services over time. The opposite and rare fall in the price index of this basket of items is called ‘deflation’. Inflation is indicative of the decrease in the purchasing power of a unit of a country’s currency. This is measured in percentage.

What are the effects of Inflation? The purchasing power of a currency unit decreases as the commodities and services get dearer. This also impacts the cost of living in a country. When inflation is high, the cost of living gets higher as well, which ultimately leads to a deceleration in economic growth. A certain level of inflation is required in the economy to ensure that expenditure is promoted and hoarding money through savings is demotivated.

As money generally loses its value over time, it is important for people to invest the money. Investing ensures the economic growth of a country.

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Who measures Inflation in India?

Inflation is measured by a central government authority, which is in charge of adopting measures to ensure the smooth running of the economy. In India, the Ministry of Statistics and Programme Implementation measures inflation. As money generally loses its value over time, it is important for people to invest the money. Investing ensures the economic growth of a country.

Inflation Explained: What is Inflation, Types and Causes? How is Inflation measured ?

In India, inflation is primarily measured by two main indices — WPI (Wholesale Price Index) and CPI (Consumer Price Index), which measure wholesale and retail-level price changes, respectively. The CPI calculates the difference in the price of commodities and services such as food, medical care, education, electronics etc, which Indian consumers buy for use. On the other hand, the goods or services sold by businesses to smaller businesses for selling further is captured by the WPI. In India, both WPI (Wholesale Price Index) and CPI (Consumer Price Index) are used to measure inflation.

What are the main causes of Inflation?

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The main causes of inflation in India have been subject to considerable debates and discussions. These are some of the chief reasons for the increase in prices: 

High demand and low production or supply of multiple commodities create a demand-supply gap, which leads to a hike in prices.



Excess circulation of money leads to inflation as money loses its purchasing power.



With people having more money, they also tend to spend more, which causes increased demand.

Also, note the following pointers: 

Spurt in production prices of certain commodities also causes inflation as the price of the final product increases. This is called costpush inflation.



Increase in the prices of goods and services is also a factor to consider as the involved labour also expects and demands more costs/wages to maintain their cost of living. This spirals to further increase in the prices of goods.

Is Inflation bad for everyone?

Inflation is perceived differently by everyone depending upon the kind of assets they possess. For someone with investments in real estate or stocked commodity, inflation means that the prices of their assets is set for a hike. For those who possess cash, they may be adversely affected by inflation as the value of their cash erodes.

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CHAPTER :09 ASSESTS Assets That Will Make You Rich And Wealthy At some point or other, we all want money. it is a necessity of world life, I admit it. you should not be a slave of money but you must understand the importance of money. Many people ask, how to make money? how to get rich? So, in this article, I will share with you 5 asset which can help you get rich but first understand the definition of an asset because you must know it and people make the biggest mistake about this only.

What is an asset & when a person is known as rich? People are not rich only because they have things or because they can buy things. True wealth is defined by the asset you own. you are truly rich when you have something called an asset. Something that works for you, makes money for you, something that appreciates your money. it is working for you even when you are sleeping because that is when you are you are not renting your time you are not working on rent just like a job you do and get paid every month but you get a salary for the time you give in a month. if you give more time you may earn more salary but it's not possible that in the same month you can earn three times, four times or five-time salary. No, it's dependent on your time and that is called renting your time 103

So, Which are those five assets that can make you rich? 1. Owning Your Business - Your own business, if it is successful, will make you money when you are sleeping. even if you stop working, then your team, your factory, your products, your marketing will make money for you. if you look at the richest people in the world, then on that list, by far are the people who started their own business. The richest people of the world, Jeff Bezos, Elon Musk, Mark Zuckerberg all of them started their own business. The richest people of India, Mukesh Ambani, Azim Premji, Adani they all started their own business. it doesn't mean that you will earn if you start a business, no, I have said many times that business is a very risky proposition, which means that if it works then it is amazing but if it doesn't work then you can lose a lot. So yes it is a good asset and making it work is your responsibility

2. Owning Business Through Stocks - Now everyone cannot start their own business but this is definite that owning a business creates an asset because the business runs

24*7

So, it's making money even when

you are not putting in your time. So, if you cant start your own business then you can at least own a business and the best way to own a business is through stocks when you buy a share or stocks of a company in the stock market then basically you are becoming a part of that business you say that I believe in this business so when it grows its stock price will also grow and then I will 104

become rich, my wealth will be created but the most important thing that be a 'long term investor'. only day trading or short term trading or reacting on tips like buy this or sell this not that is not wealth that is gambling. wealth is created when you take long term bets. One of the richest people in the world, Warren Buffet, if you read or see his life story, you will see that he made all his property, his wealth by investing and all of them are successful and rich investors and what they have always done is a bet on really long term companies for a really long term perspective So, if you want to create wealth in the stock market then have a long term view at least for 3-5-10 years, ideally 15-20 years and then bet on really strong players, market leaders in the category because you know that as the market grows country will grow, the world economy grows the players who are at number 1,2 or 3 in the industry they will also grow and they will actually be making money for me while I am on no duty.

3. Buying Commodities -

If you can’t start a business or you can't

own a business though you should, then you can own something which the world wants and that is commodities. gold, silver, mostly gold silver too there are other commodities too but we won't go there When you own these assets they also increase in value and they make you wealthy but the big mistake in this when an individual mind understands gold investing it instantly thinks of jewellery. No, jewellery

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is not the right investment. if you want to invest in gold and silver then invest digitally by buying gold bonds or ETFs. Basically, a digital bond is the best way for you to invest in gold or silver or any commodities

4. Real Estate - If think real estate an investment purpose then it could make sense. buy a cheap house that you can afford which you won't have to take a lot of loans for, ideally, you should not take any loan buy an apartment or small house worth 10-15 lakhs because that then gives you the freedom of not having to pay interest whatever rental income it garners you 5-10-15 thousand rupees maximum a house worth 10-15 lakhs will never get more than that will help you either reduce the EMI or generate additional income and then the value of that house over a long term will appreciate so you will have something which is an asset which will make money for you even when you are not on duty and that is a brilliant asset to have

5- Create Intellectual Property - Something that you will have to make only once but it will make money for life. A great example of that is content. If I am writing this Book in 2022 then this chapter keeps getting views in 2023.2024 or lifetime and based on that there will be a brand that will be built and if ads will be running on these it will give me lifetime money or I would write a book or a song or produce content that might be purchased around the world

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If you did it once will keep earning royalty or revenue from it for life and these are brilliant

assets.

Suppose you are a graphic designer and have made a lot of good graphic designs and put them on the net and sell them may be in the first month no one buys or it takes a year but if it is inevitable that someone would buy it in the next 5 to 10 years and if you release a lot of such design in the market. 100-200-300 as many as you can make at some point of time it will start generating income for you which you had no idea of when you started and that is true wealth These 5 ways are the surest way for you to think about getting. if you look at any rich person you will find that they use their maximum time and money in one of these things if not all 5 things because they know that their money will grow only when it is invested in an asset a thing that makes money not waste it.

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CHAPTER : 10 Habits Simple money habits that will help you build wealth 1:02

Mastering your money can come down to establishing a few smart habits. After all, “habits are the cause of wealth, poverty, happiness, sadness, stress, good relationships, bad relationships, good health, or bad health,” writes Thomas C. Corley in “Change Your Habits, Change Your Life,” a culmination of his research on hundreds of self-made millionaires. 11 simple money habits you can adopt today that will help make Richer Soon 1. Automate your finances. If your financial plan isn’t on auto-pilot, change that immediately, encourages self-made millionaire David Bach. Automating your finances — sending your money automatically to investment accounts, savings accounts, and creditors — allows you to build wealth effortlessly. It’s “the one step that virtually guarantees that you won’t fail financially,” Bach writes in “The Automatic Millionaire.” “You’ll never forget a payment again — and you’ll never be tempted to skimp on

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savings because you won’t even see the money going directly from your paycheck to your savings accounts.” Simply link your accounts, so that money from your paycheck goes straight to your 401(k) or from your checking account to your savings account, and set up the exact day you want to make transfers. In addition to never making a late payment again, automation ”frees up valuable time and allows you to focus on the fun parts of life, rather than spend time worrying about whether you paid that bill or if you’re going to overdraft again,” writes Bach. 2. Invest your ‘spare change.’ Investing is one of the most effective ways to build wealth, and contrary to popular belief, you don’t need a lot of money to get started. In fact, thanks to micro-investing apps such as Acorns, you can start by simply investing your “spare change.” The app will round up your purchases to the nearest dollar and automatically put any spare change to work. Other apps also aim to make investing simple and accessible, and automated investing services known as robo-advisors can work for you, no matter how much you have in the bank. The key takeaway: Start investing sooner rather than later to take full advantage of compound interest. As Bach explains, “the miracle of compounding can transform a relatively small but consistent amount of

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saving into major wealth.”

3. Ditch the small, daily purchases, such as your morning coffee. Bach coined the term “The Latte Factor,” the idea behind which is that eliminating your $5 daily latte could help you save quite a bit of money over time. Just as you can put your spare change to work, you can put this money to work. A Rs.5 daily coffee amounts to about Rs.35 a week, or Rs.150 a month. “If you invested Rs.150 a month and earned 10% annual return, you’d wind up with Rs.948,611 in 40 years,” Bach notes. Start by determining your “latte factor,” cut back on that expense, and direct the money towards an investment account, the financial advisor suggests: “We all throw away too much of our hard-earned money on unnecessary ‘little’ expenditures without realizing how much they can add up to.”

4. Come up with specific money goals. “The number one reason most people don’t get what they want is that they don’t know what they want,” self-made millionaire T. Harv Eker writes in his book “Secrets of the Millionaire Mind.” “Rich people are totally clear that they want wealth.”

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To reach that level of clarity, he suggests writing down goals for your annual income and net worth. Like all goal-setting, be realistic, but don’t be afraid to challenge yourself. After all, the wealthiest people aren’t afraid to think big. 1:13

5. Save, don’t spend, unexpected cash. Pretend that extra money, such as a bonus, birthday check or any windfall, doesn’t exist. Get in the habit of putting any surprise cash, even if it’s just that $20 bill you found in your coat pocket, to work. Apply it to student loans, debt, your emergency fund, or an investment account. It’ll add up. Plus, establishing this habit early on will help you avoid lifestyle inflation when you get more surprise cash in the form of a raise.

6. Tell yourself you deserve to be rich. The wealthiest individuals believe that “success, fulfillment and happiness are the natural order of existence,” self-made millionaire Steve Siebold writes in his book “How Rich People Think.” “This single belief drives the great ones to behave in ways that virtually guarantee their success.” On the flip side, the average earner remains average because they expect to, the self-made millionaire explains: “The masses think they aren’t worthy of great wealth. Who am I, they ask themselves, to become a millionaire?” 112

Try asking yourself, “Why not me?” After all, that’s what the millionaires and billionaires do.

7. Spend 30 minutes a day reading. Rich people tend to read. They continue to teach and invest in themselves long after formal education is over. “Walk into a wealthy person’s home and one of the first things you’ll see is an extensive library of books they’ve used to educate themselves on how to become more successful,” Siebold writes. If it works for the millionaires and billionaires, it could work for you.

