Family Budget: Consider Inflation while planning your Child’s Future

Family Budget: Consider Inflation while planning your child’s Future.

Let us today discuss one financial planning exercise. Mr. & Mrs. Sharma are living in a joint family having 2 children (Aged 10 & 5). Mr.Sharma is a Businessman and the couple’s annual Income is Rs.35 Lakhs and Monthly Expenses are Rs.20,000. The couple wants to build a corpus of Rs.20 Lakh for each of their sons when they turn 18.

Now, let us plan their budget in simple and easy to understand method. As we know that the couple falls under the above average income group. So it won’t be much difficult to plan their family budget. Here is a step by step planning for this Couple.

Step: 1 Build an Emergency Fund -

This is the most important step. An Emergency fund should be 6-12 months of expenses that primarily deposited in the savings account. Emergency fund is necessary for several kind of emergencies. According to monthly expense of the couple, Rs.3 Lakh of Emergency fund would be sufficient.

Step: 2 By a Term Life Insurance Plan -

The couple should buy a Term Life Insurance policy for whole of their policy.

Step: 3 Never go for ULIPs & Insurance + Investment Products -

The couple is advised to stay away from the ULIPs and other investment products from the Insurance Companies.

Step: 4 Start SIP in Equity Diversified Mutual Fund -

It advisable that to meet the goals of Rs.20 Lakhs for their 2 sons, the couple should start investing in the good equity diversified Mutual Funds.

Step: 5 Consider Inflation while planning your Future -

This is very important. Mr. & Mrs Sharma wants to give their 2 sons Rs.20 Lakhs when they turn to 18. Now, They want to give today’s 20 lakhs to their children. And if we consider the inflation rate of 6% than the amount they need after 8 & 13 years would be around Rs.31,87,000 & Rs.42,65,000. So keep in mind the Inflation factor.

Step: 5 Expect Realistic Returns from Equity -

Always Expect Realistic returns from the Equity. You can expect 15-20% return from the Indian Equity in the long time run and 10% from the Developed markets like USA. So Start SIP accordingly. Don’t expect 40% return from Equity just because in the last decade it has appreciated this much.

Step: 6 Aim for an Equity:Debt allocation of 60:40 -

They can go for 60:40 allocation in Equity & Debt.

Step: 7 Invest for your own Retirement -

Don’t forget to Invest for your own Retirement. Start with 1 Lakh of monthly SIP. And the couple with end up with good retirement fund after 25 years, may be around Rs.10 Crore with 10% CAGR.

Budgeting Exercises: The Must need Exercises for your Kids

Budgeting Exercises: The Must need exercises for your Children

Accounting and Budgeting are the 2 most important subjects for managing your money. Managing money is more important than earning money. But unfortunately, Budgeting is so much boring subject that it is very difficult to learn and motivate your kids to learn it.

There are several things available in the market such as spread sheets, budget worksheets, fixed and variable expense sheets, softwares and many other things. But buying these things, taking them home and learning from it is very boring task.

So the question is that, How to teach Budgeting to your School going Kids?

Well, instead of giving them budget worksheets, why don’t give them the real time exercise? In the summer vacation, give them the budgeting exercise that they have to plan the complete household budget including vacations, weekends and entertainment.

Honestly tell them that what is your household monthly income and which are the various Fixed expenses while which are the variable expenses.

And let them decide by themselvses that how to budget. And yes, tell them that after deducting all the expenses, there should be left something behind for long term Investing also.

If you give them ready made budgeting worksheets available in the market than they won’t use their mind. The main purpose behind budgeting is to use your mind. If all the fixed and variable expenses are in front of their eyes than they won’t think much. But if you give them the exercise like this than they will be forced to use their brains.

Thsus, give your children budgeting exercise this summer vacation.Believe me, your children will never forget this valuable lesson in their life and you will be rewarded by Adult financially independent children in the future.

Do You Have a Clearly Defined Financial Goals?

Do You have a Clearly Defined Financial Goals?

What will be your answer if I ask you the above question? Many of you will say “Yes”. Many will be confused while many will answer “No”. Now What if I ask you that, Do you have a Clearly defined daily, weekly, monthly, annual and lifetime financial goals?

