Seven habits of highly effective financial parent.....

(The author is the Founder and CEO of Money Avenues, a Wealth Management firm based in Chennai. Feedback can be sent to reachyourviews@gmail.com)

Parental responsibilities in the current scenario is quite challenging with the kids catching up very fast than what we could imagine. They also grow up with unlimited ambitions and aspirations. It's the duty of the parents to regulate their thought process as it involves huge financial implications. It is also crucial to teach them the values of life with reference to money . Let's look at some the key points here on financial parenting:

Seven habits of highly effective financial parent:

1. Preaching financial values to the kids:

Preach them the life's values particularly the financial values as they never carry an expiry date. Story telling can be a very effective tool to preach such values at their young age. Values such as

a) Saving money.

b) Helping others.

c) That there is a life beyond money.

d) That money is not the only thing in this world.

e) Difference between " I want" and "I need".

Just to mention a few...

2. Moderating and managing their expectations:

Kids are growing fast and ambitious. It's good to have reasonable, attainable ambitions, but with the kind of peer pressure and other factors, kids tend to develop higher level of expectations from their parents. It is essential to manage their expectations and moderate them in an appropriate way. Because unmanaged expectations can imply a huge financial burden.

3. Openly communicating the family's financial realities:


Make them understand the family's financial realities which can develop a healthy financial atmosphere @ home.

4. Desisting from huge and unmanageable financial commitments:



It's not a great idea to shoulder huge and unmanageable financial burden for the kids as there are better ways to fund their goals and aspirations. 

5. Teaching them the importance of financial independence:

Kids must be taught to be independent and more so financially from the younger age. They must also know what costs are incurred on their school, college education and how are they managed to be paid. Bottom line is that they should not think money is easily made. They must also be encouraged to look at sponsorships and grants to reduce the financial burden of the parents. It's a good idea for young adults to work as interns and trainees which gives them the responsibility of earning and spending the money on their own.

6. Financial planning for the children's future:

Planning your child's future becomes essential, given the fact that the costs are escalating in the space of education. Planning also ensures that the financial burden is spread over the time which eases the stress when they grow up and get ready for higher education.

7. Planning the distribution of wealth to the children:

On distribution of wealth to the children, billionaire Warren Buffet once remarked “Enough so they can do anything, but not enough so they do nothing”. The prophetic words should be a great eye opener for all who would want to distribute their wealth to their children. Wealth distribution should focus on children to earn it and not own it. Create wealth wisely, but distribute it responsibly...



(The author is the Founder and CEO of Money Avenues, a Wealth Management firm based in Chennai. Feedback can be sent to reachyourviews@gmail.com)

Seven financial habits of highly effective 40 year olds...

(The author is the Founder and CEO of Money Avenues, a Wealth Management firm based in Chennai. Feedback can be sent to reachyourviews@gmail.com)

Age group of 40s is the crucial stage in one's life in terms of  income generation and income distribution. A properly planned 40s will lay a strong financial foundation for the future which includes retirement and other financial goals. The following are the seven financial habits of highly effective 40 year olds...

1.Follow "Financial Parenting**" diligently:


 

Kids of today grow with unlimited ambitions which sometimes may be reasonable and sometimes unreasonable. They may ask for the sky and the moon. It is the duty of the parents to regulate the flow of ambitions as they come up with huge costs in the present scenario. Hence the importance of "financial parenting". Let's look at it very briefly:

a. Teach the kids, the value of saving.

b. Help them understand the difference between "I need" and " I want".

c. Manage their expectations, particularly when it involves borrowing.

d. Openly communicate the family's financial situation.

e. Teach them manage their regular expenses.

**As financial parenting is a very lengthy subject, will handle it separately.  

2. Moderate the debt levels:

40s is the time to ease out debt out of the books gradually; should ideally reach zero or near zero debt levels.

3. Investment decisions based on a Financial Plan:

Well laid financial plan should guide the investment decisions during this phase. The asset allocation pattern for investments (equity, fixed deposits, real estate, gold etc) should dictate the decisions and not impulsive decision making. The level of risk taking in investments should gradually decline during this phase.

4. Well planned retirement:

Though everyone's wish is to retire early and pursue our other interests, it's not the case with our incomes. We always wish our incomes not to retire. This is the phase to consolidate the retirement fund for which the plan should start in the 30's and be ready for payouts at a future date.

5. Planned other financial goals in a SMART way:

Our goals do not end only with our retirement; there are other goals as well which would involve our children, spouse and parents. This is the phase to consolidate those goals as well.

These goals should be Specific, Measurable, Attainable, Relevant and Time bound. In short the goals should be SMART.

 























6. Up to date Insurance cover:

This is a critical need during this stage, as 30s would have given phenomenal growth in incomes and careers. Its ideal and necessary to have life insurance up to date. For eg., If one is aged 45, earning 50 Las PA, the family's expectation from the person is to bring home 50 lacs every year till the next change in income. So the person in the present date should atleast have a life cover of 50 lacs * 10 times = 5 Crores to leave  to his family in his absence.

Earlier is not better, it's the best...