8. Set your alarm clock earlier. In addition to reading, wealthy people tend to wake up early. Self-made billionaires Richard Branson and Jack Dorsey start their days at 5:00 a.m., and they’re far from the only successful people to get up before the sun. In a five-year study of hundreds of self-made millionaires, author Thomas C. Corley found that nearly 50 percent of them woke up at least three hours before their work day actually began. We can’t guarantee that joining the early bird club will make you rich, but it can’t hurt, and it will almost certainly make you more productive. 0:58 Break your snooze habit with this 5-step strategy

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9. Surround yourself with successful, high-earners. Who you hang out with matters more than you may think. In fact, your net worth tends to mirror that of your closest friends, Siebold points out. “Successful people generally agree that consciousness is contagious, and that exposure to people who are more successful has the potential to expand your thinking and catapult your income,” the self-made millionaire writes. “We become like the people we associate with, and that’s why winners are attracted to winners.” Looking for a new crew to roll with? Consider joining a high-end tennis, golf, health, or business club, Eker suggests in “Secrets of the Millionaire Mind.” “If there’s no way you can afford to join a high-end club, have coffee or tea in the classiest hotel in your city,” he writes. “Get comfortable in this atmosphere and watch the patrons, noticing they’re no different from you.”

10. Track your spending. You can’t build wealth if more money is leaving your wallet than coming in. To ensure you’re earning more than you’re spending, track your daily expenses. There are a handful of apps that will do this for you, such as Mint, Personal Capital, and Level Money. You can also use a spreadsheet on your computer or simply record your everyday purchases in a notebook or on your phone.

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Perhaps you’ll find another “latte factor” that you can cut back on.

11. Prioritize high-interest debt. It’s important to understand that all debt is not created equal. An effective strategy is to rank all of your debt in order of interest rate, from highest to lowest. Then, prioritize the debt with the highest interest rate, while still paying the minimum on all of your debts, in order to pay less over the lifespan of your loans. There is an alternate option, too: Rank your debt in order of size and start with the smallest. It’s a strategy that personal finance expert Dave Ramsey calls the “snowball method.” The idea is that each time you pay off one form of debt, you build momentum, which helps you tackle the next biggest, and so on. The important thing is that you get out of the red as quickly as possible. After all, it’s hard to start building wealth if you’re not debt free.

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CHAPTER: 11 Debt – An unseen Demon or Devil How to Get Out of Debt

Finding yourself deep in debt can be overwhelming. The good news is, getting out of debt is possible—it just takes a little time. While some debt can be unavoidable—such as a mortgage or car loan— you can and should deal with other unnecessary debt that's causing stress. Once you formulate a plan and stick to it, you could find yourself debt-free and armed with the knowledge to stay that way. Follow these steps to help you get out of debt, remain debt-free in the future and build good credit for the long haul.

1. List Everything You Owe To pay off your debt, you need to know exactly how much you owe:  Make a list of all your debts. Include your mortgage, vehicle loans,

student loans, other types of loans, accounts in collection and credit cards.  For loans, note your interest rate and monthly payment.  For credit cards, note your interest rate and the minimum

monthly payment. 116

Add your monthly loan payments and minimum credit card payments to determine the minimum amount you owe each month. If you're unsure of all the accounts you have open, especially those that might be in collections, you can check your free credit report. It will show what creditors are currently reporting to the credit bureaus, including your most recently reported balances and contact information for the accounts. (Your banks and credit card issuers will have the most up-to-date information.) The total you come up with is the minimum amount you need to pay every month simply to stay current on your debt. However, if that's all you pay toward your debt on a monthly basis, it will be nearly impossible to pay it all off.

2. Decide How Much You Can Pay Each Month Once you've listed out your current debts, make another list that includes all your non-debt monthly expenses, such as groceries, cell phone bill, utilities, gas for your car, rent, entertainment, clothing and so on. Some of these amounts can vary from month to month, so it's a good idea to take the average of several months. For example, to find out your average monthly electricity payment, add up the total from six months' worth of bills and then divide the sum by six. That's your average monthly electricity cost for the past six months. This list represents basic expenses that you have to pay every month. Now compare this amount with your monthly income, considering only

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the money you have left after paying taxes and other salary withholdings—your take-home pay or monthly net income. Subtract these total expenses from your monthly income. If the amount you have left over after paying these necessary bills is less than the amount you need to put toward your debt, you'll need to take action. You may choose to:  Look for opportunities to save. Reconsider your expenses and

consider ways to spend less. For example, if you dine out a lot, cutting back could save money that you could put toward paying off debt.  Consider debt consolidation. A debt consolidation loan allows you

to compile multiple high interest debts, such as credit card balances, into a single lower interest debt. While debt consolidation can't lower the principal of what you owe, it can reduce the total amount of interest you'll pay over the life of the debt. Reducing interest expenses may make it easier for you to put more money toward paying down the principal of the debt.  Increase your income. This will give you more money to put

toward your debt. You might get a second job, sell some things you don't need or look for a job that pays more. If the amount left over after paying basic expenses is more than the minimum amount you need to put toward your debt, decide how much additional money you would like to set aside to pay down your debt each

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month. Remember, the more you can pay above the minimum, the faster you'll be able to pay off your debt.

3. Reduce Your Interest Rates High interest rates can cause your debt to grow rapidly, especially if you have a lot of credit card debt. When you're paying a lot in interest, it can be difficult to pay off the principal. Here are some common types of higher interest debt and tips for how to reduce the interest you pay on each:

Credit Cards You have a few options for reducing credit card interest rates:  Ask the credit card issuer for a lower rate. If you have a good

payment history with them and good credit, they may agree to lower your rate for a period of time, or even permanently. Calling your issuer and asking for a lower interest rate costs you nothing and doesn't affect your credit report or credit score.  Consider a balance transfer credit card. If you're not able to

secure a lower interest rate from your current credit card company, you may be able to transfer outstanding credit card balances to a balance transfer card with a lower or zero interest rate. Credit card companies often offer promotional rates for a limited period in exchange for you transferring a balance from

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an existing card to a new one. You'll need to meet the balance transfer card company's qualifications, and you'll probably need to pay a transfer fee of around 3 percent of the balance you're transferring.  Look into a debt consolidation loan. This option can be another

way to lower your interest rates because loans of this type typically charge lower interest than credit cards.

Student Loans While certain types of student loans can have fairly low interest rates, if your student loans are older, your rates may be higher. Additionally, if you have a high principal, the interest can quickly add up. Depending on your income and the type of student loan you have, you may be able to apply for an income-driven repayment plan on StudentLoan.gov that will lower your monthly payment. You must be current on your student loan debt to qualify, but you could reduce your monthly payment without incurring a penalty or harming your credit score. You may also be able to obtain a debt consolidation loan if you have more than one student loan. Consolidating multiple student loans, which you can also apply for through StudentLoan.gov, will allow you to have a single monthly payment at a fixed interest rate that's based on the average of the interest rates on the loans you're consolidating. There's no cost to consolidate multiple federal education loans into one loan.

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However, you may lose certain student loan benefits, such as the ability to defer repayment. You may also apply for a debt consolidation loan from a bank or other financial institution that combines your student loans and other debt, such as credit card debt. If you go this route, however, you may lose student loan benefits, such as the ability to defer repayment.

Debt Settlement If you're looking for help dealing with high interest rates and difficult-tomanage debt, you may wonder if debt settlement is a good option for you. Some debt settlement companies advertise that they will negotiate with lenders on your behalf to get your payments reduced. With debt settlement, you go through a third-party company to pay your creditors a lump sum, usually an amount less than the total you owe, to settle the debt. While debt settlement may make it easier for you to pay off your debt, it does have some significant credit consequences. Whenever you pay less than the full amount you owe—which you agreed to pay when you entered into a credit agreement with the lender or credit card company—the settlement appears as negative information on your credit report. Negative information can contribute to lower credit scores. Instead of diving into debt settlement, a better option might be to talk to a nonprofit credit counselor. Credit counseling organizations can help you better understand tactics for managing and reducing your debt,

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such as creating and following a budget, and they may help you avoid the negative impact of debt settlement Credit counseling organizations also offer debt management plans, which are typically for those deep in debt. A debt management plan can reduce the number of payments you have to remember each month. A credit counselor from a government-approved list will negotiate with your creditors to see if they'll accept reduced interest rates or monthly payments, waive fees or reduce the amount you owe. Then you pay the credit counseling agency once a month and the organization distributes the funds to your creditors per their agreement. If you enroll in a debt management plan, it could appear on your credit report. For more, see "A Debt Management Plan: Is It Right for You?"

4. Pay Your Bills on Time Each Month Paying all your bills on time every month is one of the single best things you can do for your credit. Take any steps necessary to ensure you remember to pay your bills. You can set up automatic payments or payment reminders through your bank to ensure you never miss a payment. If you find you're having trouble juggling all your bills and keeping up with payments, a debt consolidation loan or a debt management plan, mentioned above, could help. But you don't need professional help to create your own plan for managing debt. There are multiple ways to pay down debt, including:

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 Put extra money toward the debt with the highest interest rate. In

the long run, this will reduce the total amount of interest you pay.  Put extra money toward the credit card or debt with the smallest

balance. You'll be able to pay it off quickly, reducing the total number of accounts you have to deal with and giving yourself the mental boost of successfully eliminating part of your debt (though you'll pay more interest in the long run than if you were to pay off debt with the highest interest rate first).  Deal with any debts in collections. Bringing collection accounts

current can help reduce their negative impact on your credit, which is a good reason to put it at the top of your to-do list. Plus, reducing calls from debt collectors can help relieve some of the stress of being in debt.

5. Be Diligent Moving Forward As you work to pay down your current debts, it's important not to undermine your hard work by taking on any new debt. Avoid the temptation to use a personal loan or balance transfer card to consolidate credit card debt unless you're extremely diligent about not using the card once you've paid off the balance, or only charge what you know you can pay off every month. Each time you successfully pay off a debt, put the extra money you freed up toward paying off more of your other debts. In months where you 123

make more money than anticipated or your expenses are less than expected, make the extra money work harder for you by putting it toward additional payments on your debt.

What if You Still Need Help? Sometimes debt is just too much and you may fear you'll never be able to repay everything you owe. You do have some last resort options, such as getting a debt management plan or declaring bankruptcy. Declaring bankruptcy is one of the most harmful circumstances for your credit, and it should only be a last resort. Depending on the type of bankruptcy you declare, the negative information will remain on your credit report for seven to 10 years. You may either have all your debts eliminated or have to agree to a plan to repay at least part of your debt. If your debt management plan isn't working and you're thinking about declaring bankruptcy, you might first consider getting a debt consolidation loan to help streamline your payments and lower your interest rates. Check out these Experian partner loans offering debt consolidation loans with competitive annual percentage rates (APRs).

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CHAPTER : 12 Investment What Is an Investment? An investment is an asset or item acquired with the goal of generating income or appreciation. Appreciation refers to an increase in the value of an asset over time. When an individual purchases a good as an investment, the intent is not to consume the good but rather to use it in the future to create wealth. An investment always concerns the outlay of some capital today—time, effort, money, or an asset—in hopes of a greater payoff in the future than what was originally put in. For example, an investor may purchase a monetary asset now with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit. KEY TAKEAWAYS 

An investment involves putting capital to use today in order to increase its value over time.



An investment requires putting capital to work, in the form of time, money, effort, etc., in hopes of a greater payoff in the future than what was originally put in.

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

An investment can refer to any medium or mechanism used for generating future income, including bonds, stocks, real estate property, or a business, among other examples.

How an Investment Works The act of investing has the goal of generating income and increasing value over time. An investment can refer to any mechanism used for generating future income. This includes the purchase of bonds, stocks, or real estate property, among other examples. Additionally, purchasing a property that can be used to produce goods can be considered an investment. In general, any action that is taken in the hopes of raising future revenue can also be considered an investment. For example, when choosing to pursue additional education, the goal is often to increase knowledge and improve skills (in the hopes of ultimately producing more income). Because investing is oriented toward the potential for future growth or income, there is always a certain level of risk associated with an investment. An investment may not generate any income, or may actually lose value over time. For example, it's also a possibility that you will invest in a company that ends up going bankrupt or a project that fails to materialize. This is the primary way that saving can be differentiated from investing: saving is accumulating money for future use and entails no risk, whereas investment is the act of leveraging money for a potential future gain and it entails some risk.