In this case, most of the people will answer “No”. This is because most of the people don’t understand the importance of daily, weekly or even monthly financial goals. But according to one survey, If you ask this question to the millionaire households of United States (USA) than most of the millionaire households will answer this question “Yes”.

Wealthy people have clearly defined set of daily, weekly, monthly, yeatrrly and lifetime financial goals. The key of becoming rich is that, you should have clearly defined financial goals.

Just tell me that, how many of you sit down every week or a month with a paper and pencil and write down your financial goals? I think very less right? But those who clearly define and write down their financial goals on paper become more wealthy than those who don’t set any financial goals at all.

This is because, to become a financial success you not only have to work hard but also you have to focus on where you will manage your money? You will have to focus on managing money as well if you want to achieve financial freedom.

And you can only manage your money well by having clearly defined financial goals on paper…!!!

Budgeting & Accounting: Important Financial Skills

Budgeting & Acconting: Important Financial skills to aciheve your Financial Goals

Budgeting and accoutning both are very boring sibjects when it comes to exercise them in real life tplan your finances. But the budgeting and accounting for the domestic consumption is directly related to achieiving your financial goals.

Tabulating and charting your monthly and annual expenses in each and every category helps to control your expenses. This also reduces the probablity of allocating too many dollars to those products and services that are not really important.

If you want to become financially free and wealthy than you must budget your expenses like governments and business all around the world. You must have to keep track of each and every dollar you earn.

If you can manage to reduce unnecessary expenses than you can divert that money towards buying some appreciating assets (Stocks, bonds, gold, mutual funds, real estate…etc..) which appreciate in its prize over the time and make you rich and financially free.

Budgeting and accounting are the subjects that are not taught well in our school and colleges. And that’s why most of the people struggle financially. Both of these skills are the only important skills to achieve your financial goals.

People who are wealthy today are typically doing both of these exercises for their Business and home every month since years and still today to maintain their wealthy state, they continue doing the same exercises every month. And they teach their children also these 2 basic subjects of money management.

And that’s why their children are more financially independent than the children of high income but low net worth group of people (Upper Middle Class).

What Are Your FInancial Goals?

What are your Financial Goals?

If you ask a typical upper middle class people (I am talking about High Income, low net worth group of people), about their financial goals than most of the people will tell you the following.

- Minimize the Tax burden by taking large mortgage loans

This is the prime financial goal of people living in USA and worldwide. They think that taking larger mortgage loans is a smart idea. Because it will reduce your tax liabilities and thus, you will save the tax.

But here my question is that, if these people are so much tax savvy that to save the tax they can even borrow money which is very dangerous, than why don’t these people budget their monthly expenses and save money from un ncessary consumer buying?

One of my friend has recently took a large mortgage loan to save taxes. But according to me, if he just budget his household montlhy finances tha he will easily save more money than saving on tax every year.

Most of the people focus on larger things. But they don’t focus on the smaller expenses. If you deduct few of your small expenses every year than you will save much more money than your interest payment on your home mortgage (Only Interest payments in mortgage loans are Tax free).

What I advise to people that, every month sit down with your spouse or family and write down each and every category expenses on a paper. Make category of each and every spending and write down expected spending in front of each category and compare it with actual expenses.

I know that this is very boring. And I personally myself find it very boring exercise. So what I suggest you is that, find out some alternative methods of budgeting your expenses like me such as “Pay Yourself First” method or “Budgeting on Excel spread sheet or something else….

But in any case, budget your finances…

Budgeting: The Long term benefits

Long term Benefits of Budgeting

When it comes to budgeting, all the financial planners and advisors will tell you that How important budgeting is and why everyone should do it. Now, all of us know that budgeting is very important financial exercise but how many of us seriously do budgeting?

Not 1% people do budgeting. In fact, let me tell you my own example. I myself running a personal finance blog and advising people to budget their own finances. But Honestly speaking, I personall hate this exercise. Because it’s so boring and nothing is glamorous in it.

So What I do is, I create the environment of economic scarcity for me. I use “Pay Yourself First” Formula. It means that every month I invest 10-15% of my Income for long term investing. And I live with the rest of the money.

