Posted in Budgeting, Personal finance, Spending

10 things worth spending money on

After months of dillydallying, I bought a second car. I also have a list of home improvements that I want to see get done. With the holiday season approaching, the vacation dreams are taking shape too.

However all these cost money, some little some a lot. And didn’t we say, we want to save more, invest more so that our retirement corpus grows with time? The $20000 spent on a car (decent, used or new), if invested instead can go a long way in boosting retirement savings over 15-20 years.

But life also gets in the way. We do have emergency fund for the unforeseen, worst case expenses. So are we going to just live frugally and save the rest?

After all, desires and dreams also make your life worth living. You have to find a balance on how to live a fruitful life and yet not damage your personal finances. However, it is very important to avoid consumer debt in all cases, and be ready to save and pay cash for these desires and wants.

I did exactly that. I had neat sum saved up in a savings account, and was procrastinating how to invest it. I also knew at the back of my mind that the family may need another car. Finally I gave in to the need and bought the car.

Thinking through this phase, I realized there are few expenses which are better made when the need arises. So I compiled a list of 10 such expenses, which are intangible investments in a way. These apply to my situation, yours may be different and so make your own wish-need list.

Insurance

We think bad things cannot happen to us or our family. However life is uncertain. I experienced this last December, when a very close family member in India met with an accident and passed away suddenly. He left behind a wife and a school going child, and being the only bread earner in the family, the whole situation was very shocking and sad.

Life insurance, health insurance and disability insurance are things no one should ignore. The exact amount of  the need should be assessed and insurance purchased as soon as possible.

I have also seen in India, people do not want to buy pure term insurance in which you do not get back anything if you survive till maturity. That’s precisely the meaning of insurance, to transfer the risk of  a life/event to the company. Many unscrupulous agents push cash-value, investment plans at a higher cost and lower insurance just to lure the people who wants to get back a return.

Keep the investment for the low cost mutual funds and ETFs, and buy insurance for what it is. And there is no better alternative to a cheap and effective term plan.

Peace of mind is worth paying for. 

Car

A good car is a must for our commute, weekend trips and running errands. As I researched my way through used cars in various forums like Carmax, craiglist and dealers, one common theme came up.

You can get cheap deals (Dave Ramsey’s proverbial $1000 car) but they may cause you more headache down the line. If you are anyway buying it, you better buy it to use for a number of years. I don’t plan to trade in my car in just 2 years, just to upgrade to a bigger and newer model.

It is always better to wait a few more months, save up more through a budget and then pay cash for a decent car (2-4 years old) with low mileage. These are the cars I bought in last two years.

  1. 2017 – Toyota Corolla from a private party – 2015 model, < 20k miles for $11,000 cash.
  2. 2018- Toyota Camry from a dealer – Certified Pre-owned 2017 model, < $25k miles for $18,000. I traded in the Corolla, as I wanted to pay cash and did not want to hold two cars. So I just had to pay the difference in cash.
  3. 2019 – Honda Accord from the same dealer – 2017 model, < $20k miles for $17,600 paid in cash.

So with the Camry and Accord, my needs are met for the next few years. Me and my wife do not have to timeshare our work anymore, it was only possible earlier as I was working from home. I think it is money well spent, and with no debt (a.k.a car payments).

Debt-free mobility is another name for Freedom. 

Vacation

If done correctly, and afforded with cash, this is one of the events I look forward to every year. And who doesn’t?

While in India, we used to go to the beach town of Goa every year, after the Dec 25 – Jan 1 rush is over. It gave us access to the same festive ambiance (since the beach shacks are still celebrating with their longer stay clients) at a much lower cost. The airfare and the hotel prices start dropping after Jan 1.

Now from US, one of the vacations I save for throughout the year, is visiting India in the summer. It is very relaxing to be able to meet family and friends and also keep my children bonded to their roots.

Whatever you do, make sure you enjoy it. A vacation bought with debt only brings back stress and payments, and hence make sure you save up for this event throughout the year. It’s an investment for your well being, and like any regular investment this should be planned and saved in small increments.

After all, stuff do not make you happy, experiences do. 

Home improvements

This can be small to big ticket items. You can fix or enhance small things like paint a wall or room, or bigger improvements like a kitchen or bathroom remodel.