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12 best investments 1. High-yield savings accounts 2. Certificates of deposit (CDs) 3. Money market funds 4. Government bonds 5. Corporate bonds 6. Mutual funds 7. Index funds 8. Exchange-traded funds (ETFs) 9. Dividend stocks 10. Individual stocks 11. Alternative investments and cryptocurrencies 12. Real estate

1. Stocks This includes shares of ownership of any company and helps you earn dividends in return.

2. Bonds Wondering what is investment meaning in terms of bonds? It means lending your money to an institution or government, for which you receive fixed interest at regular intervals and also the face value upon maturity.

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3. Mutual Funds In this, funds are collected from different investors and put in a company’s bonds or shares, which are managed by fund managers. On understanding what is investment meaning and your investment objectives, you may choose equity funds or debt funds, depending on your risk capacity.

4. ULIP ULIPs or Unit Linked Insurance Plans are a type of investment that provides both investment and life insurance benefits. A portion of the money invested into ULIPs is allocated for investment, meaning in this plan a part of your premium is invested in different funds and helps you earn market linked returns. It also offers tax-saving benefits of up to Rs. 1.5 lakhs under Section 80C.

5. Public Provident Fund (PPF) Understanding investment meaning of PPF is simple. It is a government offered saving scheme that invests your funds for a specific period and helps you earn returns on the same. It provides an 8% interest rate starting 1st October 2018 For your benefit, you may also find out what is investment for tax saving and invest in such plans. Also, as discussed earlier, when you ponder over what is investment meaning and similar questions, consider adding term plans and health insurance policies in your portfolio for securing your family. After this, put your funds in instruments like ULIP, mutual funds, ELSS (Equity linked savings scheme) and other government plans. 128

When talking about equity investments, you may wonder what is equity share? Here’s what you need to know to understand what is equity share: Any corporation can use equity shares as a long-term financing source. These are non-redeemable shares that are issued to the general public. Shareholders have the right to vote, share profits, and claim a company's assets. Understanding what is equity share can help you make more informed decisions and create a diverse investment portfolio.

How Should You Invest? Now that you know ‘what is investment definition,’ and how it can help you create wealth, the next thing is to understand how to invest. Here are a few vital points you must keep in mind before you decide to invest.

1. Analyze Your Financial Needs Firstly, analyze your financial situation concerning risk tolerance, investment objectives and other factors like family size, number of earning members and life goals. You may even take help from a financial professional. It will help you clarify any doubts about ‘what is investment meaning for you?’ and identify the suitable options.

2. Investment Diversification Build a diversified financial portfolio according to your investment objectives by

putting

your

funds

different

instruments

maintaining the right balance between risk and returns.

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for

Also, when thinking about ‘what is investment meaning’ and ‘where to invest,’ consider giving priority to those instruments that offer security to your loved ones. It may include life insurance policies like term plan, ULIP (ULIP full form: Unit Linked Insurance Plan) and other such instruments. You may consider the objectives for investment to generate appropriate returns from it.

3. Time Period You should also know that it is difficult to answer what is investment meaning for a particular individual without considering the time period. That is why, while considering what is investment, know what time you have before turning your investments into cash. This is a crucial element that determines your investment objectives. Depending on your requirements, you may choose short-term or long-term funds.

4. Periodical Reassessment Since funds are influenced by market forces, it is imperative that you closely monitor them periodically. You may also consider readjustment if your portfolio is not generating good returns. Depending on your investment and savings objectives, you can choose from a variety of investment plans offered by Max Life including Guaranteed Income Plan, Smart Wealth Plan, Savings Advantage Plan and more.

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What are the Objectives of Investment? Before you decide to invest your earnings in any one of the many investment plans available in India, it’s essential to understand the reasons behind it and the investment meaning. While the individual objectives of investment may vary from one investor to another, the overall goals of investing money may be any one of the following reasons..

Reasons to Start Investing Today 1. To Keep Money Safe Capital preservation is one of the primary objectives of investment for people. Some investments help keep hard-earned money safe from being eroded with time. By parking your funds in these instruments or schemes, you can ensure that you do not outlive your savings. Fixed deposits, government bonds, and even an ordinary savings account can help keep your money safe. Although the return on investment may be lower here, the objective of capital preservation is easily met.

2. To Help Money Grow Another one of the common objectives of investing money is to ensure that it grows into a sizable corpus over time. Capital appreciation is generally a long-term goal that helps people secure their financial future. To make the money you earn grow into wealth, you need to consider investment objectives and options that offer a significant return on the initial amount invested. Some of the best investments to achieve growth 131

include real estate, mutual funds, commodities, and equity. The risk associated with these options may be high, but the return is also generally significant.

3. To Earn a Steady Stream of Income Investments can also help you earn a steady source of secondary (or primary) income. Examples of such investments include fixed deposits that pay out regular interest or stocks of companies that pay investors dividends consistently. Income-generating investments can help you pay for your everyday expenses after you have retired. Alternatively, they can also act as excellent sources of supplementary income during your working years by providing you with additional money to meet outlays like college expenses or EMIs.

4. To Minimize the Burden of Tax Aside from capital growth or preservation, investors also have other compelling objectives for investment. This motivation comes in the form of tax benefits offered by the Income Tax Act, 1961. Investing in options such as Unit Linked Insurance Plans (ULIPs), Public Provident Fund (PPF), and Equity Linked Savings Schemes (ELSS) can be deducted from your total income. This has the effect of reducing your taxable income, thereby bringing down your tax liability.

5. To Save up for Retirement Saving up for retirement is a necessity. It is essential to have a retirement fund you can fall back on in your golden years, because you may not be able to continue working forever. By investing the money you earn during your working years in the right investment options, 132

you can allow your funds to grow enough to sustain you after you’ve retired.

6. To Meet your Financial Goals Investing can also help you achieve your short-term and long-term financial goals without too much stress or trouble. Some investment options, for instance, come with short lock-in periods and high liquidity. These investments are ideal instruments to park your funds in if you wish to save up for short-term targets like funding home improvements or creating an emergency fund. Other investment options that come with a longer lock-in period are perfect for saving up for long-term goals.

Categories of Investments 1. Ownership Investments Ownership investments, as the name clearly suggests, are assets that are purchased and owned by the investor. Examples of this kind of investment include stocks, real estate properties, and bullion, among others. Funding a business is also a kind of ownership investment.

2. Lending Investments When you invest in lending instruments, you’re essentially behaving like the bank. Corporate bonds, government bonds, and even savings accounts are all examples of lending investments. The money you park in a savings account is basically a loan that you give the bank. This money is used by the bank to fund the loans it gives out to its customers.

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3. Cash Equivalents These are investments that are highly liquid and can easily be converted into cash. Money market instruments, for instance, are excellent examples of cash equivalents. Cash equivalents generally offer low returns, but correspondingly, the risk associated with them is also negligible.

What Is Investment Meaning in Comparison to Savings? The question, ‘What is investment meaning?’ becomes crucial when asked about savings. Savings simply mean putting aside a part of your earnings over time. The saved amount of money is subject to no risk and, therefore, does not help you earn any profits or returns. However, its value appreciation remains more or less stagnant, as there is no addition over and above what you add each month. On the other hand, investment definition is based on the concept of earning returns or profit on the money you first put in a fund or spent on an asset purchase. Remember here that the involvement of risk is what makes them profitable. When understanding ‘what is investment meaning,’ remember that there is a direct relation between returns and risk, meaning more significant the risk involved, higher are the chances of earning greater returns. That is why when you are identifying ‘what is investment meaning?’ for you, you must check the risk profile of different options and review your risk appetite.

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When Should You Invest? Some people waste many years of their life thinking over ‘what is investment’ and figuring out the investment objectives and how it is beneficial. They hesitate to consider investment meaning for wealth creation because of the involvement of risk. However, many investments are also risk-free, and some carry only little to moderate risk. When you are young, it is best to fully understand about ‘what is investment meaning’ and its role and then start. At an early age, you have

few

responsibilities

and,

thus,

have

better

tendency

experiment with different investment and leverage those, which suit your requirements best. Investing early is also better because of the compounding benefits on investments that help grow your money. With more years ahead, you can reap maximum benefits on your investments, provided you first understand and evaluate different aspects of ‘what is investment meaning’ and then start early.

Why Should You Invest? You may be wondering why to give so much importance to the question ‘what is investment meaning,’ when you can work towards saving more from your earnings instead. Taking a portion of your income and saving each month will only create a reserve fund, which may prove to be inadequate in covering your family against a medical emergency.

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On the other hand, now that you know ‘what is investment,’ you will understand that investing your money leads to wealth generation and helps in achieving life goals.

Understood ‘What is Investment?’

Now Get Started

Now that you know what is investment definition and role, and about a few plans, and its benefits start early for maximum benefits. Choose the right plans and track your portfolio for ensuring high returns. So, find out what is investment meaning for yourself by putting your money in different options and see them grow. Investment in market linked investment plans are subject to market risk. We suggest to consult your financial advisor before investing.

SAVING VS. INVESTING – WHICH IS BETTER? The terms ‘investing’ and ‘saving’ are often used interchangeably. With individuals referring to their investments as their life savings, the fundamental difference between the two terms, and essentially the two concepts, has drastically diminished. However, one must understand that these are different concepts that work in tandem. This article will emphasise on the differences between saving and investing.

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What is ‘Saving’? Saving is the act of setting aside money for a future need or expense, i.e. for unforeseen situations. Financial institutions offer several savings’ options, the most common being savings account in a bank, or fixed deposits, etc. What is ‘Investing’? Investing is the process of putting your money in financial products and investment avenues that offer the potential to generate income or aid in wealth creation. The most popular investment options in India include stocks, mutual funds, real estate, bonds, ETFs (exchange-traded funds), etc. It’s important to remember that risk and return go hand in hand when it comes to investing. Why is ‘Saving’ Important? There are several reasons why you should save your hard-earned money. Here are some of the top benefits of your savings: 1. Emergency cushion: Savings are a must regardless of the purpose for which they are ultimately used. Emergencies can come unannounced: you might lose your job, or have a medical emergency in the family, or plan to start your own business. In these circumstances, you need liquidity to fall back on. Thus, it is always advised to set aside at least 3 to 6 months of your income for an emergency. 2. Stepping stone to investing Saving is the difference between your income and expenses. Out of the money saved, allocate a small portion to liquid assets such as bank fixed deposits or liquid funds and the rest to long-term wealth creation. 137

Importance of Investing Investments hold the key to one’s future as they aid you in realising your dreams. Following are some of the top benefits of investing: 1. Beat inflation: Investing your money helps you to beat inflation over time. If you don’t invest, chances are your purchasing power will decline as inflation tends to eat away the value of money over time. To insure yourself against this situation, it makes sense to invest your money in investment avenues that have the potential to yield inflation-beating returns. 2. Realise your financial goals: Whether it’s buying a house, a car, or saving up for your marriage, or paying for your child’s higher education, or planning for your retirement, investing can help you to meet all such financial goals. Investing your money is one of the best ways to achieve your long-term goals. 3. Earn higher returns Investment avenues such as mutual funds or stocks have the potential to fetch higher returns than fixed deposits or savings account. Saving vs Investing Savings accounts offer ready access to cash, but might limit the number of withdrawals you can make

Saving Purpose

To meet short-term goals or Long-term wealth creation and capital unplanned expenses

Duration Ideal for the short-term

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Investing

appreciation Investing for a longer duration usually

yields positive returns

Returns

Relatively lower returns

Potential to earn high returns Some investment options come with a lock-

Access to

in period. However, there are a few options

cash

that offer high liquidity, such as liquid mutual funds

Risk involved

Typical products

Savings entail minimal risk Investments are subject to market risk

CDs (certificates of deposit), savings account, money-

Mutual funds, bonds, stocks, ETFs, etc.

market instruments, etc.

