[arun agarwal]

Dear Friends,

Today while discussing with a close friend, I realized that most of the guys are really ignorant when it comes to managing their money.

As many boarders here belong to working category instead of just students, I thought of starting this thread for them.

Most of the guys/gals like us, come from a middle class background and all along we are taught how to do well in our exams so that we can get a good job and earn good salary for living, but beyond that, how to manage the money we earn is left un-taught. Most of the guys/gals are influenced by sales agents who are after our money and who make most of their money while selling us products/scheme which we don’t need but sellers make a huge commission.

I have started this thread to initiate a discussion on how to make our life more comfortable and worry free at least as far as money is concerned. Let’s face it “MONEY IS THE MOST IMORTANT FACTOR IN OUR LIFE” we may say it openly or not, but it is a fact.

Please Note:

This thread is for starting a healthy discussion on how to take care of our money.

It is not for giving any tips on share to buy or sell.

It is not for going into specifics of any particular insurance/Mutual fund scheme.

The discussion will remain general in nature but we can get into specifics whether one should go for fixed interest income or Mutual fund or Insurance.Also any solution can not be general to everybody. Based on individual requirement, the solution will also be individual specific.

So let us start an open discussion on the dirty money matter, which we normally don’t discuss so openly.You can post your query here or if you are embarrassed to post it openly, you can PM it to me. I will be posting few more details and questions in my next post tomorrow.You can start with a saving of just Rs.1000 a month and still come out with flying colors. You just need to be aware of you financial needs, now or later.

Arun

P.S. I would like to mention that I also belong to a middle class family, just like most of you. Started a job in 1981 with monthly salary of Rs.1100 . (Don’t laugh, famous scale of 700 -50-1100, that was the maximum starting salary at that time). With lot of luck and proper money management (and few beers along the way), I was able to take a retirement at 41 . It is different matter that I plan to come out of retirement, as it is because of boring life than money requirement.

[arun agarwal]

First of all sorry for all mixed up post above. It was highly un-readable. Now I have edited it.

Now in continuation. All you working guys/gals, I have few questions for you, related to money:-

1. Have you ever done any calculation how much money you will need for buying your own flat and how are you going to finance it.

2. How much money you wil need after 8-10 yrs for the education of your children and how you are going to manage it.

3. How are you going to fund sudden money requirement due to illness of your aging parents or any other loved one.

4. In the end, how you are going to live happily ever after your retirement, without needing any financial help from anybody.

5. Worst of all, how your family is going to cope up with everything, if something happens to you. (It is very difficult to imagine something happening to us, when things are going well. But all of us know that accidents do take place and all of us are vulnerable to this chance).

Most of the young guys/girls don't think about any of above matters now, but unfortunately now is the correct time to think about all these issues. the more one delays these matter, more costly it becomes. Can anyone tell me why ????????

Come on guys, these are real issues and don't brush them under the carpet.


Arun

[Mahip]

Nice thread Arun

Last year there was a lovely book from Outlook Money about "How to create wealth and manage your money". It deals with all these issues and various investment options. The book has properly divided people into age group of 20-30, 30-40, etc. and discussed various investment options accordingly. They have detailed analysis of the expenses u'll do in shopping, books for children, their education and many small small things even cost of baby diapers after considering inflation et all 10 yrs down the line

Buy that book if you all don't have

[razabpn]

Hey Nice Thread...


This is my first month of first job...Initially i was very excited that i would be self-sufficient from now on, but how wrong it was. I had to ask my father for finance! That too it was way too high than my allotted pocket money till date! My first month salary just went by...

I guess the reason is, we have aspirations which is beyond our budget. Then there is peer pressure to spend on lot of things, and then there is this unforeseen expenditures...All this eat up all money that we earn. I always do a mental budgeting but expenses keeps happening....and i just land in trouble...

[mbaankit]

Originally Posted by arun agarwal

5. Worst of all, how your family is going to cope up with everything, if something happens to you. (It is very difficult to imagine something happening to us, when things are going well. But all of us know that accidents do take place and all of us are vulnerable to this chance).


Arun

first of all uncle...i like your style of riting....
u begin on a serious note and then suddenly make a point which is serious but satyrical too....this is grt...

lets start money management.......
i havnt thought bout any of these questions since i started working 8 months back...:neutral:

[arun agarwal]

Originally Posted by mbaankit

lets start money management.......
i havnt thought bout any of these questions since i started working 8 months back...:neutral:

Thanks guys, but to start the discussion we need some real life situation and requirements. Someone has to come out with actual requirement and all related details. Either someone posts these things here openly and we can then plan everything step by step.

or

Someone can PM me the details and then I will remove the name and post all details and start the discussion.

Only general lecture by me will be boring and will not go a long way. Real particiapation will help everybody.