While it can be very costly to do the high end remodel, this is a project that can pay off in the long run. Some well designed improvements like in the kitchen, bathrooms, an extra room increases the home value, while others may just increase your happiness and convenience to the family.

We had this problem where we did not have an extra space in the house, for my children to practice their dance lessons. We had to move the couch or dining table every day and it was becoming quite inconvenient. The natural reaction was we need a bigger house.

But then we realized we use our garage for only storing junk, and may be the car in the night. Throughout the day, it is an unused space that can be used. Cooling (AC) the garage effectively is a problem, but the kids are not going to practice for more than 30-40 mins anyway. So I spent about $2000 to have a shiny epoxy floor and some lighting installed. In that $2000, we now have a beautiful hobby space, and my wife improved it further at very low cost (just interior decoration and a bigger fan) to shift her music studio there.

At night, we still park the Camry inside. Its all about space management with an investment of $2000.

Home is where the heart is. Do not neglect it or underestimate it’s intangible value. 

Netflix

After the above expensive proposals, here is sweating the small stuff. However its not small, as cable expenses can add up to hundreds of dollars for some people.

While in India, I realized that I do not need the 100+ channels that the local cable or some of the high end services were advertising and everyone buying them.

Except for certain sporting events, I just ended up surfing and jumping from one channel to another killing time and really not watching anything to the full. I guess choice spoils you and your time.

So then I discovered Netflix (it was still new in India few years back) and subscribed to it. I knew if I needed entertainment, I can just start a movie and sit through it better than listening to a news anchor shouting at the top of his voice, throwing his political opinion.

Netflix has remained with me since then and the only TV subscription I have in the US. The $9/month is a good investment and much more value for money than any other TV subscription.  With free YouTube complimenting the rest, I don’t need to spend any more on passive entertainment.

You will be more entertained when you channelize your focus to one medium. 

Books and Courses

From my childhood, my introvert nature has one true friend – Books. I love reading and it has increased over the years to varied topics like technology, business and personal finance.

A part of my budget is spent on kindle books and paperbacks. This is also the reason why I do not need anything beyond Netflix, as my free time is well spent reading otherwise.

When I came to US, I discovered the local library which opened up a further avenue for my reading at $0 cost. The public libraries are an excellent initiative and maintained by the city here. Sadly they are long lost in most Indian cities, only some schools still have them.

To grow myself intellectually and improve my skills, Coursera has also been a huge help. Nowadays they run many good courses with a $49/mo plan, where you can take the course at your own pace (faster the better as you pay every month) and it gives you a certification. I am presently doing this amazing course on personal finance.

Personal and Family Financial Planning

and finished the following recently.

Finance for Non-Finance Professionals

The certificate I received looks something like:

Coursera certificate

Its certainly a wise investment and a satisfying experience to learn continuously out of work and school.

Education is much more affordable and accessible now than ever before. Use it and grow your skills and knowledge. 

Eating out

The finance gurus will scream – Live within your means, should not eat out, drop that latte and save the $3.50 everyday. But what is the problem if you have budgeted for it, to eating out with family twice a month? Or a set amount like a $100, which can amount to 2-3 dine outs for the family depending on what kind of food and restaurant you eat at.

It is a way to unwind once a week or two, and treats your taste buds to different cuisine. Socializing with friends and family also makes you happy and you get back to work on a Monday fresher and looking forward to another week.

Of course, daily and random eating out can have adverse effects on health and finances, hence like everything else, it also has to be budgeted and planned for.

Dine out not for the food, but for the experience. 

Productivity stuff

I have talked about automation in personal finance and other areas of life in an earlier post.

Five components of a personal finance system

Similarly with the automation of FinTech, you can use lots of tools to improve your productivity in managing personal finances.

FinTech – can you be immune to it?

Some of these websites and tools charge a monthly/annual fee, while some others may be fees for investment or specific service.

These fees, if reasonable, can be well paid to get the convenience of automation and services that will improve your productivity. Some of the online services and apps that I use are:

Elevate – Brain training and brain games – this is an excellent app which trains your brain and tests skills in Math, Reading, Writing, Listening and Speaking.