Which is better? Saving or Investing? The right choice between saving or investing depends on your financial position, risk tolerance, and financial goals. However, you can consider following these two rules: 1. If you need the money shortly, say within a year or so, or you wish to create an emergency fund, you might consider a savings account. 2. If you want to grow your wealth over the long-term, then you might consider investing. Let’s understand this with a real-life example*. Manan can save Rs. 20,000 each month. He is confused if he should keep this amount in a savings account or invest in mutual funds. Let’s compare the wealth creation capacity of the savings options vs mutual fund investments to get better clarity. 139

Savings options

Mutual fund investment

Bank Deposits Liquid funds Hybrid funds Equity funds Monthly outlay

Rs. 20,000

Time period

10 years

Assumed RoI

5.5%*

8%**

11%**

Total outlay

Rs. 24 lac

Rs. 32 lac

Rs. 36.8 lac

Rs. 43.8 lac

1.53

1.83

Value after 10 years Rs. 29.5 lac Corpus ratio

1.23

*Examples are for illustration purposes only and in no manner should be considered as the suggested investment option.

The above table illustrates how investment products create greater wealth over the long run. If you stay invested for the long-term at a higher rate of return, your returns earned on the principal keep getting reinvested to accumulate a higher corpus. This is how the power of compounding works. Saving and investing are two different concepts that work in tandem to secure your financial future; neither can survive without the other in this constantly inflating market. Investing is essential if you want to keep up with the ever-rising cost of living. Remember, the sooner you start, the more wealth you accumulate over the long run. The magic of compounding works wonders to boost your wealth empire. Further, when you invest for a longer duration, your investments tend to ride the volatilities of the market. Happy Investing!

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CHAPTER : 13 Power of compounding Compounding may do wonder to your investments if adequate time is given. Longer the duration, the greater would be the wonder of compounding. According to Albert Einstein, compound interest is the eighth wonder of the world. Compounding may do wonder to your investments if adequate time is given. The formula for annual compound interest is A=P(1+r)^t (where A is maturity amount, P is principal invested, r is rate of interest and t is number of years for which investment is made) that makes the time the most important factor in compound interest. So, the longer the duration, the greater would be the wonder of compounding.

Albert Einstein had once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” Now, let’s see how the power of compounding and the duration create wonder under the various investment options, viz Mutual Fund (MF), Public Provident Fund (PPF), Provident Fund (PF) and Fixed Deposit (FD).

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Here’s what Rs 1 lakh per annum in MF, PPF, PF, FD does to wealth creation . Mutual Fund (MF)

MFs, especially equity MFs, are meant for long-term investments and would fetch the benefits of compounding. Although market fluctuations affect equity MFs in the short term, they provide higher returns in the long term. Let’s assume equity MFs provide 12 per cent interest in the long term. If you invest Rs 1 lakh at the beginning of each year, after 10 years, you will accumulate about Rs 19.7 lakh. The amount will increase to Rs 80.7 lakh in 20 years, Rs 1.49 crore in 25 years and Rs 2.7 crore in 30 years.

Public Provident Fund (PPF)

PPF is one of the most popular tax-saving instruments due to providing protection and its tax-free nature. Assuming that the current PPF interest rate of 8 per cent will continue, by investing Rs 1 lakh at the beginning of each year, you would accumulate Rs 15.65 lakh in 10 years, Rs 49.42 lakh in 20 years, Rs 78.95 lakh in 25 years and Rs 1.22 crore in 30 years.

Provident Fund (PF)

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PF is aimed at providing retirement benefits to the private sector employees having eligible salary up to Rs 15,000 per month, who are working in organisations having 20 or more employees. For employees having higher eligible salary and organisation having less than 20 employees, the scheme is optional. Assuming that the current PF interest rate of 8.7 per cent will continue, by investing Rs 1 lakh at the beginning of each year, you would accumulate Rs 16.28 lakh in 10 years, Rs 53.77 lakh in 20 years, Rs 88.07 lakh in 25 years and Rs 1.4 crore in 30 years.

Fixed Deposit (FD)

FDs are one of the most popular investment products in India. However, FDs are not tax and inflation-efficient instruments. At present, the average interest rates on FDs are about 7 per cent. Assuming that the current FD interest rate of 7 per cent will continue, by investing Rs 1 lakh at the beginning of each year, you would accumulate Rs 14.78 lakh in 10 years, Rs 43.865 lakh in 20 years, Rs 67.68 lakh in 25 years and Rs 1.01 crore in 30 years.

Benefits of Compound Growth

Compound interest is "interest paid on the interest" and this is the major power of compound interest. It is also the reason that Schwab 143

Moneywise and other financial experts recommend starting a retirement plan early. A 20-year-old who places Rs 3,95,000 in a onetime investment that earns an average 8-percent annual return would have Rs.1,26,40,000 at age 65, while a 39-year-old who makes a one-time Rs 3,95,000 investment at that rate of return would have only Rs.31,60,000 at age 65. The advantages are even greater for someone making regular contributions to the investment. The same applies to businesses that are attempting to save for a major capital purchase or reinvestment back into the business.

Things to Consider A consideration is how often the interest is compounded; an investment with interest compounded monthly will grow faster than an investment with interest compounded annually. While compound interest is beneficial if you are the one receiving the interest, if you are the one paying compound interest on a loan or credit card, then it's costing you a lot of money, as interest is charged on interest.

THE RICE AND THE CHESS BOARD STORY — THE POWER OF EXPONENTIAL GROWTH There was once a king in India who was a big chess enthusiast and had the habit of challenging wise visitors to a game of chess. One day a traveling sage was challenged by the king. The sage having played this 144

game all his life all the time with people all over the world gladly accepted the Kings challenge. To motivate his opponent the king offered any reward that the sage could name. The sage modestly asked just for a few grains of rice in the following manner: the king was to put a single grain of rice on the first chess square and double it on every consequent one. The king accepted the sage’s request.

Having lost the game and being a man of his word the king ordered a bag of rice to be brought to the chess board. Then he started placing rice grains according to the arrangement: 1 grain on the first square, 2 on the second, 4 on the third, 8 on the fourth and so on.

Following the exponential growth of the rice payment, the king quickly realized that he was unable to fulfill his promise because on the twentieth square the king would have had to put 1,000,000 grains of rice. On the fortieth square, the king would have had to put 1,000,000,000 grains of rice. And, finally, on the sixty-fourth square, the king would have had to put more than 18,000,000,000,000,000,000 grains of rice which is equal to about 210 billion tons and is allegedly sufficient to cover the whole territory of India with a meter thick layer of rice.

It was at that point that the sage told the king that he doesn’t have to pay the debt immediately but can do so over time. And so the sage became the wealthiest person in the world.

Lessons from this story: 145



Knowledge and experience are the best investments and pay the biggest dividends. Having just one without the other will give you fewer results. Educate yourself then take that what you have learned and use it to gain experience.

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RULE 15-15-15 Know The 15*15*15 Rule In Mutual Funds If you are an investor who is looking to accumulate Rs 1 crore, then you can do so by following the 15*15*15 rule. We have covered the following in this chapter. The 15*15*15 rule says that one can amass a crore by investing only Rs 15,000 a month for a duration of 15 years in a stock that offers 15% returns per annum. It is purely an effect of compounding. Before we proceed to understand 15*15*15 rule, let’s first understand compounding.

What is Compounding? The term ‘compounding’ is extensively used in mutual funds. Compounding is a phenomenon which makes small amounts invested on a regular basis grow to a significant sum over time. This is possible as the interest earned in the previous compounding period will, in turn, earn interest in the next compounding period. Therefore, compounding is the backbone of mutual fund investments and can take people from rags to riches over time. One can take maximum advantage of compounding by starting to invest in mutual funds at the earliest. This is the primary theory behind compounding.

Power of Compounding

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Let us get to the power of compounding with an example. Consider Mr Ram began investing when he was 22 years old, and he stopped investing after eight years. His friend Mr Sham started investing at the age of 30 years and goes on to invest until he reaches the age of 60 years. Mr Ram, although he stops investing at the age of 30, he did not redeem his holdings. He stayed invested until 60 years of age. Let’s see how both Mr Ram and Mr Sham stack up at the age of 60: Parameter

Mr Ram

Mr Sham

Age when entered

20 years

30 years

Age when exited

60 years

Investment duration

10 years

30 years

Holding period Amount invested

40 years Rs 2,000 a month

30 years Rs 2,000 a month

Total amount invested

Rs 2,40,000

Rs 7,20,000

Returns earned

10% a year

Corpus accumulated at the time of

Rs 81,27,183

Rs 45,20,796

redemption Growth

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33.9 times

6.3 times

You can notice in the table above that Mr Ram has made more money than Mr Sham despite investing lesser than him. This is because he had already accumulated some corpus in his mutual fund investment account by the time Mr Sham began investing. Moreover, he did not redeem his fund units, and he left them invested. These units kept on accumulating compounded interest which swelled up Mr Ram’s portfolio to a whopping 33.9 times his investment.

15*15*15 Rule This rule is one of the most basic rules that help an investor become a crorepati. It says that if you invest Rs 15,000 a month for a period of 15 years in a stock that is capable of offering 15% interest on an annual basis, then you will amass an amount of Rs 1,00,27,601 at the end of 15 years. You invested only Rs 27 lakh while you earned Rs 73 lakh. Furthermore, if you extend this for 15 more years, your corpus accumulated will be increasing exponentially. Now, 15*15*30 rule will help you accumulate a massive Rs 10,38,49,194 (more than Rs 10 crore). You would have invested a mere Rs 27 lakh and end up earning Rs 9.84 crore.

Key Takeaway When it comes to mutual fund investments, you should not only invest money but also your time, because here time is also money! Long-term investment horizon can do wonders to your mutual fund portfolio and following the 15*15*15 rule will make you a crorepati. 149

CHAPTER :14 Retirement

Retirement is the withdrawal from one's position or occupation or from one's active working life. A person may also semi-retire by reducing work hours or workload. Many people choose to retire when they are old or incapable of doing their job due to health reasons. People may also retire when they are eligible for private or public pension benefits, although some are forced to retire when bodily conditions no longer allow the person to work any longer (by illness or accident) or as a result of legislation concerning their positions.[2] In most countries, the idea of retirement is of recent origin, being introduced during the late-nineteenth and early-twentieth centuries. Previously, low life expectancy, lack of social security and the absence of pension arrangements meant that most workers continued to work until their death. Germany was the first country to introduce retirement benefits in 1889. Nowadays, most developed countries have systems to provide pensions on retirement in old age, funded by employers or the state. In many poorer countries, there is no support for the elderly beyond that provided through the family. Today, retirement with a pension is considered a right of the worker in many societies; hard ideological, social, cultural and political battles have been fought over whether this

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is a right. In many Western countries, this is a right embodied in national constitutions.

Your Step by Step Retirement Planning Guide Retirement planning has changed over the years, and what may have worked a decade ago may not work anymore. Traditionally, real estate, FDs, gold, EPF and a regular insurance plan have constituted the bulk of retirement plans in India. However, rising life expectancy and healthcare costs coupled with the inability of traditional investment instruments to generate wealth returns, retirement planning is witnessing a shift in approach. Today, average life expectancy in India has increased to 68 years and if you have access to good healthcare and live a relatively healthy life, you can easily live up to 80 years of age. Since you will retire at the age of 60, it means that you must have a retirement corpus that can at least meet your monthly expenses for 20 years. So, keeping your financial goals, returns, risk appetite, tax burden and inflation in mind, how do you chalk out a robust retirement plan? Here’s a step-by-step plan!