7. Creation of an Emergency fund:

With corporate careers getting more dynamic and uncertain, there may be several factors which can lead to early retirement, entrepreneurial ventures, geographical relocations etc. Such situations can come at a short notice and they need a special fund to take care of the sustenance to a reasonable extent without regular income. Plan for such a fund which can be handy during the rainy days.

- Gopalakrishnan V

(The author is the Founder and CEO of Money Avenues, a Wealth Management firm based in Chennai. Feedback can be sent to reachyourviews@gmail.com)

Seven financial habits of highly effective 30 year olds...

(The author is the Founder and CEO of Money Avenues, a Wealth Management firm based in Chennai. Feedback can be sent to reachyourviews@gmail.com)

Age group of 30s is the crucial stage in one's life in terms of career and income generation. A properly planned 30s will lay a strong financial foundation for the future. The following are the seven financial habits of highly effective 30 year olds...

1. Keeping bare minimum in the savings bank account:

Savings bank account is just a temporary custodian for your money. One does not deserve interest @ 3.5% for the money invested and certainly not at this age. Look beyond this.

2. Rationalize and restructure debts:

20s is the time normally one spends and enjoys and in the process adds up the debt. 30s is to rationalize the debts which will go a long way in securing the future.

3. Definitely make a sound financial plan:

30s will be crucial to one's life as that's the galloping time for the career and income. A sound financial plan should include your dreams on retirement, children education, well being of children, acquiring homes, foreign holidays etc., Remember, starting earlier is not the better solution, it's the best solution...

4. Saving should not only be for Taxes:



Saving for taxes is important; but that's not the end of the story on financial planning. Thinking beyond tax saving will be key to the financial success during the 30s.

5.Increase in saving levels proportionate to the pay rise:

30s is the time for faster rise in careers and income levels. Adjusting the saving according to the rise in income is important. Starting earlier is not better, it is the best...

6. Saving Wisely, but Investing Intelligently:

Saving alone doesn't matter to one, but right kind of investing matters the most. 30s is the stage to explore above ordinary investment avenues for superior and fast track returns. for eg., investing in stocks in a diligent manner can work wonders over the long term.
 

7. Insuring self and the family in a comprehensive manner:


Life insurance is a powerful tool to protect you and your family's interests in the future. And the insurance cover is the legacy you leave behind for your family in your absence. So avail a comprehensive cover and upgrade the cover as you move in the income levels. It's important for you and your family.

(The author is the Founder and CEO of Money Avenues, a Wealth Management firm based in Chennai. Feedback can be sent to reachyourviews@gmail.com)

Seven habits of highly ineffective investors

Seven habits of highly ineffective investors:

1. Keeping all the money in the bank savings account

2. Assuming one to be too young or too old to start investing

3. Being too busy with the work and not spending enough time on personal investing

4. Postponing the basic financial planning

5. Treating financial planning as a boring affair

6. Not saving a regular amount automatically out of the paycheck

7. Not having enough health or life insurance for the self and for the family:

Amazing story of three friends - Part 3

Three friends Mr. Cautious, Mr. Responsible, and Mr. Fun aged around 50 meet up after a long time in the Alumni Club. After the usual chats on the good old days, the discussion turned towards investing habits. 



Mr. Cautious was proud of his investment habit, he said "I have been been saving and investing since my age 30 and made good 12% returns".


Mr. Responsible said "I started my saving and investing once I established my family at my age 35 and made great returns of 15%". 



Mr. Fun said " I enjoyed my life thoroughly, went on foreign holidays and started my saving and investing only at the age of 40. But I made it up  by earning a fantabulous return of 18% ".

Now, let's for a moment assume, three of them put Rs. 1 Lac each. 

• Mr Cautious put 1 lac at the age of 30 earning @ 12%.
• Mr Responsible put 1 lac at the age of 35 earning @ 15%.
• Mr Fun put 1 lac at the age of 40 earning @ 18%.

Now let's see who wins the race.....

At 50, during the time of their get together, can you imagine what kind of money each one of them would have made?

Mr. Cautious put Rs 1 lac at his age 30 and at his 50, he accumulated @ 12%

Rs.9,65,000

Mr. Responsible put Rs 1 lac at his age 35 and at his 50, he accumulated @ 15%

Rs.8,13,900

Mr. Fun put Rs 1 lac at his age 40 and at his 50, he accumulated @18%

Rs.5,23,450

Result: Mr. Cautious, @ 12% made Rs 1,51,100 more than Mr. Responsible, who got 15% ; And Mr. Cautious made a whopping Rs 4,41,550 more than Mr. Fun, who got the highest return of 18%. 

Moral of the story:

Saving should begin at the earliest even if the returns are moderate. Trying to catch up at the later stage may not yield desired results even if the returns are good.


As we saw in this case, the winner was Mr. Cautious who made higher returns than the other two despite deploying his money into lower returns than the other two.

The power of compounding is at work always and very very silently..... 