Rentometer and Dealcheck – Real estate information in USA. They help in evaluating rental properties. However, subscribe to the paid version only if you are seriously going to invest in rental property. I used them for a year but then dropped my plans as I am not investing in this hot real estate market. The reason I mentioned them here is the service is very good and constantly improving. I even wrote to the CEO of Dealcheck and gave him a suggestion of a new feature. I was happy to see that they rolled out the feature in next few months.

You Need a Budget (Y.N.A.B) – I use this for my daily and long term budgeting. The features are worth paying the $84/year and helps me to keep a holistic view of my cash flows.

I am sure you will find your own useful apps and after the trial period, if it seems useful in the long run, do not hesitate to sign up for the paid version.

Only thing to keep in mind is that we sometimes turn on the subscription and then forget to use it till the next year, when the credit card on file is charged automatically.

One way I manage it is – I download the app on my phone, and keep it all in one folder called “Productivity” or “Personal finance”. I visit this folder daily at least for the apps that I need to use. It gives me an instant look at the others in the folder which are lying unused. Once I figure out I am not going to use it in the near future, I cancel the subscription. This is how I discovered that I was not using Rentometer and Dealcheck after a few months. Most of these subscriptions let you finish the tenure that you already paid for, so you can keep using it and ramp down your usage.

Paying to get back your time and establish a system is worth its penny. 

Offline Automation

What is the offline automation? Just like online apps and automated services, there are some things in life that are unavoidable but you don’t want to spend your valuable time on them. For example, Amazon has made it so easy to get things delivered that running errands have cut down by a lot for most people.

For me, tasks like mowing the lawn or fixing the plumbing (when it develops a problem) are simply not expertise I want to build or spend time on. Hence I outsource this to contacts and experts who know their job, and in turn I don’t mind paying them regularly for their services. I also subscribed for a Home Warranty who dispatches service professionals when I have a problem with my household appliances.

It can get costly though if you want to use this blindly. You have to develop a good idea of the cost of each service through collecting quotes or researching on the Internet.

But at the end, I think its money well spent if it saves me the headache and time to try to do everything myself. And indirectly, I get to help the local businesses run.

Expertise is available and widely distributed, make use of it judiciously. 

Giving

Last but not the least, Giving is never regretted. In fact, what you give gets back to you in multiples of the original amount.

This is God’s way of paying interest to the good people.

I am not an expert on charity, and as long as you can find a legitimate and genuine organization which helps the needy, this is an activity worth spending money on and automating the giving every month.

Even if its just $20-$50, automate it so that there is no hesitation left. Sometimes we know we should, but we keep postponing it till we think we have enough surplus to give.

It is difficult to get over the inertia, so just like “Pay yourself first”, pay your rent on the Earth and help the not-so-fortunate brothers and sisters.

Giving is a way to abundance, even if it sounds counter intuitive. 

Conclusion

In personal finance, the gurus and pundits constantly talk about saving, investing and minimalism. However life is not about accumulating wealth alone – money is a way to gain freedom and is only a means and not an end.

The real freedom is when you are happy doing the things you love, and some of them do cost money, defying all financial logic and the only return is happiness.

If you love music, you know what I mean.

two men and woman sitting next to each other
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Posted in Investing, Liabilities and Debt, Personal finance, Savings

The universal truth about Dave Ramsey’s 7 baby steps

Who doesn’t know of Dave Ramsey? 

Even my 10 year old kid has been taught about Dave in elementary school mathematics.

Dave Ramsey is America’s trusted voice on money and business.

Well he is popular for a solid reason. In this post, I will describe why he makes perfect sense to me.

When I immigrated to US in 2017, I did not know who he is. I was trying to quench my thirst for new personal finance books, especially on the US system. Then I stumbled upon Dave’s Total Money Makeover.

As I read the book, initially his rant against debt was a bit overwhelming to digest. However thinking deeply, I realized that coming from an Asian country, I have unconsciously followed the same principle for decades.

Why this coincidence? Because the principles are universal and extremely healthy for personal finance, no matter which economy you come from.

If you do not know yet, here is a recap link to the 7 steps from his website.

Dave Ramsey’s 7 baby steps

Here are few points where I found an one-one match with how traditional Asian (India) household finances worked.