Step 1: Choose your retirement age Whether you want to retire early or wait till 60 years of age, it’s up to you. But then, it also depends on your financial goals and liabilities. Most millennials today want to retire at the age of 50. In that case, you must have substantial retirement savings that can sustain you and help you lead 151

a comfortable retirement life for the next 30 years; assuming that you live up to 80 years.

Step 2. Find out average life expectancy Once you decide on your retirement age, you need to arrive at a figure that correctly estimates your retirement corpus. To do that, you need to estimate your life expectancy based on your age, medical condition, family history and other factors.

Step 3. Calculate your retirement corpus Calculating the correct retirement corpus is the moment of truth in retirement planning. You have to keep many factors in mind and there are chances of miscalculation. Of course, you cannot reach the exact amount but you should be able to reach a ballpark figure. To avoid any shortfall in reaching your ideal retirement fund size, you need to keep a few factors in mind such as inflation, current age, medical condition, current liabilities, retirement age and current monthly expenses. The best way to calculate your ideal retirement corpus is to take your current monthly expenses and expand it to your retirement age while keeping an average inflation rate in mind. For example, if your current age is 30 years and monthly expenses are Rs. 50,000, it will rise to Rs. 1,06,000 per month by the time you reach the age of 50, assuming that inflation rate will remain at 6%. Therefore, if you want to retire at the age of 50, you need to save for another 30 152

years. According to the calculation, you need to have a retirement corpus of more than Rs. 3 crore to meet your monthly expenses for 30 years (Rs. 1,06,000 x 30 years).

Monthly Expense at 6% Yearly Inflation Rate

Planning for regular monthly income is important Once you retire, you will still need regular income to meet your monthly expenses. Therefore, it is a must to invest in a pension plan or annuity plan post retirement. To achieve your ideal retirement savings goal you need to start saving early and choose the right investment instrument. Unit linked insurance plans (ULIPs) allow you to have a robust retirement plan as it provides the triple benefit of insurance protection, wealth generation and tax savings. It is vital to remember that there are few factors that can erode your retirement fund; that is inflation and tax. Therefore, when you start retirement planning, choose an investment tool that provides inflation-beating returns and gets you maximum tax benefits.

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ULIPs have consistently provided returns at the range of 9-12% and they are the most tax-effective investment instruments available in India.

Retirement Planning: 10 golden rules One of the most important questions to answer, when planning our retirement, is how much do we need to save or invest, to live comfortably in the retirement years. As per the National Health Profile published in 2019, life expectancy in India is 68.7 years. However, it is now normal to live up to 90 years and we must plan for this eventuality. What this implies is that we need a steady income plan for at least 30 years after our retirement. In addition, we must factor in higher costs on healthcare, care givers, lifestyle needs of the elderly, and increase in the cost of living due to inflation. This may sound like a daunting prospect but with intelligent and early planning, we can secure our future.

1. Plan for more than you may need At the cusp of retirement, or earlier, we must have a general idea of our income needs after retirement. As a rule it’s better to be cautious and plan for more than we may need. It is important to start with an estimate of all the expenses. Generally, people feel that they may only need about 70% of their last drawn income. However, it is prudent to

assume that they may need more.

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2. The 4 per cent rule It is important to know how much income we could draw down from our investments. The 4 per cent rule was derived by financial planner William Bengen. According to him, a retiree with an investment portfolio of 50% equity and 50% bonds should be able to outlive the funds if they draw down only 4% of the investment every year, adjusted for inflation. In effect this rule also means that the investments must be long term and last for 30 years. The 4% rule guides us but is not necessarily perfect since it relies on past data and not on current market estimates or future risks.

3. Start retirement planning early If we use the 4% rule as a guideline, and wish to drawdown Rs 1 lakh per month after our retirement, it means that our investment corpus must be at least Rs 3 crore. As with any investment, the earlier that we start our investments, the better the yields. As a rule, we should definitely start retirement planning and creating a retirement investment portfolio as early as in our 20s. Compound interest on our early investments add up to significant multiples. However, if we haven’t started investing from an early age, we must invest significantly more to achieve the Rs 3 crore target.

4. Invest in real estate One of the best ways to create a guaranteed income stream is to own property and lease the property to earn a rental yield. In case of 155

multiple assets, the rental income is higher. In fact, many seniors lease out their residences and move into a senior care community. Since rents increase every year, this form of income also helps stay ahead of inflation. So, it is prudent to invest in property when we are younger and create a steady and guaranteed income stream. In addition, we can also sell the real estate asset and create an addition corpus for investment.

5. Reverse mortgage Another way of creating an income stream from property is to opt for reverse mortgage. Reverse mortgage is not very popular in India. However, it is a good solution for creating an income stream.

6. Senior Citizens Saving Scheme Public sector banks such as SBI have an investment scheme for senior citizens. This account is applicable for seniors above the age of 60 years, with an investment of up to Rs 15 lakh and offers an interest of 8.6%. The scheme qualifies for tax benefits under section 80C of the Income Tax Act. Though the interest earned is taxable, the scheme offers one of the highest interest rates.

7. Monthly Income Scheme at Post Office This investment scheme offers a guaranteed return of 7.7% per annum, offers a monthly fixed income, keeps the initial capital intact and yields better results than other debt instruments. The scheme also provides for

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a recurring deposit into which the income can be parked. This accelerates savings. The maturity period is 5 years. There is no TDS for this scheme but the interest earned is taxable. The scheme does not qualify for tax benefits under section 80C of the Income Tax Act.

8. Mutual funds It is also prudent to invest in mutual funds. These investments have higher liquidity and allow the investor to earn a steady income. They carry lesser risks than investing in the primary market and yet offer good returns on investment.

9. Pension Funds In addition, seniors should invest in pension funds and saving schemes. Though these investment options are low risk and help them preserve their capital, they also offer much lower returns.

10. Investing in a senior living community It is a known fact that costs of living increase as we get older, especially after retirement. The increase in costs of living may include hiring caregivers, higher healthcare costs, physiotherapy, security and lifestyle services. It is, therefore, prudent to invest in a senior living community. At a senior living community, the community is sharing the resources and its costs. Therefore it is easier to live a better lifestyle, in comparison to living alone. In addition, offering healthcare facilities, quality 157

housekeeping, chef prepared meals, curated wellness programs, sports and recreation facilities would be difficult to support financially by an individual. Also, higher security, trusted employees and staff who are specially trained to look after seniors are an added advantage. This would be expensive to replicate at a standalone residence. It would be difficult to provide additional services such as senior focused concierge services, legal and administrative planning, valet parking, senior friendly spa without the support of an entire community. Due to the benefits of economies of scale, senior living communities are a preferred choice of seniors across geographies.

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CHAPTER: 15 Thumb Rules of Finance 17 popular financial thumb rules to remember

“It is better to be approximately right than precisely wrong”

Warren

Buffet How much money should I save for my retirement to maintain my current lifestyle? How much money can I withdraw every year from my retirement corpus without ever running out of funds? What percentage of returns I need to target for my investment to triple in 10 years? What is the maximum amount I can spend on a new car? How much should I be investing in equities for my age? Do you need quick answers which are approximately correct and are based on practical experience, wisdom and common sense ?

Enter

“Thumb rules”…..

The early use of the phrase “thumb rule” has been traced back to the 16th century. While the precise origin is not clear, the most convincing theory is that the thumb was used in those days for approximate measurements. E.g. it was used for judging the distance between two objects on a table or for checking the alignment between two things (by holding the thumb in the eye line). From a not so precise origin, the number of thumb rules have really flourished. Now we have thumb rules for virtually every sphere of

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human activity. The world of finance and investing is no exception with tons of thumb rules available, some useful and some not so useful. My interest in thumb rules was piqued due to a fine twitter conversation I had on the “millionaire next door” net worth thumb rule. This post is the result of that conversation which led me to explore the other popular and useful financial thumb rules.

Rules for the road Before we get started on the list of financial thumb rules, few points: 

Thumb rules are not set in stone to give you precise answers.



Many thumb rules have their origins on practical wisdom. Do not expect scientifically proven research data to back it up.



Take all thumb rules with a pinch of salt. You can decide if the pinch needs to be increased to a handful in your specific scenario.



There are many subtle and some not so subtle variations of the popular thumb rules. Each wise head adding a twist like a chef giving his personal touch on a popular dish. Choose wisely the variation you intend to use.



Sometimes sound advice and commonsense are presented as thumb rules. Advises not involving any form of numerical calculation is NOT the focus of this post.

We are good to go.

Financial And Investing Thumb Rules

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# 1. Expected Net worth Rule (Millionaire Next door formula) This rule is used to arrive at your expected net worth based on your income and age. It was published by Thomas Stanley and gained popularity with the book “The millionaire Next door”.

Rule 10% X Age X Gross Annual Income (Pre-tax) = Expected Net worth

Example For a 40 year old with an annual income of INR 25,00,000. Expected Net worth = 10% X 40 X 25,00,000 = 100,00,000 ( 1 crore or 10 million) As with every thumb rule there are some limitations. For e.g. applicability for young people starting their career. [Additional Reading: How wealthy you should be by Thomas Stanley]

# 2. 4% Safe withdrawal rule (Bengen rule) This rule was published originally in 1994 by William Bengen where he proposed a safe withdrawal rate from the retirement corpus.

Rule

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The rule states that you may withdraw 4% of your retirement corpus in the initial year of retirement and from the next year onwards adjust your withdrawal amount for inflation and yet you will never run amount of money.

Example Let us say the retirement corpus is INR 100,00,000 ( 1 crore or 10 million) and inflation is at 5% for the first 3 years. Year1: Safe Withdrawal Amount = (100,00,000) x 4% = 4,00,000. Year 2: Safe withdrawal amount =

(4,00,000) X (1.05) = 4,20,000

Year 3: Safe withdrawal amount =

(4,20,000) X (1.05) = 4,41,000 and so

on………… This rule can be reverse engineered to find out the retirement corpus you need to have if you know your expected annual expenses.

Rule Estimated Annual expenses

X 25 = Retirement Corpus

Example Let us say your estimated annual expenses is 3,00,000 ( 25,000 per month X 12) . Then you are good to retire if you corpus is 75,00,000. ( 3,00,000 X 25) Initially the rule was proposed with a 30 year retirement life in mind. Subsequently, tons of research have found this rule to be good for any time frame. 162

[Additional Reading: Check out this excellent post on Bengen rule for the underlying research data]

# 3. Retirement Corpus rule This is another rule which talks of the retirement corpus amount you need to accumulate before calling it quits to have a peaceful and financially stress free retirement life.

Rule Retirement corpus = 20 X Gross Annual Income

Example Let us say your annual income is 25 lacs ( 25,00,000) then your retirement corpus should atleast be 5 crores ( 25 lacs X 20) to maintain your current lifestyle There are variations of this rule where financial planners’ advice up to 30X of annual income considering the increasing life expectancy and inflation. As Mae West said “Too much of a good thing can be wonderful”. to accumulate at least 20X. If you can do anything more, then it’s wonderful.

# 4. 100 minus age rule (or Bond portion equals age rule)

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Aim

This thumb rule tell an investor what portion of his portfolio should be in equities. The logic is that as an investor gets older, their risk taking appetite reduces and hence would not prefer large swings in portfolio value. This rule was made even more popular when John Bogle said “My favorite rule of thumb is (roughly) to hold a bond position equal to your age – 20 percent when you are 20, 70 percent when you’re 70, and so on – or maybe even your age minus 10 percent.”