Recently one of my friend suggested me to download budgeting sheets on MS-Excel spreadsheet. I have downloaded some by searching Google. These were little bit less boring and it was very easy to keep track of all of my expenses.

So What I advise you is that, find out some less boring ways of budgeting your finance like “Pay Yourself First”. Spread sheets or something else. Because there are long term advantages of budgeting and it’s much easier to budget if you visualize the long-term benefits of this work.

Media people will never publish the life style of people who budget their expenses and keep the track of every single dollar they earn. This is because their life style is not glamorous. Rather than showing a life style of some high income, over consumer and low accumulator of wealth will be more beneficial to the media channels.

There are long term benefits of Budgeting. So You have to find out alternate ways to budget your finance if you don’t like to budget your finance like traditional ways. I have find out the 2 methods. If you have other methods to budget finances than please share it with this blog readers…!!!

Does Your Household Operate on the Annual Budget?

Does Your Household operate on the Annual Budget?

If I ask you the above question than what will be your answer? Do you have an on paper record of your consumption spending accroding to various categories such as food, clothing, entertainment, mobile phones and other categories?

Most of the people don’t have this record. This is because most of the people never plan any budget. But yes, most of the wealthy people plan their household budget according to category wise every month.

Now what about those wealthy people who don’t plan any household budget?. Well, according to the study they control their spending by creating an artificial economic environment of scarcity for their all the family members.

What they do is, during the starting of the month, they Invest 15-25% of their Income for long term before doing any other expense. And after that they spend rest of the money behind other things. This is known as “Pay Yourself First” Formula. By doing this, it will automatically set a discpline in their lives and over the time they become wealthy.

Thus, Budgeting is very important exercise that everyone should do. I know that many of you find budgeting very boring because there is nothing exciting in budgeting. In that case, you should go for “Pay Yourself First” Formula. Simply invest 15-20% of your monthly income for long term investments during the starting of each month and create the environment of financial scarcity for you. This will impart a discipline in your life.

But in any case, Budgeting and controlling your expenses is the MUST exercise. If you want to become rich and wealthy than you MUST know that where each Dollar goes from your account every month.

Take Time to Plan & Budget

Take time to Plan & Budget your Finances

I have written several articles about the importance of Financial Planning and Budgeting. In fact, this is the key to become wealthy and financially free in the future. Now, all of you understand this fact that budgeting and financial planning are the 2 exercises to become wealthy.

But still, most of the people sit quietly and don’t take any action to shape their personal finances. Well see, once you understand the importance of these two basic financial exercises, you have to invest your time to do these exercises. You cannot sit back and everything will be fine. You have to take action.

I have tell you the 2 best financial exercises by which you can become financially free. It’s like shaping your body in the gym. If you follow the instructions and exercises of your coach/Instructor, you will be physically fit in no time. Sometimes, it will take a time to be a physically fit depending on your current health status but if you follow his advise strictly, you will definitely become physically fit.

Now, Here I have given you two exercises to become financially fit. But just like you spend an hour a  day in the gym, you have to spend time in budgeting and financial planning on regular basis. Otherwise, how can you become rich and wealthy?

The people who are rich and financially free today are doing these two financial exercises everyday since their early childhood. Wealthy people spend 3 times more time in planning and budgeting their money than everyone else.

Remember, the more time you give in these exercises, the more Financially Fit you will become. So What are you Waiting for? Start doing it Right Now…!!!

Internet Business Plan

How to Write an Internet Business Plan?

When you want to start your own Business and you will Google the web, literally thousands of so called Internet Marketers and Finance Gurus will tell you that, You will require a Great Internet Business Plan to succeed Online. Actually they want from you that, you buy some sort of eBook or a program or a readymade business plan from them in exchange of money.

Now, i am not saying you that a Business Plan is not important for any Business. I am just saying you that, for start-ups you don’t require any professionally written Business Plan. You can just take a piece of paper and write down your Spiritual Mission, Business Mission, Goals, Deadlines & everything else. This piece of paper will work as your Internet Business Plan during the start-up days of your Business.