Have an emergency/contingency fund (Dave’s baby steps 1 and 3)

There are many names to this – emergency fund, contingency fund, rainy day fund. In many Asian households, it goes by the simple name of savings. Savings is in-built into the culture and an emergency fund is a default choice.

In a way, if you don’t have debt instruments (HELOC, Credit card) available to you, how else will you pay up for maintenance, car breakdown, education etc.?

Answer is simple, money socked off into a separate bank account – lo and behold, by end of the year, you have an emergency fund.

Use Cash – or debit card at the most (Dave’s baby step 2)

Before moving to US, my only credit card was a HDFC Bank Premium card. I was sold this card citing lots of benefits like reward points, airline miles, premier lounge access etc.

The truth is that I used it only for big purchases like appliances, electronics or vacation. And that too, because I knew I had to pay it off at the end of the month and just deferred the money being taken out of a CD (Fixed Deposit as named in India).

If I look back, except for getting a few discounts at clothing stores, I did not reap the reward points. Never had the idle time or need to figure out how to access the premier lounge. Once I tried to book a holiday trip through the miles, I found that I could get it for lesser by buying a cheaper economy ticket. Yet I paid an annual fee (or had to spend a minimum on the card to avoid the fee) for those unseen benefits.

Credit cards may work better in the US, but it is also a double edged sword. Americans are saddled with trillion dollar credit card debt. (source: Dave Ramsey) 

All my household daily expenses ran on either hard cash (lots of places in India do not accept any cards) or debit card.

Simply put, I never felt the absolute necessity to hold a credit card. Some people say its good for emergency situations, but then the previous step already solved that problem.

Oh there is one more reason – online shopping. In India, Flipkart has a C.O.D (cash on delivery) option. If that doesn’t work or not offered, you can pay using NetBanking which all online vendors provide with major banks. It is equivalent to using debit card, but without the card number. You are redirected to the bank website and you can authorize the transaction from your account, using login and password.

Retirement savings (Dave’s baby step 4) 

There are government retirement plans like Provident Fund (equivalent to 401k), Public Provident Fund (equivalent to Roth IRA) and now the NPS (National Pension System).

The first two are effectively tax exempt with the Provident Fund being tax E.E.E (exempt on contribution, growth and withdrawal). The only drawback is that the investment options are traditional – debt based with an interest rate guaranteed by the Government. The option of Equities has only come up as an option in NPS.

The Provident Fund or the NPS is now mandatory in most organizations for their employees. The amount you can invest from your paycheck typically hovers around 12% (with matching grant from employer), and is close to Dave Ramsey’s recommended savings of 15%.

There are of course private options from brokerages/banks to invest in mutual funds and stocks, as also R.E.I.Ts are now coming up.

Children’s education – use cheaper (sane) options (Dave’s baby step 5)

There is hardly any concept of student loans. Education is still affordable, though it is becoming expensive each passing year.

And despite the huge competition (owing to large population), there are no Ivy League schools to lose your shirt on getting a degree. Even the premier institutes like Indian Institute of Technology, or Indian Institute of Management are well affordable with their excellent career prospects.

I don’t have all the education expenses data, but I have not heard of any student saddled by student loan debt or carrying it well into their adulthood and married life.

Moreover in recent years, the growing start-up culture in India has also made an expensive education pretty much irrelevant.

Pay off your house (Dave’s baby step 6)

In US, people hold their mortgages for 30 years, and do not need to pay back earlier.

And it is more helped by the low interest rate regime that is sweeping the news everyday.

However in India, average mortgages survive for 3-5 years, before they are completely paid off. Both my mortgages in India were paid off in less than 5 years.

What is the reason for this? There are several factors.

  1. Interest rates are higher – typically 8.5-10%. This causes people to take mortgages with lower than 80% Loan-to-Value, to avoid big E.M.I (equated monthly installments).
  2. Higher down payment earns good discount from builders. One of the main sources of home buying in India is from builders.
  3. Floating rate mortgages – The interest rate by default is floating. Fixed rate mortgages have a much higher interest rate, typically 1-2% higher. Carrying a floating rate mortgage is risky, hence the tendency is to pay it off as soon as possible.
  4. Last but not the least – its a debt-averse culture. You don’t feel good till you actually own your home, free and clear.