Rule Percentage of portfolio in equities =

(100 – your age)

Example If you are 40 years old then the suggested percentage of allocation to equities would be 60% (100 – 40). An alternate way to put this is that the percentage of allocation to bonds would be 40% (equals your age) As with every thumb rule there are different versions out there with some experts substituting 100 with 110 or even up to 140. For all practical purposes an investor can stick with the original rule of 100.

# 5 . Rule of 72 This thumb rule is used to estimate the number of years it would take to double your investment given your expected rate of return.

Rule No. of years to double = 72 / rate of return 164

Example With the current fixed deposit rates in Indian banks for long term deposits hovering around 6%, it would take approximately 12 years to double your money (72 / 6). We can check the actual calculation using a compound interest calculator . If 100 is invested for 12 years at 6% then we get the future value as 201.22. (Remember the rules of the road, we are looking at being approximate right) This rule can also be used for reverse calculating the rate of interest applicable for doubling your money for a period.

Example Someone approaches you with an offer to double your money in 6 years. To evaluate the offer you wish to find the rate of return promised. Return % = 72 / 6 years = 12%. Using a CAGR calculator to cross check the calculation we get the value as 12.25%. (Again, we are approximately right) We must be aware of one crucial thing about the rule of 72 . It does not take into account the effect of inflation / purchasing power in the calculations.

# 6 .Rule of 114 Similar to the rule of 72, this rule is used to estimate the number of years it would take to triple your amount given the expected rate of return. 165

Rule No. of years to triple = 114 / rate of return

Example Using the same data as rule of 72, No. of years to triple would be 114 / 6 = 19 years.

# 7 .Rule of 144 Similar to the rule of 72, this rule is used to estimate the number of years it would take to quadruple (4 times) the amount given the expected rate of return

Rule No. of years to quadraple = 144 / rate of return

Example Using the same data as rule of 72, No. of years to triple would be 144 / 6 = 24 years.

# 8. 20% down payment rule This thumb rule basically applies to the minimum down payment a borrower should pay from own funds while taking any form of loan liability (Housing loan / Car loan / any other loan).

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The rationale for the rule is twofold.

First and foremost the 20% down

payment is barometer to infer whether the borrower is stretching beyond means or well within his affordable limits. Secondly, higher the down payment, lower will be the interest liability for the borrower.

Example If a posh villa cost 1 crore (10 million) then the prospective buyer taking a housing loan should at least pay 20,00,000 (20% of 1 crore) as margin /

own contribution. In case the buyer is finding it difficult to put the

20% share then in all probabilities the buyer is stretching beyond prudent levels.

# 9. House Affordability rule This thumb rule helps the home buyer decide on the maximum amount they can spend on buying a house or property. It would be wise to keep the purchase price of the house within this amount.

Rule Maximum value of house = 2.5 X Annual Income.

Example Let us say the annual income is 30 lacs (30,00,000). The maximum value of the house should be less than 75 lacs (30 lacs X 2.5) There are variations of this rule where the suggested range varies between 2X to 3X of the Annual income. Still we get a fair picture of the 167

possible range of values (60 lacs to 90 lacs). In the event of the buyer liking a property worth say 1.5 crores (15 million) then it is obvious that the price is above the prudently acceptable affordability range.

# 10. 28% Housing EMI rule This rule talks of the maximum amount one can budget for housing loan monthly EMI payments. Everyone loves to own a big house from a reputed builder in a posh locality. The tax rebates on housing loan payments gives further incentives to a prospective home buyer to go for bigger houses. This rules helps us with a reality check.

Rule Maximum Monthly Home loan EMI = 28% of Gross monthly income

Example If you make 1 lac (1,00,000) a month then your monthly home loan EMI should not exceed 28,000.

# 11 . 20/4/10 Vehicle rule This rule talks about the prudent practices while purchasing a vehicle / car by way of a loan.

Rule

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The rule states that you should make a down payment for the loan of at least 20% of the on road price; the tenure of the vehicle loan should not be more than 4 years; the total expenses towards the car ownership should be less than 10% of gross annual income (total expenses ideally should include vehicle loan EMI expenses + fuel expenses + insurance + any other vehicle expenses like parking rentals )

Example Let us say your annual income is 20 lacs (20,00,000). This rule states that your yearly transportation costs (car loan EMI + annual fuel expenses + annual insurance) should be less than 2 lacs.

# 12 . 50% Car rule This rule talks about the maximum price we can budget for purchase of a new car.

Rule Car affordability = 50% of Gross annual income

Example If you are making 20 lacs per year (gross) then you can plan for a car worth 10 lacs. In this case if you wish to go for a new Audi Q7 worth 70 lacs then clearly you are stretching beyond your affordable range.

# 13 .10 year Car rule 169

This rule states that to be financially prudent one needs to use a new car for at least 10 years. Car is one thing which depreciates quickly. The value of a car falls minimum 15% the moment it hits the road and is out of the showroom. 10 years of vehicle ownership is considered ideal to get maximum value of your vehicle purchase taking into consideration the effects of depreciation as well as possible spiraling of maintenance expenses of older vehicles.

# 14. 36% Debt rule Assuming you are a wonderful customer for your bank having availed housing loan, vehicle loan and personal loan then this rule states the maximum amount you can spend by way of loan / debt payments

Rule Maximum Monthly debt (EMI) payments = 36% of Gross monthly income

Example If you make 1 lac (1,00,000) a month then the total of all your monthly loan EMI’s should not exceed 36,000.

# 15. Emergency Fund rule

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This rule talks of the amount a person needs to set aside in a liquid asset (cash, savings account, short term fixed deposit) to face any emergencies like loss of employment, illness, business downturn etc.

Rule Emergency Fund = 6 X Monthly household expenses* *Household expenses also includes the monthly loan EMI payments

Example Let us say your monthly commitments and expenses add upto 50,000 then your emergency fund should be ideally 300,000 (3 lacs). There are variations ranging from 3X for people starting their career to 10X for the conservatives. Take your pick.

# 16. 10% saving rule Saving for a rainy day is a practice followed from the early days of human civilization. This rule talks of the amount we need to save to build our retirement nest egg.

Rule Minimum monthly savings = 10% of Gross monthly income. Saving 10,000 if you are making 1 lac is the minimum suggested amount. Ideally the percentage should be above 20% if you wish to have a decent corpus and a decent lifestyle. One crucial thing also is to start saving early. 171

# 16. 48 Hour Rule This thumb rule is useful against impulse purchases. The rule states that when you have a strong urge to make an impulse purchase then postpone the purchase for 48 hours. If even after 48 hours the urge still remains then go ahead with the purchase. In most cases it has been found that the urge is no more there. This also prevents piling on debt / credit card dues because of impulse purchases.

# 17. 1% Windfall rule This is a very important rule worth remembering. This talks of what needs to be done in case you hit a jackpot say, lottery / inheritance / house sale / multi-bagger stock picks. This rule prevents you from taking impulse decisions like splurging on a new car or house and thereby losing the fortune.

Rule In case of a windfall take out 1% of the proceeds after taxes and treat yourself. The rest of the money to be set aside in a bank account to be left untouched for at least 6 months Some studies have shown that 50% of the windfall is lost in relatively short period of time and also that 70% of the fortune won through lottery is lost within 3 years.

So this rule becomes very crucial to preserve the

windfall from rapidly eroding. 172

Also when the news that you have hit jackpot spreads, you will have a sudden spurt in the number of friend requests as well as visits from relatives you have not seen for years. These new characters will also most likely disappear the moment the bounty is exhausted. To

Example If you get an inheritance of 1 crore (10 million) then spend 1% or 1,00,000 on yourself and your family. The remaining 99,00,000 to be set aside in bank account for 6 months.

Final Thoughts Financial thumb rules are

based on practical experience, common sense

and wisdom. The thumb rules detailed in this post are precisely that and are intended to help us with quick (approximately correct) answers. However, while using these thumb rules, the user must also try to understand the rationale or assumptions behind each rule. Blindly following the thumb rules may be injurious to your financial health. As Buffet put it brilliantly “Too often, though, investors forget to examine the assumptions behind the models”. Thumb rules provide a fine starting point or a reference on which you can build your final decisions.

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CHAPTER 16 Meditation on Money Law Of Attraction

5 SUREFIRE WAYS TO ATTRACT MONEY USING THE POWER OF YOUR MIND The concept of being wealthy begins in your mind. So if you’re really looking to attract wealth, you’ll have to start off by training your subconscious mind. Although this might sound illogical to many, many millionaires vouch by this principle. The idea is pretty simple. You first start off by creating wealthy thoughts and then move on to manifest those thoughts in your everyday actions. Once you do this, you’re one step closer to being wealthy. That being said, I do understand the challenges in starting off with this principle. So in this Chapter, I’ll give you a guideline on…

How To Attract Money Using Mind Power. As you read the next couple of sections, you’ll understand how you can train and hone your mind to be as wealthy as you want to be. So firstly… 174

1. Be Clear How Much You Want It goes without saying that you need to have a clear set of goals in order to attract the kind of money you want. Unless you have a clear understanding of HOW MUCH you want, you’ll never be able to communicate your thoughts to your subconscious. So start off by writing down the amount you aspire to earn. Once you’re done, start motivating your subconscious mind to follow your plan. As strange as it sounds, your subconscious mind will soon follow suit and compel you to do things that directly or indirectly affect your money making abilities. After a point, your goals will start defining you and you’ll soon be able to follow the path you had planned for yourself. Next…

2. Feed Your Subconscious Mind With Hope Your subconscious mind thrives on positive thoughts and hope. So it is really important to be hopeful about your goals. If you have a big dream but are ashamed to admit it to yourself, you’ll never be able to achieve it. This is why you need to motivate yourself with just the right thoughts. For instance, if you have a goal of making Rs.50000 a month, tell yourself that you’re going to achieve it. You can use positive affirmations like… “I now earn Rs.50000 a month because that is what I decided to earn” “I am more than able to earn Rs.50000 a month” When you start repeating these positive thoughts, your subconscious mind will inadvertently work in your favor. 175

In case you’re looking to boost things up, team your positive thoughts with a positive vision. Both of them will collectively trigger your subconscious mind and help you achieve your goals faster.

3. Don’t Be Greedy Whether it’s Ebenezer Scrooge from Charles Dickens ‘A Christmas Carol”… or George Bailey from ‘It’s a Wonderful Life’ For both of them, kindness paid off at the end. And trust me; The same thing is going to work for you. Regardless of your current societal situation, always make it a point to be kind. When you’re kind and willing to give your money to people, it automatically infuses you with a sense of positivity. Over time, this positivity comes handy in communicating with your subconscious mind. When you live in a positive state and do something that fills your mind with positive thoughts, your subconscious becomes all the more ready to help you fulfill your goals. Goodwill never goes unnoticed. So instead of hoarding, try to give money to people who need it more than you. Your good deed will surely come back to you, over time.

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3. Visualize The Things You Want To Buy

Like I already mentioned, in addition to positive thoughts and actions, you also need to conjure positive visualizations. For instance, if you want to buy a beautiful house with the money you earn, try thinking about the house; like how many rooms it has, or its color till your emotions finally feel it. These positive visualizations will motivate your subconscious mind to help you achieve your goals.

5. Be Grateful For Your Current Financial Situation If you’re wondering how to attract money using mind power, this is perhaps the best way to go about it. Unless you’re grateful about your current financial situation, your subconscious will be bogged down by negativity. So instead of being disappointed or disgruntled learn to be grateful and learn to trust yourself to do better. There will always be something positive in your financial situation. Even if it’s the fact that it could be worse than what it currently is. Try to focus on what you have because what you focus on grows. Don’t focus on your worries and problems (unless you want that to grow). If you do your financial situation will get better. Don’t over complicate things, just use these five simple principles to help you attract money faster than you had even thought of. Don’t sit around waiting for improvement, try following these actions right away for the best results!