Let me give you my Example. When I started “My Journey To Billionaire Club”, I did not have any budget to write down sophisticated Business plan. This is because I started this Business out of Scratch only. I did not have any seed capital to write a Business Plan. So What I Did? I took a piece of paper and write down my Business Plan.

Here is my First Business Plan for this Blog Business that I wrote on a piece of paper only.

# - Spiritual Mission – To provide World class level of Financial Education to people around the world and create value in their lives. To Create such an Information rich Blog that by reading just 2-3 articles of that Blog, the Financial IQ of the people won’t remain the same. But It will increase by several folds.

(Well, Yes. This was the Main Spiritual Mission of my Blogging Business. I wanted to add value in the lives of millions of people by developing a world class level of financial education blog.")

# – Business Mission – To Make Money from the Content I create by applying various Income streams mainly Google AdSense. To create world’s Largest Articles Portfolio on Money & Personal Finance.

(Of course, the Business Mission of any Business is to make profits and so was mine. There is nothing wrong in it. Your Business will be successful or failure on your Spiritual Mission and not on your Business Mission.)

# – Marketing Plan – Comments on other blogs, Articles Submission to various Directories, Facebook, Orkut and other social media marketing.

(Well Twitter was not popular in March 2008 when I started this Blog so I did not include Twitter Marketing in my very first Business Plan. But well, today it is included.)

Thus, the above was my very first Internet Business Plan on a piece of paper. And still, I have make a successful profitable Internet Business.

What I want to teach you here is that, There should be Business Plan for your Business before you start your Business. It should not necessarily a software generated or MBA written Business plan during the early days of your Business when you are alone.

A hand written Business plan simply on a piece of paper will also work. So take a Paper & Pen and write down your future Business Plan Now. This will be a great financial exercise.

Personal Finance Exercises

Best Personal Finance Exercises

This article is all about the various Personal Finance Exercises that you can practice to master the personal finance. Personal Finance includes Accounting, Budgeting and Investing skills. So if you master the following personal finance exercises, you will become rich and financially free faster than other people who don’t know anything about Personal Finance.

Personal Finance Exercise # 1: Write Down your Goals -

The first very important exercise is that, Write down all of your Financial goals (Short, Medium and long term) on a piece of paper. Take a paper and pencil without fail, sit and start writing your financial goals. This is as important. Because according to one study done over 100 students, only 3 students were used to write down their financial goals on the piece of paper and after 20 years, those 3 students were financially more ahead than the rest of the 97 students.

So if you want to be financially ahead than rest of the people in this world, than you should write down your goals on the Piece of Paper.

Personal Finance Exercise # 2: Start Early -

This is another great Personal Finance Exercise. The Exercise is Start Investing Early means NOW. Early doesn’t mean tomorrow, next week or next month. But early means NOW. This is very important. Because if you start investing early than the compound interest will work in favour of you to make your wealth grow. But you never save and invest your money, the compound interest will never work on it.

Personal Finance Exercise # 3: Pay Yourself First -

Most of the people argue that, they can’t save and invest their money because at the end of every month, nothing left behind for investing. For these people, this is a Best Exercise. Just set your Mutual Fund SIP Dates in a manner that, every month you receive your paycheck, the next day some amount go towards mutual fund SIP.

You will find extremely difficult to live on the rest of the amount for first few months. But believe me, this will be habit after few months.

Personal Finance Exercise # 4: Budgeting -

Every month, take a paper and pencil and like down all the possible expenses that are likely to occur and after that, in the side column, write down the actual expenses of the month and than compare the both the expenses. You will realize that, where you have spend more last month. And according to that, you can reduce your un-necessary expenses.

Personal Finance Exercise # 5: Investing -

Start learning investing from great investment books, magazines, Blogs, eBooks or any other material. Every time, you learn something new, go and try it in the real world. Say for Example, if you have learned some new Real Estate investing strategy than go and try in the real world market and see that weather it works or not?

Thus, all of the above are the Great Personal Finance exercise. Apply all of these exercises and you will never have any financial problem in your life.

Investing at the Age of 15

Teen Investing: Investing at the age of 15: How to Get Rich at Young Age?