Buying a house in India is stressful owing to the sector’s corrupt practices, less regulation and random mismanagement of funds by builders. Hence keeping low to no debt is prudent not to add on to the crisis.

Building wealth and Giving (Dave’s baby step 7)

The last baby step in Dave Ramsey’s plan is the absolute bliss.

This is where a lot of well to do families will be. With the above steps explained and if followed properly – they will be living in paid for houses, driving paid for cars (some with chauffeurs), have a good retirement corpus that is growing, children graduating from college without student loan debt, and an emergency fund stashed out in some savings account.

Now they can buy more investment assets like real estate, stocks and entire businesses.

You start building serious wealth and enjoy true Financial Freedom.

As Dave says, “If you live like no one else, you will live like no one else”. 

Now the last part is Giving. This may not be traditionally so popular in India, due to many factors. However lot of new initiatives are now trying to organize charity and reach to the real needy.

The huge wealth inequality throws up a lot of opportunities of giving. However if you are not careful and the non-profit organizations are not well researched, you will end up making some fraud people rich. I have ended up donating to NGOs (Non Government Organization), who started showing a suspicious pattern of corruption (sometimes irritating me with calls and messages for more). It becomes clear they want to milk you in the name of charity.

However with little diligence and online/offline research it is possible to select meaningful giving opportunities. 

Thus Dave Ramsey’s 7 baby steps are definitely a recipe for success with personal finance. I have only drawn a comparison with what I have lived and seen in India.

Dave’s success in getting millions of Americans out of debt and living their dream life is a testimony to the sound principles that the 7 steps represent.

Live like no one else. If you are not forced by the system, be intentional about the 7 steps. 

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Posted in Budgeting, Personal finance, Savings

Five components of a personal finance system

There are many articles on how to be frugal, how to save more, earn more and invest for high returns.

All this is good advice, and the Internet is full of such articles, blogs, videos, courses.

However the key to saving money and investing for growth is action and the discipline to implement the good practices.

If you go through most of the articles, some common themes emerge such as:

  • Pay yourself first
  • Do a proper budget or at least allocate money to your various expenses
  • Big tax refunds are not cause to celebrate
  • Get out of debt
  • Regularly invest a little
  • Use Robo advisors
  • and so on…

Yet lot of people (some say 78% of Americans) live paycheck to paycheck, and will not be able to cough up $400 cash in times of emergency.

With so much of good advice and technology out there, why then we still have the problem with more than 50% of the population? What is different with the 10-20% who manage to create and keep wealth?

I think the answer lies in being organized, intentional and disciplined. As Dave Ramsey said “Personal Finance is more behavior than numbers”.

It requires a system to be organized and manage your money. Once the system is in place and you get into the habit of it, you will automatically resist impulsive behavior.

In this post, I will highlight some of the systems that I follow to organize this area of my life. And remember, the more organized and intentional you are on personal finance, it impacts rest of the areas of your life as well. Cliche, right? Yes but difficult to implement.

There are 5 parts to the system:

  1. Automate
  2. Cap
  3. Archive
  4. Remind
  5. Learn

Just for fun, lets rearrange and call this the CARLA system (Cap, Automate, Remind, Learn and Archive). Really the order does not matter.

1. Automate

Automation is the heart of any system. And with most of the financial products employing high end technology, there is no reason to avoid automation.

A simple automation makes the “Pay yourself first” a breeze like operation.

For example, in my case, the first bi-monthly paycheck (pre and post tax) simply goes to my mortgage and investments (retirement, 529 plan, HSA, investments). I just cannot see it in my checking account by the 2nd or 5th of the month.

How do I run my expenses and pay my bills then? Another automation.

All my bill payments are set on the one and only credit card that I use. It is completely automated so I don’t need to remind myself to pay electricity, water or phone bills. The same credit card is used for first half of the month to buy essentials.

By the same system, the second bi-monthly paycheck pays off the credit card bill in full.

A portion of that also goes into savings for short term goals (provided the credit card was not overused – we will talk about caps in next section).