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Powerful Meditation for Manifesting Money Meditation for Manifesting Money; Creating Wealth & Success The current economic downturn the world over, has made many people worry and perhaps panicky too. This includes people in employment, business owners as well as self employed professionals. Since people have seen better days and experienced booming economies, it is quite natural to feel financial stress and anxiety when the economy is not so good. In this article, let me share with you a powerful meditation for manifesting money.

Powerful Meditation for Manifesting Money Once the worry about money sets in then it has a snowballing effect. Stress about one issue invites more negative emotions, which in turn attract still worse thoughts and damaging emotions. While the physical reality cannot be denied, being a wellness counselor, it is my sacred duty to remind you that there is always abundance in the universe. Remember that Universe has everything in abundance. All we need is to tap into the abundant resource. Thankfully, one of the tool is : A Powerful Meditation for Manifesting Money

Can Money Meditation Help Manifest Money? The good news is that no matter what your current financial situation is, you can free yourself from these weakening fears. In the new age and even before, people have been advocating, teaching and practicing

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Meditation, Affirmations, Visualization, Law of Attraction etc. to manifest money, wealth and prosperity in their lives.

Meditation and Manifestation The most attractive feature is that Meditation is free, it can be practiced by anyone, anytime and it has no side effects. Hence there should not be any excuse for not taking the advantage of what may very well give you the benefits and advantages that you’ve been looking for. In fact, not only just money, you can manifest for yourself success, power, good relationship, great career, new job or anything else that you deeply desire.

The Money Meditation Techniques and the Steps 

Sit in a comfortable position. You can sit in a chair or in any cross legged posture. If you are sitting in a chair then do not cross your hands or legs.



Close your eyes. ( Not if you are in a public place)

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Relax yourself.

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Take 3 deep breaths – inhale…exhale…inhale…exhale….inhale…exhale slowly, without causing any discomfort to yourself or holding your breath.



Roll your eyes slightly upwards. As if you are looking towards the centre of your forehead. This is also the location of the Third Eye Chakra (Ajna Chakra) and is an important point which helps you manifest that which you visualize.

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Caution: in case your eyes get tired or you get uncomfortable with your eyes position, immediately stop and do not persist. However, continue with the visualization throughout the duration of the meditation. 

As a next step bring your attention to your breathing and allow it to slow naturally. Be with your breath for at least 1 or 2 minutes so that you are centered, calm and at peace.



Once you feel that your body is relaxed and the mind has become calmer and quieter it is the time to begin the visualization exercise.

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Visualize yourself already wealthy and rich (in the present tense).

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Also visualize that more of money, wealth and prosperity is flowing into your life effortlessly and continuously (in the present continuous tense).



To bring more intensity and better result emotionalize your visualization. For example feel the money in your hands, see the color of currency notes, smell the fresh ink and crispy paper. In other words, involve your senses of smell, touch, seeing into play and feel happy that your object of desire is with you.



Follow same steps and similar visualization if it is an object other than money. For example, if it is a car and visualize yourself opening the car door, getting into the car, feel the seat, the steering wheel and the sound of engine starting and you taking the car on the nice road for a drive and you are enjoying the drive.

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The key to success in Money Meditation 

The key to success is always seeing yourself in the picture and visualize your life exactly how you want it to be.



Do this meditation for 3 to 5 minutes. Once a day is good, twice a day is very good and thrice a day is excellent.



Be convinced that Abundance is your fundamental right. See

How to

attract Abundance in Life . 

Regularly read the Quotes on

Money, Abundance



Practice Money and other Affirmations.

The advantages of Money Meditation 1. This aligns you with the enormous powers of Universe 2. You learn to put the Universal Laws (such as Law of Attraction) to the best possible use for the benefit of self and others too 3. It helps to manifest your deepest desires. 4. The practice of meditation and visualization clears the blockages if any, to help create money, wealth, success and abundance. 5. Alignment with Universe and practice of meditation helps in promoting spiritual growth & enlightenment. 6. Develops focus, concentration and other mental powers. 7. Blesses you with inner peace & tranquility.

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Suggestions for Better Success with Money Manifestation Meditation Some fine suggestions before you get set to start your practice of this beautiful technique, is that your desire to make money must be through ethical method and it should be spiritually aligned. Do not visualize to harm somebody or rob somebody for the sake of making your fortunes – because this will not work. It is the positivity that will increase your chances of success greatly. This Chapter has given you a broad framework for how this system works. It helps you understand material and spiritual manifestation in general. The success, its quality and the speed of manifestation and how much money you manifest will vary from person to person and from time to time even for the same person.

A very Special Million Dollar Meditation If you are very ambitious or are coping with money problems and need money fast then here is a special Money Meditation and Visualization Technique 

Chose a corner in your home or office and a time of the day when you will not be disturbed



Take a comfortable posture in which you can sit easily for about 10 minutes



Do deep breathing – inhale and exhale a few times. Imagine good relaxing energy entering your body and all tensions, worries and negative feelings going out with your breadth.

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

Starting from your head and moving slowly towards your toes, advice each and every part of your body to relax, thereby relaxing each and every muscle in your entire body.

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Now visualize a soothing, healing and warm (some like it cool and it is OK too) beam of light and energy embracing your body and entering every single cell inside you. Let it relax you deeper.

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Visualize yourself bathing in golden / while / silvery vibrant light of goodness from the top of your head to your toes.



After a few minutes of bathing in the divine light, visualize a shower of $100 bills and it may add upto hundreds of millions of dollars. The money is coming like a rain from the clouds above, entering the roof of your house, and filling up your room!



Visualize

yourself swimming through the money, touching the

currency notes with your hands! Look at them, feel them, touch them and see how EXCITED and HAPPY you are! It is raining millions of dollars in yours home! At the same time your neighbors are also receiving money, signifying that there is more than enough for everyone. 

Let this blissful feeling of being considerably rich to sink into your system i.e.

your heart, mind and soul! Know that you are a loved by

God, and you deserve it! Repeat this exercise at least once a day for a few weeks. Stay for a while with this feeling of abundance, and also experience the feelings of JOY, SECURITY, and EXCITEMENT this money brings to you.

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As with all manifestation techniques, you have to take up your emotions — really feeling and experiencing the joy and excitement outlined in the meditation — is the best way to kick the law of attraction to move in your favour.

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Chapter 17 QUOTES ON MONEY

SAVING MONEY QUOTES THAT WILL MAKE YOU RICH Looking for some wise quotes about saving money? We have rounded up the best collection of saving money quotes, sayings, proverbs, captions, messages (with images and pictures) to inspire you to spend less and save more. These quotes will encourage you to plan your expenditure and save money. Money saved can always be a great support for tough times. So wasting money on unwanted things and splurging should never be a habit.

SAVING MONEY QUOTES “Buy only what you need.” “Save money and money will save you.” “A penny saved is a dollar earned.”- B. Franklin “The art is not in making money, but in keeping it.” “Enough is better than too much.” – Dutch Proverb “Money is usually attracted, not pursued.”- Jim Rohn “A penny saved is a penny earned.”- Benjamin Franklin “Money amassed either serves us or rules us.” – Horace “If you’re saving, you’re succeeding.” ― Steve Burkholder “Money should be mastered, not served.” – Publilius Syrus “Being in control of your finances is a great stress reliever.” 185

“Saving comes too late when you get to the bottom.”- Seneca “He who will not economize will have to agonize.”- Confucius “Know what you own, and know why you own it.”— Peter Lynch “I’m Master of Coin. Saving money is important.”- David Benioff “You must learn to save first and spend afterwards.”- John Poole it!”

“It’s not about how much money you make. It’s how you save

“It is thrifty to prepare today for the wants of tomorrow.” – Aesop “By sowing frugality we reap liberty, a golden harvest.” – Agesilaus “I’m stuck between “I need to save money” and “you only live once.” “Don’t blame your income for the fact that you’re not saving money.” “Money looks better in the bank than on your feet.”- Sophia Amoruso “Money is a terrible master but an excellent servant.” — P.T. Barnum “Being a smart shopper is the first step to getting rich.” – Mark Cuban “The easiest way to save money is to waste less energy.”- Barack Obama “Balancing your money is the key to having enough.”- Elizabeth Warren “Never spend your money before you have earned it.” – Thomas Jefferson “That man is richest whose pleasures are cheapest.”— Henry David Thoreau

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“Save one-third, live on one-third, and give away one-third.”- Angelina Jolie “If you can count your money, you don’t have a billion dollars.”- J. Paul Getty

“Spend not where you may save; spare not where you must spend.”John Ray “He who buys what he does not need, steals from himself.” – Swedish Proverb

“It is great wealth to a soul to live frugally with a contented mind.”– Lucretius “If you would be wealthy, think of saving as well as getting.”- Benjamin Franklin “The goal isn’t more money. The goal is living life on your terms.” – Chris Brogan “Beware of little expenses. A small leak will sink a great ship.”- Benjamin Franklin “Money speaks only one language “If you save me today, I will save you tomorrow.” “It’s not your salary that makes you rich. It’s your spending habits.”Charles A Jaffe “If you cannot save money, the seeds of greatness are not in you.”- W. Clement Stone “Saving must become a priority, not just a thought. Pay yourself first.”Dave Ramsey “Waste neither time nor money, but make the best use of both.” – Benjamin Franklin

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“Wealth consists not in having great possessions, but in having few wants.”- Epictetus “Every time you borrow money, you’re robbing your future self.” – Nathan W. Morris “Stop buying things you don’t need to impress people you don’t even like.”- Suze Orman “A wise person should have money in their head, but not in their heart.”- Jonathan Swift “The price of anything is the amount of life you exchange for it.” – Henry David Thoreau “A man is rich in proportion to the things he can afford to let alone.”- Henry David Thoreau “Saving money won’t get us rich. You have to spend it to get it.” – Jonathan Anthony Burkett “You don’t have to see the whole staircase, just take the first step.”– Martin Luther King, Jr. “Saving requires us to not get things now so that we can get bigger ones later.”- Jean Chatzky “Do not save what is left after spending, but spend what is left after saving.” – Warren Buffett “You must gain control over your money or the lack of it will forever control you.”- Lydia Sweatt “People suddenly know how to use money when there are none left.”Bangambiki Habyarimana

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“A man is usually more careful of his money than he is of his principles.”- Ralph Waldo Emerson “Don’t tell me what you value, show me your budget, and I’ll tell you what you value.”— Joe Biden “Saving is a very fine thing. Especially when your parents have done it for you.”- Winston Churchill “A budget is telling your money where to go instead of wondering where it went.”- John C. Maxwell “The safe way to double your money is to fold it over once and put it in your pocket.” – Kin Hubbard “A budget is telling your money where to go instead of wondering where it went.” – John C. Maxwell “Rich people stay rich by living like they’re broke. Broke people stay broke by living like they’re rich.” “A simple fact that is hard to learn is that the time to save money is when you have some.”- Joe Moore “The way to stop financial joyriding is to arrest the chauffeur, not the automobile.”— Woodrow Wilson “The quickest way to double your money is to fold it in half and put it in your back pocket.”- Will Rogers “There is a gigantic difference between earning a great deal of money and being rich.”- Marlene Dietrich “All days are not same. Save for a rainy day. When you don’t work, savings will work for you.”- M.K. Soni “Save your money. You’re going to need twice as much money in your old age as you think.”- Michael Caine 189

