Talking about money is a very private topic like religion, we don’t even discuss these topics ever with our close buddies. Yet we are constantly spending most of our time & energy to earn more of it.
Have you ever questioned yourself have I made a real effort to try to understand how the financial systems works?
What should I do now to improve my financial freedom?
How can I retire safely?
How will I handle unexpected events that are sure to hit us when we least expected?
How prepared are u?
The most powerful tool of great minds is the ability to anticipate and be prepared so when any catastrophic event hits they will be prepared to handle it in the best possible way, else we will just react to those situations.
What is the financial education needed to take control of our finances?
Financial education is not an MBA in Finance or a CFA Certification, it’s the simplest things like taking control of our Spending habits & Saving habits, The Greatest Financial Minds do say the most important part of financial education is the ability to control your behavior. It’s called Behavioural Finance.
When we speak about taking control of our financials, first thing pops up into our mind is let’s go and meet a financial advisor and get his advice and the rest is left to markets or take it what comes.
When you get good results we are happy and when its too bad blame the advisor, Change to a new one until we have money left.
What if I tell you, that u can be a financial advisor for your self and even do better than most of the financial adviser.
How? Come let’s Find it out.
#1 Principle Start with Living a Modest life
Let’s start with a word of wisdom from the father of Value Investing, one of my hero Benjamin Graham.
Words of Wisdom on Life
“As Having Slipped into the extravagant way of life which I did not have the temperament or capacity to enjoy, I quickly convinced myself that the true key to material happiness is a modest standard of living which could be achieved under all economic Conditions.”
The margin of safety applied to Personal Finance.
Margin of Safety (Build a Bridge of 15000Kgs and Don’t Drive a Truck whose weight exceeds 10000Kgs)
#2 Principle be a Good Saver
If you want to improve your financial position, you have to be a Good Saver.
To put it in simple terms “Spend Less than what you earn save it, put it in a tax differed account over long period of time it will create wealth for you”.(e.g PPF Account)
Then comes the most important discussion, I don’t have enough funds to meet my current needs how can I accumulate money for investments. Don’t confuse absolute necessity with desire.
Don’t Forget this rule “Every 1/10 of what I earn is mine to keep” start with this rule and gradually increase your savings.
The easiest way to save more money? Put your savings on autopilot.Automating your savings could be just what you need to get your finances in tip-top shape to ensure you reach your savings goals.
#3 Principle Be an Investor
Don’t be a Consumer be an investor.Investing is a lifetime Journey, its a critical aspect of achieving a purposeful life.
Don’t mistake investing is all about money alone, you can invest your time to build knowledge, build health, build long-lasting relationships.
The simplest metaphor to think about investing is like preparing for a marathon, not a 100-meter dash.You have to train hard every day and build endurance.
The similarity in Investing and Marathon is it’s very hard, requires persistence, discipline and a strategy/process. As a novice runner my 1st goal is to complete the marathon than be the winner, similarly in investing my aim is to retire or build wealth safely.
To finish first, you must first finish.
Tying to get rich too fast it’s the perfect recipe for disaster. A simple example is day Trading, u need to understanding day trading and investing are entirely different and requires a different skill set.
“Someone will always be getting richer faster than you. This is not a tragedy.” Charlie Munger
There’s only one way to the top: hard work.
“Obviously if you want to get good at something which is competitive, you have to think about it and practice a lot. You have to keep learning because [the] world keeps changing and competitors keep learning. You have to go to bed wiser than you got up. As you try to master what you are trying to do – people who do that almost never fail utterly. Very few have ever failed with that approach. You may rise slowly, but you are sure to rise.” Charlie Munger
So with all said how can I be wealthy and wise, the answer is to compound your money and knowledge. Where can I compound my money and where most of the people have done it successfully, there is a place called Stock Market for compounding your Money and it’s not the only pace, there are other options like Starting your own business and real estate.
To be a successful investor what are the skills I need to build.
1. You need to have a Process that suits your character
4. Long-term(10/20/30 Years) Mindset
“Expect anything worthwhile to take a long time. Very Long Time”
Finally, Understand how compounding works
The best time to start anything is now, let’s start our journey of financial freedom.
Finally, I would like to finish with a question “When was the last time you did something for the first time?”