Arun

[arun agarwal]

Originally Posted by razabpn

Hey Nice Thread...


This is my first month of first job...Initially i was very excited that i would be self-sufficient from now on, but how wrong it was. I had to ask my father for finance! That too it was way too high than my allotted pocket money till date! My first month salary just went by...

I guess the reason is, we have aspirations which is beyond our budget. Then there is peer pressure to spend on lot of things, and then there is this unforeseen expenditures...All this eat up all money that we earn. I always do a mental budgeting but expenses keeps happening....and i just land in trouble...

Dear Razab,

You have hit the nail early on. This is one of the major reasons that newbies are unable to save early in life. When we start discussion, you will realise that this is the biggest mistake. One should spend only a small part of earning on such impulses or peer pressure.

Most of your expenditure should be planned and that plan should include some expenditure on pleasure. One should not be a miser but even this expenditure should be planned and not impulsive.

One easy way of avoiding such impulsive/un-necessary expenditure is to invest some money as soon as receive your salary. This way you will not have excess money in your hand and will be forced to careful in your expenditure.


Arun

[mbaankit]

i get a monthly sal of some 20,000....

i have given all of it (8 months)to my parents..they are managing it...i have no idea how much 'I' spend...

wat should i do..??shld i manage myself???

[reachmonil]

Good thread Arun!

Lets take my example, no need to snip the name or anything!

I woke up to saving and investments last year, when I went to my CA in October. I showed him my income statements. He said, 'Invest karo, else your IT this year will approximately be Rs.50,000.' (Remember, I have multiple sources of income). He suggested I invest Rs.100,000 and my IT would reduce to Rs.17,000.

This is a common situation faced by all. Where to invest? How much? What is the perfect blend to suit my needs?

My Investment Background:
I had no prior investments.

My Investment Plan:
Preferences:
- My motto was diversity. I cannot put trust on one source.
- I wanted good returns in short term investment.
- I didn't was to take too much risk.

I decided to go for a Insurance + NSC + MF mix.
- LIC Insurance (Jeevan Anand) - Rs.25000 yearly premium.
- Rs.40000 in Tax-Saving Mutual funds. (Invested in 6 MFs - Diversity)
- Rs.35000 in NSC.

Why?
Insure was opted for coz I needed a life cover, earlier you start, lower the premium.
The MFs was choosen coz Lock-in period is only 3 years. Expected better returns.
NSC because I didn't know a safer option with lesser lock-in period.


Now a few Questions:
1. Can anyone suggest a better split of investment, considering my preferences?
2. How is ULIP as an option? How does it work? (I am clueless.)

I think these are questions everyone faces. So, lets get more ideas flowing and surely we can save a buck more!

[harshadk]

Hello !

Good initiative, Arun !

I think we Indians are very quickly losing our traditional attitude of saving money, and prefer 'living for the moment' ( read : blowing it all up )

I'll give a personal example : I had a very well paying job in a big company for 7 months....... earned a lot, spent a lot too - till my parents came to know about it - and they forced me to invest in a mutual fund with a lock-in of 3 years. i now have a nice corpus which i cannot touch for 2 more years !

I currently have my own firm - but things are going terribly from a financial perspective. Over the last year or so, I have understood the real value of money, how difficult everything becomes when you go broke, how you have to think twice even to have dinner at an expensive restaurant - things which we rarely think of before. On many occasions, I have joined my friends for dinner at some place after having dinner at home.

After going through this, I have decided on a fixed course of action when i land up a decent job after my mba.

assuming conservative estimates for income and slightly luxurious estimates for expenditure, my typical savings plan would be:

Total annual earnings : 5 lakh p.a AFTER TAX( dont think this should be a problem, as all of us are mba aspirants ! )

Direct Savings : 30% - 1.5 lakhs

Investments in mutual funds : 50000 to 1 lakh, depending on comfort levels, condition of markets. spread across different funds to minimise risk.

FDs / PPFs / other less risky options : balance

Home Loans : 40% - 2 lakhs

This is of course on the higher end of the scale.... but paying off as big a chunk of the home loan when you dont have to foot your kids' expenses and wife's ( / wives' ) jewellery bills would be much more sensible.

In case I have not bought a house, this would go into an account specifically for that purpose.

Expenses :

Rs. 5000 pm for accomodation would give Rs. 60000 as annual costs.

Rs. 150 per day for food would give approx Rs. 55000 as annual costs.

balance remaining : Rs. 45000 per annum, which works out to slightly less than Rs. 3800 per month for miscellaneous expenses.

This is of course, when you start off your post-mba career. for those geezers who get high salaries, the percentage saved should be much higher, say around 50-60%.

how does it sound ?

cheers,
Harshad