“When a man has learned to live without money, he thought, a few rubles can go a long way.”- Dan Millman “Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.” – Ayn Rand “The bitterness of poor quality remains long after the sweetness of low price is forgotten.” – Benjamin Franklin “Save money on the big, boring stuff so that you have something left over for life’s little pleasures.”- Elisabeth Leam “Many folks think they aren’t good at earning money, when what they don’t know is how to use it.”- Frank A. Clark “Empty pockets never held anyone back. Only empty heads and empty hearts can do that.” – Norman Vincent Peale “Try to save something while your salary is small; it’s impossible to save after you begin to earn more.”— Jack Benny “Look everywhere you can to cut a little bit from your expenses. It will all add up to a meaningful sum.”- Suze Orman “By definition, saving for anything requires us to not get things now so that we can get bigger ones later.”- Jean Chatzky “Save a little money each month and at the end of the year you’ll be surprised at how little you have.”- Ernest Haskins “A man who both spends and saves money is the happiest man, because he has both enjoyments.”- Samuel Johnson “Once you really accept that spending money doesn’t equal happiness, you have half the battle won.”- Ernest Callenbach “Saving money isn’t about being able to buy bigger and better things. It’s about being arranged to take care of your family.” 190

“Be saving, but not at the cost of all liberality. Have the soul of a king and the hand of a wise economist.”- Joseph Joubert “If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed.” – Edmund Burke “Waste your money and you’re only out of money, but waste your time and you’ve lost a part of your life.”— Michael Leboeuf “Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.” – James W. Frick “Deprive yourself on nothing necessary for your comfort, but live in an honorable simplicity and frugality.” – John McDonough “Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do.”— Mark Twain “If you wish to get rich, save what you get. A fool can earn money; but it takes a wise man to save and dispose of it to his own advantage.”- Brigham Young “Many people take no care of their money till they come nearly to the end of it, and others do just the same with their time.”- Johann Wolfgang von Goethe “It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”- Robert Kiyosaki “Money has never made man happy, nor will it, there is nothing in its nature to produce happiness. The more of it one has the more one wants.”- Benjamin Franklin “The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind.”- T.T. Munger

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“Money is a guarantee that we may have what we want in the future. Though we need nothing at the moment it insures the possibility of satisfying a new desire when it arises.”- Aristotle Money is multiplied in practical value depending on the number of W’s you control in your life: what you do, when you do it, where you do it, and with whom you do it.”- Timothy Ferriss “It’s good to have money and the things that money can buy, but it’s good, too, to check up once in a while and make sure that you haven’t lost the things that money can’t buy.”- George Lorimer “Before you speak, listen. Before you write, think. before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give.” At the heart of any savings plan is a budget. Budgeting helps you prioritize your expenditure and find a balance between spending and saving across a whole year.

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Chapter 18 Qualities of Rich Man and Qualities of Poor Man

Poor Vs Rich: Mindset Habits To Develop Now You are likely reading this article because you are interested in the differences between the way poor vs rich people think and act so you can apply them in your own life. Right? Well, one thing's for sure - it starts with the right mindset. If you're serious about success, then you need to change how you think. As you study the lives of rich people, you'll notice one consistent theme: a growth mindset. One of my favorite quotes of all time is from Dale Carnegie. "Most of

the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all." Having a rich mindset is ultimately about growth and persevering until you reach your desired outcome. The best place to begin? Understanding the poor vs rich.

The difference between rich and poor people If you've spent any time on social media such as Instagram and YouTube, you've no doubt seen people posting content about their incredibly lavish lifestyles.

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For some, the images are real. But for others, behind the scenes is a lot of debt, poor credit, and zero savings. In the extremely popular and captivating book, The Millionaire Next Door, the author has studied millionaires over several decades. Do you know what he found? Most millionaires aren't living out in Hollywood. Most millionaires are right in front of you - living in your neighborhood, driving that secondhand Toyota, and sporting the iPhone from 5 years ago. There are so many lessons to learn from these millionaires. They're business owners who've built their empires from the ground up, women and men who've maintained their old lifestyles while building real assets. So as you scroll in awe, realize that truly rich people often won't flaunt it. And it's partly why they continue to increase in wealth. They're not buying the latest gadgets, instead, they're building assets. And there are many more of them out there than you can imagine. This is a key differentiator between rich vs poor people.

What is a poor person mentality? On the other end of the spectrum, you have a significant number of people stuck in a poverty mindset. This generally convinces people that their circumstances are fixed and that living paycheck to paycheck is the best they can do.

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Poverty and being poor is complex. Our environment, exposure, and life experiences can keep us trapped in its cycle. However, by deciding to adjust your mindset, you can carve your way out. Someone with a poor person's mindset believes that life has thrown them never been seen before challenges that are impossible to overcome. What this person fails to realize is that everyone goes through rough patches. Oprah didn't rise to where she was without facing major personal and professional challenges, and neither did the likes of the late and great Kobe Bryant. Instead, they had a wealth mentality, and below, we'll walk through certain habits that rich people have that sets them apart from the rest.

Rich people habits to start emulating now Now that you know the difference between poor vs rich mindsets, let's get into specific rich mindset habits that you can start working on today. 1. Rich people always have a vision Before you hit the ground running, ask yourself this: what is your

vision? Jonathan Swift said it right when he said "Vision is the art of seeing

what is invisible to others." Do you have hopes and dreams you're constantly thinking of achieving? Is your vision big beyond what you think you are capable of today? Will

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what you see for yourself change your life, the life of your family, or your community in the future? If all you see is where you are today, challenge yourself to build a vision. Once you do, realize it's not a one-and-done affair. Instead, it's an everyday process where your mind dreams further of what's possible.

2. Rich people have productive routines Netflix, YouTube, and TikTok have been dominating the entertainment scene of late. Millions of hours are viewed each day. While it's great for them, it does little for you - and rich people know this. Most rich people don't spend their time consuming mindless content for hours every day - not at all! Instead, rich people are intentional. They have routines. And they understand that you don't just wake up as a diligent individual out of nowhere. When we talk about routines, we don't just mean waking up at 5 am every day. That's only a tiny part of it. Instead, we're referring to the overall environment rich people put themselves in. Rich people are intentional about the friends they keep. They pay attention to what they feed their minds. And rich people put themselves in environments where success is most likely.

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Routines consist of all these components - time, environment, and habits. For example, when you need to get some work done, do you work from your bed? You probably end up getting much less done. Having a designated workspace will get you much further ahead. When its time for bed, put your phone away. These habits sound simple, but they're not easy. Rich people know this and are intentional about having a consistent routine.

3. Rich people are results-driven Wait, didn't we say that rich people are all about routines? Yes, they are - but more important than that, rich people focus on outcomes. Rich people aren't building routines for bragging rights. No one is waking up at 5 am so they can post about it on Instagram. No. Rich people are focused on the results and will commit to doing what it takes to achieve them. Routines alone will improve your quality of life. But they won't do anything for your bank account. Routines coupled with focused action will yield results. So what's the best way to achieve results? Start with the end in mind. When you have a clear idea of what the end goal is, it will be so much easier to work back and figure out what it takes to get there!

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4. Rich people admit when they don't know Have you ever listened to someone who clearly doesn't know what they're talking about but they keep going on and on about it? It's ridiculous. What's better is to admit that you don't know and to ask meaningful questions. Rich people know this and are on a constant search for knowledge. If you're learning from a mentor, ask smart questions. Learn about the challenges they are facing, understand what they are trying to achieve, how they are planning to achieve their goals, and what they've learned from past experiences. Listening always pays off and rich people know this. They gather intel on best practices, new opportunities and potential challenges and solutions. They use this skill when learning, negotiating, exploring, networking basically every human interaction they have!

5. Rich people don't work for money You heard that right. Rich people work to learn. Poor people work for their next paycheck. You see it all around you. Poor people end up working from paycheck to paycheck barely making ends meet. Rich people in the meantime grow their skills and abilities and continually rise up the ranks.

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Once you make money the end goal, you'll be stuck working for it, without growing in your talents and abilities to earn more income. If you work to learn, you'll be well on your way to success.

6. Rich people have mentors

Life is all about relationships. You've heard the saying before "your

network is your net worth." It's true. Now that doesn't mean you should go out there and dump your friends. Instead, it means you should broaden your circle. You see, rich people connect with other people. They identify stars in their field, study them, and through a leap of faith, make that connection. It all goes back to your vision. Who inspires you? What do you admire about them? What do you hope to learn from them? It doesn't just stop there. You have to ask yourself how you'll make a connection with that person. And the best way isn't by sending them a message on LinkedIn asking for a coffee chat. In fact, its the exact opposite. To connect with anyone you'd like in the world, you have to serve them first. Understand their world and figure out how you can add value to them. They'll be much more receptive to mentoring you once you've built a relationship. 199

"Can I pick your brain for 15 mins" messages on LinkedIn don't quite cut it - adding value first does.

7. Rich people always look out for opportunities

Shark Tank is a fascinating show. Every week, handfuls of entrepreneurs stand before the sharks and pitch a new idea. Some of them are wild. Would you ever imagine a sponge in the shape of a smiley face making hundreds of millions of dollars? Or a toilet stool that makes bowel movements easier revamping how people handle their business? Scrub Daddy and Squatty Potty did just that. Their founders were visionaries who saw opportunities in the mundane day-to-day activities of life. If you'd asked the average person on the street how to improve the dishwashing, many would tell you the way we did things was totally fine. But not someone with a rich mindset. A rich person always seeks to improve upon what's out there - and there's always room for improvement. Both in good economies and bad. Past recessions birthed companies like Airbnb, Disney, Venmo, Slack, and Uber. Recessions and times of economic uncertainty birth some of the greatest comeback stories you can ever imagine. It's times like these where differences between people with rich vs. poor mindsets stand out.

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8. Rich people believe in abundance

There's often one core belief that holds poor people back. It's a belief that resources are limited. It's a belief that if my neighbor Jane succeeds, then there's less room for me to succeed. It can often lead to resentment and an assumption that rich people only look out for their own interests. To a person with a poor mindset, resources are always scarce. Rich people, on the other hand, believe in abundance. You've succeeded? Great! Who else can too? Rich people know there's plenty to go around. They do not engage in an "us vs. them" mentality. They focus on providing as much value as they can to as many people as they can. That's their formula for success. Zig Ziglar summarized it well when he said, "You can have everything

in life you want if you will just help other people get what they want." 9. Rich people learn how to manage their finances No one is born knowing how to manage their money. Sure, some people are born into families where financial management is modeled well for them. But for the majority of us, that's not the case. Rich people know this and are proactive in managing their finances. A rich person has a budget. A wealthy person has learned how to invest in the stock market. A successful person made it a priority to get out of debt. 201

Beyond that, rich people understand how to use potentially harmful tools to their advantage. Instead of racking up thousands of dollars in consumer debt, rich people will leverage it to start a business if they need to. They use debt to build and they pay it off responsibly. 10. Rich people are not afraid to fail If there's anything you take away from today, let it be this - rich people are not afraid to fail. They're not afraid of trying something new. They see a problem and they are quick to think of solutions to it. They are not afraid of failure because as long as there are life lessons to learn, they have not failed. You've certainly achieved wins in the past but before those wins, you've probably also had things not go according to plan. Look back at each of them and you'll notice the lessons you learned in order for you to get to the point of success. In conclusion Becoming rich is not hard. You just need to start cultivating habits that will get you there. Like many before you, you too can become a millionaire. It won't happen overnight, but with consistent and diligent effort, you'll be well on your way to achieving wealth. So I'll leave you with these questions: What is your vision? Where are

you going? Who do you want to be?

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Today is a great time to start developing your rich mindset and working towards your goals.

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Emergency Fund.

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Assets that makes you rich.

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Meditation on Money. Personal Finance Simplified will help you take control of your cash flow once and for all.

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