8 Steps to Financial Planning

financial planning

What is Financial Planning?

Financial planning is planning your finances to meet your long-term financial goals. You had to be very disciplined when you do this, you must know how much are you earning, what are your expenditures & how much are you going to invest every month and how are you going to achieve your goals.

Financial Planning is very important to lead a Stress-free life.

Steps in Financial Planning

1. Listing down your Goals

Sit down and put your thinking cap on. Write down whatever goals come into your mind. Either small or big. For example:

Buying Home
Buying a Car
Child Education
Child Marriage
Vacation
Retirement

Along with this, there must be a very clear timeline associated with the Goal. Something like “I want to buy a Car after 3 years, which will cost 7 Lacs at that time assuming the rate of inflation”.

2. List down Your Cash Flows

After the first step, we will prepare the list of your cash flows,

Cash flow Statement means, how much money is coming in and going out? Any income earned is a Cash inflow and any Expense is Cash outflow.

It will help you understand how much are you earning & how much are you spending how much is remaining for investing purpose.

3. Understanding and figuring out your Risk-appetite

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How to live a Stress-Free financial life?

How to live a Stress-Free financial life thru Saving and wise Spending of Money?

How to live a Stress-Free financial life?

Personal financing of your money is something that needs much of your discipline to make it work well.

Here are tips to have a happy stress-free financial life.

1. Have yourself paid first: Aim to put away at least 10% of your pre-tax income into your savings account. Individuals usually save money which is left after their expenses. As soon as you get the salary, keep aside the saving amount and then try to spend on your expenses from the remaining money.

2. Be strict in spending less than you earn: Keep yourself away from so many demands of shopping. Be not an impulsive buyer. Only use credit cards for utility bill payments or in case of emergency. Stop spending too much. Start saving.

3. Pay your bills on time: Avoid needless late fees as these may cause delays or interruptions in your transaction. Keep track on how much money you actually have. As soon as you get SMS or email of the payment reminder. Note in down as an alert in your google calendar or mobile phone. Bills and expenses put a lot of stress. But if you go with right ways, you will be prevented with debt problems. Continue reading “How to live a Stress-Free financial life?”

How to deal with Personal Finance?

Personal Finance: How to Deal with It

Personal finance takes the principles of micro-financing and applies them to the needs of an individual or a household. In light of the global economic crisis, wallets and bank accounts are put into shackles, and debts are becoming as hard to manage as they could be. Lucky for those who have had savings since birth – thanks to parents who know their own personal finance practices. For a lot of us who are struggling to survive, there is no better way to start being conscious of money but now.

Measure Your Spending and expenses

The key to managing money is planning your finances, which starts by setting your goals (both short term and long term) and closely monitoring your money flow in lieu of those goals. There are some apps that you could download to your cell phone and use for monitoring your money – Monefy, Microsoft Money, Money Manager, for instance. Some of the features could even be used for free. Continue reading “How to deal with Personal Finance?”

Survivorship bias in Trading

Survivorship bias and Trading

I know you are also unaware of the term survivorship bias and right now scratching your head or googling it. Here’s a Wikipedia link to get information on the Survivorship Bias.

Survivorship bias is the logical mistake we make while thinking or decision-making process about something. We ignore certain facts and fail to think on the opposite side. Which might impact your decisions and outcomes.

Let me explain by some examples.

Startups: Nowadays everyone is thinking about starting a new startup, Including you 😀 .  Why? Because startups make you rich in a big way. You can be master of your own destiny and enjoy a lavish life.

Wonderful isn’t it?

You are super wrong. According to the survey done by IBM in collaboration with Oxford University, Only 10% of Startups survive till the age of initial 5 years. God knows how many survive in the long run.

So, If the majority of Startups fail then why we are still thinking of taking risks?

Because the media and the Internet say so. They paint a rosy picture and show interviews of successful start-ups. They show success stories of individuals who seek after their fantasies and beats the chances. you feel so damn motivated after you see an interview with a smart young man, way younger than you, earning in millions. Books and the Internet are filled with articles on how to become a millionaire or how to start your startup?

Nobody talks about the remaining 90%. Everyone feels taboo talking about those. The astounding numbers of failures are not visible to the individuals, and only those who succeed are shown regularly.

The Misbelief: You should follow the successful people and their habits if you want to become successful like them.

The Truth: When disappointment ends up noticeably undetectable, the contrast amongst disappointment and achievement may likewise wind up unnoticeable.

Another example

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What is the rule of 72?

Let’s discuss the rule of 72 today

The Rule of 72

Investors invest for one primary reason – to make a return on their money. Compound interest is the friend of an Investor.

What is Compound Interest?

Compound interest is interest that accrues based on the total balance of principal and accumulated interest. Compound interest is a powerful tool for getting the financial glory.

What is the rule of 72?

The “Rule of 72” is a simple, quick and easy way to calculate the length of time in which money doubles at a certain interest rate.The Rule of 72 is a math formula that tells you how long it will take to double the value of the money you invest:

Firstly, Find out your interest rate…
Second… do the math!

  • 72 / interest rate = # of years
  • Example: $1000 invested at 6% interest rate
  • 72 / 6 = 12 years –> In 12 years $1000 will double at 6%!

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Free advice can cost you 1 billion

How a Free advice can cost you 1 billion (1 crore rupees)?

free advice can cost you

Why pay for financial advice when you can get it for free? You get it free from friends, colleagues, relatives, bank executives and insurance agents, right?
But have you ever wondered that the free advice can cost you a lot of money? For example, if you buy a costly insurance plan that you don’t need or a mutual fund that does not suit your investment profile, you will lose much more than the annual fee of a financial planner. True Financial Planners are not Advisors or Product Sellers and they prepare a Financial Plan that is based on your need, your situation, your goals and your risk appetite.

