"Finding good partners is the key to success in anything: in
business, in marriage and, especially, in investing". -Robert
A tricky situation: one of my junior colleagues got married not long ago.
He has been in love with his wife for quite some years and was extremely confident about his
marriage sailing through.Just a couple of months back before his marriage I happened to ask him
,quite casually of course regarding the financial budget allocation with respect to his marriage. He
looked at me as if I spoke some utterly confusing words!! Oh brother!!! Come on !! Marriage is
about understanding and not money matters!! Finance not money, I quipped in. Same thing!! Forget
the complexities in life!! Enjoy!!! That was my colleagues' philosophy. I thought it would to sane to
remain silent!!
Couple of months have passed after his marriage.Now he looks depressed and strained and unable to
focus on the matters in hand.
I thought , may be I should talk to him. And from the conversation between us certain problems
became crystal clear which I thought was inevitable.
Problems:
1. The colleague did not have a budget prior to his marriage.
2. He had to take a personal loan from that bank at a high rate of interest(14.75%) to meet his marriage expenses.
3. He recklessly spent money buying unnecessary and often expensive items, which in spite of his new life, should have been a clear avoid.
4. He is struggling to pay back the loan.
5. He is unable to carry on with his life style any further causing great discontent in his partner.
Solutions :
1. Plan a monthly budget.
2. Adhere to this budget strictly.
3. Explain the entire situation to his wife.
4. Tell her he loves her but won't be able to carry on with high expenses.
5.Prepare to cut on expensive visits to malls, buying clothes, or even restaurants.
6. Spend time with her and make her a joint financial planner of your budget.
7. Focus on clearing the debt.
8.Even if it means you have to cut on your investments.
9. Maintain the cash-flow by investment cuts and other expenditures.
10. Take advise of a good financial adviser.
Now let us assume he eliminates his debt by the 3rd year. In the meantime he may carry on with his
cut throat budget.His partner may be confused, feel betrayed, feel nervous, anxious and have mood
swings. But never let her go. Confide in her. Boost her morale.
Now both of them are ready. They have had their share of wild imaginations and harsh reality. Now it is time for them to plan a family and allocate their assets.
As per the golden rule of not putting all the eggs in the same basket they shall distribute their asets wisely.
1. They shall have assets both in money as well as equity markets.
2. 10% of their assets shall be in gold. Gold is an excellent commodity for hedging during economic downturns.
3. The rule of thumb for investing in equity markets is,
100-age of the investor
4. Assuming he is 30, he shall put 70% of his money in equity or equity related products.
5. 10% of his money should go to PPF (Public Provident Fund)
6. 5% of his money should go to the contingency fund.
7. 5% , provided he is aggressive enough should be invested in REITS ( Real Estate Investment Trusts) which of course gives a very handsome return.
And remember this is allocation of his savings which shall be considered part of his expenses.
And he must pray for a 5 year bear market ,or be a pessimist so that he buys his financial products at a cheaper price and be a long term optimist so that he can sell them at a higher price in a distant future.
Money you won't need to use for at least seven years is money for investing. The goal here
is to have your account grow over time to help you finance a distant goal, such as building
a retirement fund. Since your goal is in the future, money for investing belongs in stocks.
-Suze Orman
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