Amazing story of three friends - Part 2

Three friends Mr. Cautious, Mr. Responsible, and Mr. Calculative aged around 50 meet up after a long time in the Alumni Club. After the usual chats on the good old days, the discussion turned towards investing habits. 


Mr. Cautious was proud of his investment habit, he said "I have been been saving since my age 30 and investing only in deposits and happy with 9% returns". 


Mr. Responsible said "I save and put largely in deposits and some money in equities" and my overall returns stood at 12%. 


Mr. Calculative said "I saved and always had a good balance in investing into deposits and equities and I managed a return of 15% ".

Now, let's for a moment assume, at their age of 35, three of them put Rs. 1 Lac each in an avenue which gave them about 9%, 12% and 15% returns per annum respectively. 

At 50 during the time of their get together, can you imagine what kind of money each one of them would have made?

Mr. Cautious put Rs 1 lac at his age 35 and at his 50, he accumulated @ 9%

Rs. 3,64,000

 
Mr. Responsible put Rs 1 lac at his age 35 and at his 50, he accumulated @ 12%

Rs.5,48,000

Mr. Calculative put Rs 1 lac at his age 35 and at his 50, he accumulated @15%

Rs.8,14,000

Result: Mr. Calculative made Rs 4,50,000 more than Mr. Cautious; And made Rs 2,66,000 more than Mr. Responsible. All this happened in the differential return of 6% and 3%.

Moral of the story:

Saving alone is not important; investing wisely is all the more important.

The power of compounding is at work always and very silently..... 

Beware and be aware of rising health costs

 

One of the key challenges we may face going forward in our financial plan is the possibility of a huge rise in health risks and corresponding escalation in health care costs. And this is going to be boosted by innovations in the health care sector and that comes definitely at a higher cost to all of us.

Do consider the following check list on your health care cover:

1. Do I have adequate health cover?
2. Do my dependents have adequate health cover?
3. Am I covered by my organization?
4. Is the cover offered by my organization sufficient enough for me and my family?
5. What happens during job transitions? ( Remember, you will be left with no cover during the job transition.)
6. What happens at a later stage when I decide to be on my own, rather than working for an organization?

For eg., If you were to incur Rs 2 lacs towards the cost of health care now, can you imagine what could be the probable cost after 15 years which is equivalent to Rs 2 lacs???

 Rs. 16.3 Lacs

Yes, It may cost you about Rs 16.3 Lacs.. Or even more than that..


Do your homework on your health care cover........


If you are part of an organization, do review the adequacy of cover you and your family receive...


If you are independent then all the more important to review the cover's adequacy...

Remember, you are better off when health cover is taken at the early stages of life. The principles  of "Earlier the better" & "Better late than never" work perfectly in taking health cover decisions.

Sarve Janah Sukhino Bhavantu

(May all people be happy)

Lokah Samastah Sukhino Bhavantu

(May the whole world be happy)

Amazing story of three friends...

Three friends Mr. Cautious, Mr. Responsible, and Mr. Fun aged around 50 meet up after a long time in the Alumni Club. After the usual chats on the good old days, the discussion turned towards investing habits. Mr. Cautious boasted of his saving and investment habits and said "I have been been saving since my age 30". Mr. Responsible said "I enjoyed my life a lot and started my savings once I started my family at 35". Mr. Fun said "I am always fun loving and happy and actually started my savings only at 40 years after my family and friends persuaded to do so".

Now, let's for a moment assume, three of them put Rs. 1 Lac each in an avenue which gave them about 15% returns per annum. 

Mr. Cautious starts his investment at the age of 30;  Mr. Responsible starts at the age of 35; Mr Fun starts at the age of 40.

At 50 during the time of their get together, can you imagine what kind of money each one of them would have made?

Mr. Cautious put Rs 1 lac at his age 30 and at his 50, he accumulated

Rs. 16,36,900

Mr. Responsible put Rs 1 lac at his age 35 and at his 50, he accumulated

Rs.8,13,800

Mr. Fun put Rs 1 lac at his age 40 and at his 50, he accumulated

Rs.4,04,600

Result: Mr. Cautious with the identical capital and returns of the other two, made two times more of Mr. Responsible and 4 times more of Mr. Fun and the difference is made in the matter of 5 and 10 years. 

Mr. Responsible still made two times more of Mr. Fun.

Moral of the story:

Start your saving early and invest it at the earliest....

The power of compounding is at work very silently..... 

Can Rs 333 a day for a year become Rs 19.6 lakhs in 20 years???

The answer is a loud "YES"     .... Small drops can make an ocean....

As a kid, I was amazed at the story in which the intelligent crow wriggles water out of the jug using small pebbles... It's target, is to drink the water in the jug...And it did...

Moral of the story: Using methods which can look small can help you achieve bigger and unimaginable targets... And friends, this moral, pretty well applies to the world of investing as well.

Can you imagine a daily saving of Rs 333 for 1 year ( Approx Rs 1.2 Lakhs) and by investing that @15% can potentially earn you Rs 19.6 lakhs or even more after 20 years???

Small drops indeed can make an ocean...


@ Rs.333 these days, lunch bill for 2 - 3 people?........... 

Think about it...