Vijaibabu's Blog - Personal Finance Guide for Financial Freedom

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 wi...

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...

It takes less effort, less time, less experience and less specialized knowledge to get good returns from equity mutual funds than it does from directly trading in equities. There are several benefits of investing through mutual funds instead of directly investing in stocks. Mutual funds combine the savings of a large number of investors and manage it as a single pool of money . So, instead of investors worrying about which stock or bond to invest in, professional fund managers do the job. Equities are complex and stocks you can buy come in a bewildering array of sectors, industries, size, financial structure, promoter track record, competitive scenarios and a lot more. When you invest in a fund from a good fund house, there is a full-fledged research department to keep tabs on all this; and there's an experienced full-time fund manager who has years --often decades -- of track record of making equity investments . Moreover, his track record is publicly known and thor...

It may seem like a problem you'd love to have: Getting a huge windfall and not knowing what to do with it. Frankly, it could be anything – a Diwali bonus, an inheritance, an insurance settlement, the sale of a home or business, or even winning a lottery. What you should not do is squander it all on a reckless spending spree. Here are a few ways you can handle that bonus wisely.  1) Start an emergency fund Use this money to start, or supplement, an emergency fund. In life, you should expect the unexpected – job loss, sudden medical expenses, unforeseen emergencies. Having a reserve for a rainy day is a very good idea. Without an emergency fund, you are more vulnerable to sudden life changes.  Most financial planners recommend setting aside 4 - 6 months' worth of living expenses in an emergency fund . If you take the liberal view of living expenses when deciding how much to stash away, your emergency kitty likely will last a little longer. 2) Clear expensive debt ...

You no longer have to depend on active income to meet your lifestyle expenses . Retiring early may seem ideal but it has its issues. You need to make substantial savings during your working life to provide for retirement. You also have to find productive activities in order to keep yourself engaged.Therefore, early retirement may not be as good as it appears to be. So, why not aim at achieving financial freedom instead ? Financial freedom is the state where your passive income is enough to take care of your lifestyle. By passive income, we mean interest on fixed deposits, rental income on your real estate investments, dividends and realised capital appreciation on equity investments .You could achieve financial freedom at age 50. But achieving financial freedom does not necessarily mean you should stop working.Working after you achieve your financial freedom has its benefits.   For one, you do not have to withdraw money from your retirement savings to meet your living exp...

With markets in a steady rally for over 12 months everyone seems to be happy. AMCs and distributors are seeing good inflows. Investors seem to be in jolly mood too owing to the general market sentiment and they are being told with a sense of urgency that "now" is the time to invest. But in the upbeat scenario there a few mistakes that every investor must avoid at any cost. Of the common mistakes made by investors in mutual funds, these few are repeated over and over again. The good thing is, they can be easily identified and avoided, to ensure investors don't turn out to be their own enemies! Classic mistake #1: No goals linked to investments The fundamental mistake anyone can make while investing in mutual funds is to buy a fund for any other reason than the fact that it suits their requirement. This automatically leads to the need to first identify one’s financial goals. Depending on our life stage and financial background we would have short, medium and long term goals...

It didn’t need much deliberation for me to choose the title of this article; straight from the gut, if you’d like to call it.  Before I proceed, let’s get one thing clear. We are not talking of getting rich through a lottery or inheriting huge wealth here. We are talking of:  Simple investing practices that delay gratification so that you and your family may enjoy it to the fullest later Having your financial goals fulfilled comfortably Retiring in comfort, and  Taking dream vacations without having to count every penny  When we choose conservative investment options, become apprehensive about investing more in a superior yielding asset class (example equities), dread losing money, and fear far too much about ending up poor, we are simply denying ourselves a chance to become rich.  Here are some of the common fears we have about investing in a seemingly ‘risky’ asset class such as equity, along with reasons on why your fears may not be justified: I...