Well, recently a regular teen age reader of this blog asked me that, What is your opinion about Investing at the age of 15?

Well, Investing at the age of 15 means you are in your 10th Standard right? Well, I think this is the right age to start investing. Because if you ask Warren Buffet than he will tell you that, You are too late if you start investing by the age of 15 because he had started investing at the age of 13 and he still thinks that he was late, he could have start investing early and than he was more richer than Today….!!!!

This is because the more you start investing early, the more rich you will become. Because the Compound interest will work more in favour of you to make you rich over the time. If you start investing at the age of 15 years than your other friends will start investing at the age of 30 probably and than they will be too late. Because there is a gap of 15 years of investing between you and your friends and thus they will never take over the level of your wealth.

Remember, according to Albert Einstein, The Compound interest is the greatest force in the world. Once you invest your money, the compound interest will start working in favour of you and once you borrow money, the compound interest will start working against you to make you poor.

So I think there is nothing wrong in investing at this much early age.

Now, the main hurdle in starting investing this much early is – Your Parents.

I have observed that, it is very difficult to convince the parents. Let me give you my Example. Well, I have not started investing at the age of 15 years but When I had started investing at the age of 25 years, my parents were angry with me. They started thinking that their son is becoming a money minded and he won’t concentrate on study. Instead he should concentrate behind his higher educational degrees.

So I can assume that, you will be in the same situation as mine. But after a lots of arguments and explanations, I somehow managed to convince my parents and thus they gave me permission to start investing at the age of 25 years.

But well, I know that I am 5 years late. Because I could have started investing at least 5 years earlier than this.

So Start Investing at the age of 15 years if your parents support you. There is nothing wrong in it…!!!

Investing in Early Twenties

Investing in Early Twenties makes a Huge Difference in the Wealth Later on…!!!

When it comes to retirement planning, most of the people think that, What’s hurry? I am in my 30s or 40s right now and there are still more years to retire so why to start investing early? But well, this is not true. One should start planning retirement from the day they start earning means in early twenties.

Most of the people in the world start making money in their twenties, few people start making money since their early twenties. So according to me, they should start investing in their early twenties.

Do you know that, Warren Buffet – The Legendary Investor had started investing when he was just 13 years old? And today he thinks that he was Late…!!!

Starting early is this much important. If you never save and invest your money, it will never work for you and the compound interest will never work in favour of you to make you rich. The more early you start, the more wealth you will accumulate over the time. People who are rich today have typically started regular savings and investing very early in their lives probably since their early twenties and that’s why the compound interest had worked more on their wealth to make them richer over the time.

Unfortunately, today’s youth prefers to spend all of the money they earn. Savings and Investing is the last priority. People go to their workplace to earn money and every month they receive a paycheck. And they pay all of their bills first and spend all of the money and they think that, if something will remain at the end of month, they will invest that money. But nothing remains at the end of the month for savings and investing.

While Rich people first invest their money from their monthly income. Every month when they receive a paycheck or any other form of Income, they first of all invest 15-20% of that money in the long term investments such as Stocks, bonds, gold, mutual funds or private businesses and they spend rest of the money behind their monthly household expenses.

This is known as “Pay Yourself First” Strategy.

So the Key of become very rich is – Start Investing in your Early Twenties…!!!!

How to Invest Your Pocket Money?

How to Invest Your Pocket Money?

Recently one of my teenager friend asked me that, “How do I Invest my Pocket Money?”

Well, this is a really nice question. Because as a teenager you want to start investing. As a teenager you want to invest your money. While most of the teenagers are blowing off their money behind buying X-box 360 or doing parties, it is good that some teenagers are thinking about investing their money at this much early age.

First of all, let me tell you that, You are Never Ever early in starting Investing.

Warren Buffet has started investing in the stock market when he was just 13 years old and today he thinks that, he was late. Today’s most of the middle class people who are in their 30s and 40s think that, there are lots of years remaining for retirement so what’s the hurry? There is still a time for retirement to come.

But well, this is the absolutely false mentality. Anyway, let’s back to the topic. Well, as a teenager, you can invest in several things. I will outline few things here. But believe me, you will have to use your mind to find out best assets for the investment of your money. Because there are lots of Investment options in the world.

