Swaroop C H

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What is your ideal personal finance life

14 Apr 2009

I have been reading personal finance-related blogs for a while now. But due to obvious reasons, it had become very important to have proper habits so that I have a healthy personal finance, and hence I started doing more research on it.

But what is personal finance? I like how Ranjan Varma puts it:

Whenever I tell acquaintances that I have a website on personal finance, the first and last question I get is, “Now, you can tell me where to INVEST”

By the time I finish saying that personal finance is not just investing and there are things like setting financial goals, budgeting,….., I get a feeling that I have lost them. They move on to another topic like the Rakhi Sawant’s latest reality show or something similarly interesting!

...

Personal Finance can be represented with a simple equation:

Income(t) – Expenses(t) = Savings(t) + Investments(t)

where time t signifies moving money, or purchasing power, backward and forward in time.

So personal finance is not just about Investing but also about maximizing your income, optimizing your expenses and your savings.

When I was looking for information with an Indian context, I was disappointed with websites like PersonalFN which are great sources of information if you already know what you're doing, but they don't help you to get started which is the problem in the first place!

I did find their Crorepati calculator interesting. It said that if I invest 50,000 rupees every year with a 15% interest, I'll be a crorepati in 25 years. I realized then why compounding interest is important!:

Check this scenario out: You start investing at age 25, investing $2,000 each year until age 35. Then you STOP–never touching that money again. Your dumb friend doesn’t start until age 35, but he invests $2,000 a year for 30 years (compared to your 10). Who has more by age 65?

You! Actually, you’ll have over $70,000 more than your friend.

But 25 years seemed a long way off. Then I thought that I was asking the wrong question. The question is how to spend those 25 years well instead!

I found that most personal finance bloggers had reached the conclusion that their Goal is Financial Freedom / Financial Independence. I wanted in too.

But the aim can be different for different people. For example, your question may be When can I retire and live off my investments?

I wish colleges had taught stuff like this because it is an important life skill, especially concepts like Pay Yourself First.

The gist of what I learned are in these links:

Overall Picture

Habits

So, how do I start?

Read the Financial Literacy month articles at the Get Rich Slowly blog, especially:

If you think all this is not important, then I'll mention that Google has a section called Google TipJar where people share money saving tips. If Google is into it, it must be important, right?

I'm personally looking forward to Ranjan Varma's upcoming workshop where he mentions these topics:

There are just so many aspects! And it just surprises me that money being such a life-enabler, I neglected it for so long.

What is your ideal personal finance life? How are you achieving it?

Comments

Gowri says:

This statement of yours touched me deeply: "When I was looking for information with an Indian context, I was disappointed with websites like PersonalFN which are great sources of information if you already know what you’re doing, but they don’t help you to get started which is the problem in the first place!"

This has been one of the ideas I have been pondering for a long time. There are a lot of young professionals (esp in IT) who seem to be in great need of personal finance information and advice at a very basic level, and there is pretty much no "go to" place for this. This is one area I have been wanting to put some effort and start a blog just for this. Time to get to work!

Ranjan says:

Hey, you've put me in a spot! :) Now I really need to work on that workshop seriously! :)

But seriously, thanks for the encouragement!

Ankesh Kothari says:

Great post and compilation of links Swaroop.

My problem with blogs like getrichslowly.org is that they are not India centric. You find 101 links that tell you what bank to go with or what fund to go with - if you're in USA. But no one does comparisons and provides their conclusions for Indian banking and finance institutions and tools.

Hopefully - the Money Today links you share will help cover those issues.

Swaroop says:

@Gowri I hope you get around to it, it would be very useful! Let me know if I can help in any way.

@Ranjan Your workshop would be very useful to a lot of people, so please do continue working on it :)

@Ankesh Exactly. As I mentioned, the beginner-centric personal finance blogs don't have an Indian context, and the India-centric ones don't have a beginner context :-/ For example, every personal finance blog recommends an ING Direct high-yield savings account... but what about in India?

I checked out an issue of the Money Today magazine about a month back but was not satisfied. They are mostly geared towards buying into instruments, whether mutual funds or insurance schemes. But then again, that is what a magazine is about I guess.

Manish Chauhan says:

Nice one Swaroop

I guess you would be interested in these articles I have written

4 most important pillars of your Personal Finanace : http://www.jagoinvestor.com/2008/10/pillars-of-success.html

5 most important things in an portfolio of an Indian : http://www.jagoinvestor.com/2008/10/5-elements.html

Btw, Nice to know that you worked for yahoo earliar , I currently work in Yahoo! .

Manish

Girish says:

This is an interesting blog, also usefull....
SHould try the links...should be usefull

Was thinking say a person has a 10L Housing loan.
And ahs saved about 2L within years...

Should he clear a part of loan using 1.5L of his savings
and miss the housing loan tax rebate

or reduce his loan to 8.5L....
Please share your thoughts and usefull URLs....
regards,
Girish

Swaroop says:

@Manish Nice articles.

@Girish That's a very specific question to ask, and honestly I have no idea about it. What are the pros and cons of either of the options? Also, is the difference in money saved significant enough to spend time on thinking about it?

HKS says:

Swaroop,
Good job.

I have been at the quest for financial freedom too, for a while.
My thoughts on the same are at investingforfinancialfreedom.blogspot.com/
I would welcome any comments you may have

Thanks,
HKS

Prasanna says:

You know what is frustrating? Most of the personal finance resources available online do not really help people in India as they all are euro centric. And those that focus on India are so jargon filled that people like me who want to know more but can't understand financial terms etc are totally turned off. Is there a, iwillteachyouhowtoberich kinda Indian website/blog?

swaroopch says:

@Prasanna Unfortunately, I haven't found anything like that in my research. I wonder how much knowledge would be required to write something like that.

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