books, Great People, mindset, Reference Guides, Youngsters

Books are a man’s best friend….so the saying goes.

For me books have always been a huge treasure where I have spent a huge fortune. Till I bought my tablet, physical books were what I bought and there are more than a 1000 books in my house and I have also given away another 200 odd books.

Since I bought my tablet I have moved towards buying books on kindle for 3 reasons, the space for keeping physical books has fallen in my house, I prefer to not use paper because it reduces our forest cover and last but not the least, it appears on my Kindle immediately. When I ordered physical books, I had to wait for about a week or more before I got the books delivered to my home.

Some books leave a very strong impression on me and I write about those in my blogs as I read the books.

Last few days I have been reading Steven Kotler’s The Art of Impossible. This is an amazing book. Its very dense with.a lot of knowledge packed in it with lots of data to back it up. If you like to read non-fiction books, especially in the area of human performance then, Steven Kotler is among the few authors I would highly recommend. This is another book which is going into my categories of reference guides.

Now coming to the main point of this post.

Steven actually gives out a Return on Invested Time of reading various formats of written material. I am giving his logic below because I have not come across any author giving such a clear and concise argument for reading a book.

As per him for reading

  1. a blog post which generally takes 3 min – the author would have spent about 3 days to build the content.
  2. an article in a magazine, that would take about 20 minutes to read, the author would have spent about 15 days of research
  3. a book which takes about 5 hours to read would have knowledge of maybe 15 ears of research.

While most blogs are free to read, include this one, you have to spend a little amount of money to buy a magazine, but you have to spend a decent amount to buy a book. The argument which Steven is placing is that for the 5 hours that you invest and the cost of buying, you are getting a bargain for the 15 years that the author invested in getting the knowledge in place.

I have never bothered about the cost of buying books as an issue because since my childhood, my parents inculcated the habit of not compromising on buying knowledge.

But this argument changed my way of looking at reading a book. With the 15 years of knowledge that the author puts in, you are accelerating your learning process so dramatically. That’s why most of the great people have reading lists and recommendations. However the learning would only if you have a growth mindset. Chances are that if you have a fixed mindset, you will not even pick up a book to read.

For the younger generation this could be an eye-opener. The only other way I can think of shortening your learning curve would be attending a live training where you can interact with the coach and other participants.

Let me know in the comments below if you also think alike.

Till next time then.

Carpe Diem!!!

Investment Strategies for Young Girls – Part 4

compounding, Financial Independence, Youngsters

In the first three parts (Part 1, Part 2, Part 3) I covered the basics on interest rates and compounding, then about taking insurance at all costs and then in the last one I spoke about keeping a base income of 3 months in liquid assets which can be taken out immediately. In the last post I spoke about eliminating Credit Card debt.

Today I will talk about student debt as the next biggest killer after credit card debt.

I read a wonderful blog post by Wintery Knight (you can read it here) about how student debt is such a big issue and even a cause of divorces in some cases. What was more poignant in the post was that women ended up taking up student loans and in general did course which ended up in low paying jobs, so paying off the loan took an even longer time.

When I started writing this series – investment strategies for young girls – of blog posts I did not have this kind of data. I was writing more from the fact that most of my sisters, female colleagues, team members were always working very hard, but when it came to finances, they preferred to avoid thinking about it. The result is that a lot of these young women work hard and earn a lot of money but because they don’t know the investment strategies, they are not able to make money work for them.

The thought process – finances, money, maths are things which are better handled by their father/brother/husband, I thought was something more pronounced in India where because of cultural issues women did not think about money, finance and maths.

However the data sources in the Wintery Knight’s blog show that this is an issue even in developed countries like the US. So somewhere maybe the conditioning we give our girls right from their childhood, in all cultures, is a reason for this issue.

So let’s get down to solve this issue of the education loan crisis. If you have done what I mentioned in the first 3 posts and you still have a job, then make it a habit to pay 1.6 times what ever you paid in the previous month/year. So as an example if in the first month / year you pay out $100 then in the next make an effort to pay $160 or as close to $160 as possible. In the next month / year pay 1.6 times of $160 and so on. This is going to use the Hemachandra-Fibonacci series that I wrote about in my blog here…..