First of all, forget that only stocks, bonds, gold and mutual funds are the investment options in this world. There are many other assets in which you can invest your pocket money and I will outline those things here.

01) Online Properties -

Well, Yes. Online Properties or Internet Assets. Such as Blogs, Forums, Websites, Domain Names…etc.. There is a great market for online properties on Sitepoint.com and Flippa.com

As a teen age, you can invest your pocket money in Domain Names also. You can buy a Domain Name on GoDaddy.com and later on sell it on Sedo.com or eBay.com.

Hint: The Best part about owning web properties is that, Your parents will never know that, you have started investing. This is because most of the parents are from industrial age and they believe in getting a safe, secure job and retiring at the age of 65 years. So they will never understand that why you want to get rich fast in your life.

02) Collectible Items -

Alternatively, you can invest your money in collectible items such as stamps, coins, insects (Butterfly), pictures, phone cards, Comic Books, Tattoos and many other things. Your parents will think that, it’s your hobby. But well, it’s not the hobby. It’s the investment.

Collectible items appreciate at the rate of more than 20% per annum compounding annually.

When I was a teen, I invested my pocket money behind Comic Book Collection & Tattoos collection. And later on I sold my whole of the collection to my friend for huge huge profit.

Thus, the above are the 2 innovative ways of investing your money. There are several others. You can also start investing in the stock market also.

Free Virtual Stock Market for Teenagers

Free Virtual Stock Market for Teenagers

If you are a teen and want to learn the basics of stock market and how it works than you should play games. You should play virtual stock market games for teenagers. By playing these virtual games, you will have a clear idea that, how the stock market works and how you can make profit out of it?

Here are few virtual stock market game for teenagers -

01) Moneybhai.com -

Moneybhai.com is a virtual stock market game based on Indian Stock market. Once you open the account, you will be allocated Rs.25 Lakhs. The stock prices in the game follow the real time stock prices on the stock exchange. This game is a fun.

02) Edustock -

Edustock is a game designed to teach children that what is the stock market and how it works?

03) Virtual Stock Exchange by The Wall Street Journal -

Welcome to Virtual Stock Exchange, a free stock market game from MarketWatch.
With VSE you can:

• Create public or private games with a cash balance you set
• Choose from thousands of available games
• Test your strategy with a personal portfolio
• Leverage powerful news and research resources from MarketWatch

Thus, the above 3 are the Free Virtual stock market games for teens. A Teenager can easily learn the basics of the stock market by playing these games. These are the games that teach your teenage children that how to invest money in the stock market.

Thus, by playing such games, your children will learn to invest in the stock market.

Budgeting Exercises for Teens

Budgeting Exercises for Teens

Budgeting, Accounting and Investing are  the 3 skills that anyone requires to get successful financially. Only Earning money is not the important skill in this world. But managing your money is as important as earning money. Because without managing money, you can’t be financially free.

Budgeting is a boring topic. But it is very important thing. Because of the budget, you can know that where each penny from your pocket goes. Thus, Budgeting is very important skill to learn for teens.

Go to Moneyinstructor.com & You will find various Budgeting exercises for Children. They will teach you on the work sheet that, how to plan your budget. Once you learn the basics of budgeting, you can start with real money.

The Best thing to learn budgeting is that, Take a paper and pencil during the starting of month and write down all of your possible monthly expenses on it. Than draw the another column aside and write down the actual expenses you made.

And at the end of the month, simply compare your expected expenses with the real expenses. Over the time, you will master in budgeting. And you will start knowing that, where your money goes every month. And than you can think of reducing or eliminating your monthly bad expenses.

Once you become expert in budgeting, you can control your finances. You can cut down the bad expenses and divert that money towards long term investing. Budgeting is important to cut down the un necessary expenses and diver that money towards building some real wealth.

So What are you waiting for? Start your Budgeting exercise right now. You can also play budgeting exercise in group or with your other friends and than compare the monthly expenses of each other. You can discuss your monthly expenses with your friends also and by discussion you can learn that, which are the bad expenses and which are the good expenses.