Advantages:

  • Naturally implements the Pay Yourself First.
  • Automated bill payments, so no chance of forgetting and running into credit problems.
  • Earn points on the credit card, as all expenses are charged to the one.
  • The credit card is automatically paid off within the month.

Risks

  • Need to control expenses as the credit card balance should not overshoot the projected amount.
  • Unexpected debits to the checking account (checks issued, or charged by institutions) may cause overdraft scenarios if not careful or kept track of such expected transactions.

The Starter Kit explains how to setup a system from scratch.

2. Cap

One of the toughest part of personal finance behavior is to cap your spending. No amount of technology or automation can address this adequately. There are budget apps, reminder apps, envelope system but at the end of the day, if you are armed with a credit card, there is no stopping you.

There are two ways to address this:

  1. If you are using a credit card, then absolutely you will need a budgeting and expense tracking app. I use YNAB (You Need a Budget) but I have heard people liking Mint or Personal Capital. In these apps, you can set limits for spending under each category like Food, Transportation, Utilities and Fun. Here is a referral link to YNAB.
  2. However a more effective way and not to run into debt, you can automate to transfer the estimated monthly expenses to another checking account, and use the ATM/debit card of that account. As soon as you see the account is drying up, you know you have to rein in your spending. As you do this more, you will slowly understand the pattern and be able to make or adjust estimates.

Advantages:

  • Having a cap of expenses is non-negotiable in the pursuit of good personal finance habits.
  • You know exactly where each dollar is going and how to optimize or reduce the outflow.

Risks:

  • The first approach definitely has the risk of running into credit card debt, and not able to pay in full.
  • The second approach is safer but if you are not keeping track, can hit you with overdraft fees or embarrassing card decline at the checkout counter.

Yet another simple budgeting mechanism is described in Budget – Grow the tree upside-down .

3. Archive

A good archiving system is also key to good personal finance habits. Not only habit, but it keeps you stress-free. Remember the scrambling during tax filing season, looking for bank statements, dividend results, interest certificate etc.

Moreover we have multiple sources of information, statements coming through email, snail mail, website downloads, or even previously archived repositories.

A simple system I follow consists of a uniform folder structure across multiple sources of information.

There are 4 aspects of personal finance that you need to keep track of.

  • Banking – Accounts, statements, credit cards, interest certificates.
  • Investments – Portfolio Statements, dividend statements, recommendations, documents from financial advisers.
  • Taxation – Everything related to your taxes year wise. Returns, documents sent to CPA, CPA communication, IRS communication and so on. For each year, I have the following folders.
    • Year
      • Source documents – Everything I sent to the CPA
      • Processing – All drafts and iterations I had with the CPA
      • Final – Final copies of the filed return and acknowledgements etc.
      • IRS – In case there are any direct interactions with IRS after filing (notices, response, tax due, tax paid etc.).
  • Insurance – Insurance policies, forms, statements, estate planning documents.
  • Bills and Receipts – Miscellaneous bills and receipts if they do not fall into above categories.

With the above organization, you can simply create the archival system in all your information sources.

  1. Gmail – create these as labels or email folders.
  2. Evernote – you can create notebooks and store documents as notes under each notebook.
  3. Google Drive – create folders. You can save attachments from gmail directly to these Drive folders.
  4. Laptop local drive – Sometimes it is best to store in the local drive than cloud. That is, if you are uncomfortable storing documents containing sensitive information (SSN, date of birth) into the cloud. Be sure to periodically back this up into external hard drives.
  5. Physical documents – Paper statements can be either scanned and stored in above places, or simply dropped into file cabinet drawers, with appropriate labels. The labels should follow the same categorization.

Once you have the uniform structure across all these platforms, storage and finding information is easy.

Advantages: 

  • Easy to file and find.
  • Following same structure in all systems that you use.

Risks:

  • None at all.

4. Remind

So you have automated, capped and archived personal finance. But what about still those actions to be taken, follow-ups to be done and making sure time sensitive things do not fall through the cracks?

I don’t want to describe personal productivity or time management here, but an essential part of managing personal finance is timing. There are taxes to be paid quarterly, investments to be made, or simply a phone call to be made.

Choose whatever system works for you as reminders, be it an app on your phone, or calendar on the laptop.

