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Showing posts from February, 2015

3 factors to be financially self-sustainable

i. Avoid unnecessary debt   Carrying large credit card balances and other consumption debts is a sign that our lifestyle exceeds our income. Such consumption borrowings come with very high interest and they hurt one’s financial wellness. Unlike a home loan which creates an asset i.e. real estate property, the interest paid on consumer debts is totally forfeited. Getting rid of high interest consumption's debts, at the earliest possible, is the first step towards being financially self-sustainable. Once free, keep off them as much as possible. ii. Pay yourself first   Saving could be viewed as the practice of paying oneself first. Traditionally savings applied to whatever is left of income after the long list of expenses. However to be financially independent that equation needs to be turned around – Expenses = Income – Savings!  We ought to decide how much is to be saved and then limit our spending to what remains. The habit of paying yourself first will go a lo

Savings for Retirement

Saving for retirement has a very long-term investment horizon and equity-based assets are an excellent choice. As a long-term savings project, accumulating savings for retirement is no different from any other long-term savings. However, if you talk to conventional financial advisors, you will probably discover that this is a contrarian view. For some reason, there is a school of thought that believes that because one should not take risks with one's retirement savings, one should not invest them in equity. The logic is that older people are not earning any more so they can't afford to take any risks. The value of their money must never decline, even if it grows slowly. Once you accept this logic, then the only type of investments that are acceptable are those that offer guaranteed fixed-income returns. Curiously enough, this view extends not just to investments that actual retirees make, but also to investments that even younger savers make for retirement. These experts