This way you will break the ability of the finance company to compound interest on your pending loan amount. Negotiate hard with them to ensure they don’t have a problem with you increasing your monthly/quarterly/yearly payments by 60% in every period(monthly/yearly/quarterly). The more you reduce the amount of principal at the earlier stages of your loan tenure the easier it will be payoff the loan faster.

Now this is going to be tough for the first few years where you will not be able to go out for parties and may not have the money to even buy expensive dresses and cosmetics. You could also however do some freelancing alongwith the job and increase your income ( we will take this up in a separate post).

Entrepreneurship is obviously the fastest way to wealth, but with a loan sitting on your head, it will be advisable to ensure you clear that out at the earliest and also gain experience on the way.

From the next post I will start writing about how you can utilise the laws of compounding to your benefit.

Till then – Stay Safe and Carpe Diem!!!

Investment strategies for young women Part -3

compounding, Financial Independence, Youngsters

In the first part I wrote about some fundamentals of interest rates and the rule of 72 and how using the rule of 72 you will know how soon you can let compounding grow your wealth. You can read part 1 here.

In the second part I spoke about the importance of taking insurance – life and health – before looking at making any kind of investments – because the earlier you take the insurance, the lower it will cost. If you are interested you can view the post here.

Today I will talk about the next thing you should look at before going in for your investment strategy. As you start your job, first ensure that you have your 3 months of expenses set aside. The job market is extremely volatile and you don’t know what is in store the next day. So you should always have money available in your savings bank which can help you meet your 3 months expenses.

You may think of 3 months expenses, equals 3 months salary because you end up spending all your salary every month. That’s not the case.

What you are looking at is the basic things you will need to survive for 3 months if you don’t have a job or don’t get salary for 3 months.

So this would include the rent for the house that you stay in. It would include the electricity bill and basic food requirements. Any loans that have to be paid back monthly and basic travel expenses. It will not include entertainment and eating out budgets. It will also not include holidays and tourism.

Typically the amount needed to survive at a basic level of sustenance for a human being is generally not much. If you will chart out your basic expenses you will realise that in most cases it’s not more than 30% of your monthly salary.

When I was young, I had taken life insurance as my first step. However I would end up spending all my money tht I would earn. Since I was living with my parents, I never felt the need to save. It was only after I had got married and I started staying independently and the company I was working for went in a downturn and we didn’t get salary for months. We did not having enough savings and we ended up buying things on the credit card. But because salaries were getting delayed the credit card debt started pilingup.

Which brings me to the next part. Never ever take credit card debt. I know in some countries, its necessary to improve your credit rating. You however need to understand before you start spending on the credit card, what’s the level of interest they charge on outstanding. Then use the rule of 72 which I explained in the first post. In India typical credit cards charge more than 3% per month, which means that your outstanding doubles in every 2 years.

So say you bought an item worth Rs/$100. After the first 30 days of credit you pay back the minimum 5% of the outstanding due – which is $5. This means $95 of the principle is now outstanding. Next month on this outstanding the company will charge 2.5 % which would mean your total outstanding (principle+interest) would become 97.38. At minimum 5% payment due next month you will end up with an outstanding of 92.3.

I have given above a chart of how your payment will scope out if you just keep paying 5% of the outstanding back. You will take more than 10 years to payback Rs/$100. Similarly if you were to pay 10% of the outstanding amount, back every month at the same level of interest, you would take about 5 years. But if you pay back 25% of the outstanding amount every month then you will payback in about 2 years. And all this is assuming that you have not made an additional expense on the card. Then the the whole chart will change dramatically

Now look at the amount you would have paid back to the credit card company in absolute money over the period of the time you were paying the interest and principle.

So when you take a credit of Rs/$100 and pay minimum 5% of the outstanding every month then you payback more than Rs/$3500 and when you are paying back 25% of the total outstanding every month then you will end paying a total of Rs/$ 431.

What the above is showing you is how compounding is working “against” you and “for” the credit card company. This is the reason people fall into a debt trap and are able to come out of it with great difficulty while all the banks and credit card companies are always growing.

So as a general rule take a credit card because you have to start getting a credit rating built but ensure you are always paying back everything in the interest free period. That way you can actually take advantages of the credit card. I will cover those in a separate post.

For now after you get a job, take an insurance for your life and medical/health. After that ensure you have a bank savings account which has minimum 3 months of coverage of basic necessities covered. Then go for a credit card to build your credit rating, but ensure you are paying back within the interest free period.

Till next time.

Carpe Diem!!!