For me, plain gmail works as it has a snooze facility, by which I can redirect any email to come back to my Inbox at the time I need to take action. In my opinion, it is an important tool in time management as now I can remember to take action at the right time. It just pops in my Inbox on that Sunday prior to the week I need to take action on that. 

Another good platform for keeping track of your laundry list is Trello. I use it quite extensively and the concept of board and cards, helps keep things visually clear.

Advantages: 

  • Even if you automate everything, there will be things for which action needed to be taken timely.
  • Remain stress free and auto-magically respond or follow-up with people at the right time. Sometimes this surprises people as they may have promised to do something (or get back to you) and you follow up on the agreed date. 

Risks: 

  • Unless you stick to one system (Trello or Gmail), you run the risk of multiple apps keeping track of your to-do lists and confuse you enough not to take action or update new items.
  • You may run the risk of irritating some people who do not like to be followed up, especially if they wanted to forget what they promised.

5. Learn

I cannot emphasize this enough and with the plethora of information on the Internet, whatever I say will sound like cliche.

However as with any field, it is important to keep yourself up-to-date with advances in personal finance topics. 

One of the simplest ways is to dedicate a couple of hours every week, to read about different topics, blogs and videos of personal finance. You can subscribe to magazines like Money or Kiplinger. Or simply come back to this blog as I normally post every week.

Advantages: 

  • Learning is always good, and opens up new opportunities for you.
  • You build your own system and strategy as you read and learn techniques others have used.

Risks:

  • Don’t get obsessed by personal finance reading, as it can get repetitive very easily. You may end up wasting lot of time reading the same message in different ways.
  • You may take wrong action or jump into investments without fully understanding the consequences, or simply following some author’s thumb rule from a book.

These are the Five essential elements of a good system that can be setup with minimal infrastructure. It worked for me and I hope you find it useful. 

My CARLA system (Cap, Automate, Remind, Learn and Archive) – a system to automate, manage and grow personal finance. 

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Posted in Investing, Personal finance

Know yourself and your investments

I am back after a long hiatus, as I enjoyed a fabulous vacation in India. These are times when I can introspect and know myself better and deeper. Nothing to do with the spirituality of India, but just an opportunity to separate my mind from the daily rat race, and consider what is really important.

Like everything else, personal finance is also very personal. You got to know yourself thoroughly to understand how to restructure your finances, savings and investments to fit and serve your own unique needs. It cannot be driven by advertised claims from pundits, or hyped up investment professionals.

There are several occasions when I made the mistake of trying out something which did not fit my personality or immediate goals. It was just giving in to the popular notion of what I should be doing, without thinking twice about it.

Once I was nominated or elected for a post in the HoA (Homeowners Association). While the work or responsibility was not very complex, but the surrounding politics and conflicts required a lot of different people handling skills. I utterly failed in this endeavor and quickly realized that it is not for me. I have better things to do and spend my time on.

Similarly as I read more on Real Estate Investing and the numerous strategies, I wonder is it possible for everyone to jump in and spend so much time or build such skills to be successful? Or is it better to stick to your own vocation and invest passively, thereby spend your valuable time doing what you can do best. This will also increase your income and put you through a better path to success. This is of course provided you like your job and not desperate to get out of the 9-5 routine.

Some of the investment avenues that people jump into without much education or risk analysis.

  1. Direct stock investment
  2. Real Estate investment 
  3. Life Insurance coupled as investment
  4. Crypto-currency 
  5. Exotic Art and collectibles

If you are like me, who likes to keep things simple outside his area of expertise – here is a no-nonsense investment plan.

  1. Try as hard as you can to stay out of debt. Create a budget to track your income and expenses and live within your means. See the post: Budget – Grow the tree upside-down
  2. Maintain an emergency fund and create a cash cushion. See the post: One essential comfort zone
  3. Invest in simple Index Funds and create a goal based portfolio. See the post: Investing in the High Five portfolio
  4. Keep emotions under check and have a realistic plan. See the post: Emotional Investing
  5. Last but not the least, Get Started. See the post: Shun that perfection
  6. Use the following tools to get started. See the post: The Starter Kit

Finally invest in what you understand fully and comfortable in dealing with.

Rest everything can be ignored and continue a stress-free financial journey.

gps on phone
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