Let’s do some Maths

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Why you’re not a Millionaire and how to practically become one!

Why you’re not a Millionaire and how to practically become one!

It seems to me that most people I meet really have no idea why they’re not wealthy. They blame luck, misfortune and a host of things that they simply couldn’t control. This right here is the number one reason why these people are not a millionaire! They blame things that they had no influence on instead of looking at the things they could control.

The cold hard truth is that most people would rather sit and watch TV or go out drinking then challenge themselves to make a living outside the “norm”. Let me clarify what the “norm” is here when I refer to the “norm” I am talking about a 9-5 job making an average livingbecome a millionaire and that’s the end of their way of making any income at all. Working for someone else, making their boss rich while they take home a “living” wage. Now even with this “living” wage, it is possible to become a millionaire through saving and investing, but for most people, they won’t become a millionaire dollar bankroll until they’re 65. This is just plain boring, better than nothing but boring!

You lack purposefulness in life, ever seen big business tycoons or millionaires on television sets. They seem so charged and full of purpose. They are always trying new businesses.

So below are the quickest and most practical ways of becoming a millionaire now!

 

  • Learn the stock market and reinvest wisely
  • Start your own business
  • Create a blog and market it aggressively
  • Invent a product and sell it
  • Go out there and do anything and everything until it works!

 

The most important part of becoming a millionaire is believing in yourself and removing “ I cannot,” and “if only” from your mindset. Remember, no one will believe in you if you don’t believe in yourself! Start Young!

 

Book Review Debt Proof Your Holidays

Book Review Debt Proof Your Holidays

debt proof your holidays

Each year, more people go into debt with their holiday spending. It isn’t just the gifts, but the decorations and meals as well.
Everyone wants to have a memorable holiday and make it special for all involved, but you don’t have to spend a lot to do so. There are many ways to have a wonderful holiday without breaking the bank. In Mary Hunts Debt Proof Your Holidays, she shares great tips for not only saving money but having a delightful holiday with your family and friends.

Gifts: When it comes to gift giving, people tend to go overboard thinking they have to spend more to prove they care more. This simply isn’t the case. Make changes as a family, and it will help everyone to spend less.
Make gifts instead of buying them – A handmade gift or card always means more.

Do not use credit cards – There are ways to purchase larger gifts and still avoiding the credit card trap?

Creative gift wrapping Instead of store bought paper and ribbons, make your own.

Decorating: There are many simple things that can be done to create a festive mood around the house. Making your own decorations or finding a good sale is only the beginning.
Use things you already have around the house.
Don’t buy all new decorations each year.
If you have to have “new things, buy them at after holiday sales.

Meals: Holidays and meals seem to go hand in hand with most families. In addition to overeating, we tend to overspend so create simple recipes and show within your budget.

Mary Hunt’s sense of humor, combined with her money saving tips, make this book a sure winner and a big help to those wanting to save money and still enjoy their holiday season.

 

About the Author

Mary Hunt is a self-affirmed improved prodigal and credit card addict. When she and her group of four wound up in $100,000 in the red and her better half all of a sudden lost his occupation, the time had come to fix the belt.

Declining to relinquish her personal satisfaction, Ms. Chase deliberately gives something to do each tip, trap, and method to turn her money related calamity around.

Making an interpretation of that experience into her tremendously well-known bulletin, The Cheapskate Monthly, Ms. Chase now discloses to all of you have to know to pivot your own funds for good.

Start young with Passive Income

Start young with Passive Income

Begin youthful means beginning at this point. Give time a chance to work for you, not against you. The more extended your venture subsidize develops, the more cash you’ll have. Regardless of the possibility that you contribute minimalistic all, time and the enchantment of accumulating funds of easy revenue will work well for you.

Don’t be someone who says:

“Goodness, I wish I began ten years back. Look where I would be today.”

“I ought to have put resources into Eicher engine and Maruti stock, 6 years back. The past will be passed. You can’t update your past. Nonetheless, you can outline your future. So start arranging your future today. Quite a while from now will arrive whether you start saving and contributing or not. The choice of what you’ll say a long time from now relies upon what you do today.

Protect your investment by reducing risk.

What great is it to spare your cash, just to lose it later on a theoretical hazard? It’s ideal to have a lower return and your whole venture support than a higher return and restless evenings agonizing over your cash.

Unquestionably, all speculations have some hazard. You’ll need to keep your hazard to a base while paying special mind to great returns.

You can put your additional cash month to month in a common store, in the land, to lessen your own home loan, or even in your own particular low maintenance or full-time business. Your speculation dangers diminish with learning.

Have patience.

Your investment fund won’t grow rapidly overnight. Consistent investing will give you good returns in a long term. For example, when is the best time to invest in stocks?

The undeniable answer is to contribute toward the start of a long positively trending market (rising costs). Since nobody can precisely tell the future, the best time to begin youthful contributing for the majority of us is at this moment. Clearly, stock costs go down moreover. In any case, a stock portfolio that goes down in cost is worth a great deal more than never contributing or sparing a penny.

Financial specialists who have turned out to be rich in stocks have contributed over a drawn out stretch of time. That incorporates up business sectors and down business sectors.

Handle your finances like an adult.

How do four-year-olds handle cash? Do four-year-olds utilize their recompense admirably or do they spend it rapidly on something they need? For the most part, they demand to spend their remittance that day they get it. Sparing or making a speculation support is the farthest thing from their psyche.

On the off chance that you handle your cash like a four-year-old, you’ll have the sparing record of a four-year-old.

Don’t worry too much about inflation.

Inflation will happen whether you spare cash or not. So why not spare cash? You’ll like inflation a considerable measure better when you have an extensive bank account.

 

Read to know Where else you can look options for Passive income