We are
all born into genius. Sadly, most of us die in mediocrity. We all are going to eventually
someday shed our earthly bodies and leave for another voyage – the journey of
the soul. But then, does the journey of the soul begin when we actually die
physically. Is the soul really alive when we are here on this planet? A child
knows what it wants to accomplish in life. At that point, everything is clear
and everything seems possible. As children, we are not afraid to dream and
yearn for everything. But, as time passes, a mysterious force begins to
convince us that it is not possible. By repeating the same pattern again and
again, are we moving towards the death of our very soul? Everybody has a “personal
calling”. This is the promise between God and us. It is the promise each one of
us makes to God before embarking on our earthly journey. Whoever you are, you
have a personal calling, a desire that originated in your soul. This is clearly
your mission on earth; the purpose of your very existence on this planet.
The
single most important thing which comes between man and their dreams in the
physical world is money. The New Year 2016 is very soon approaching and we will
be busy making different wows in order to improve our health, social and family
life. Now, let us also make 10 goals to improve our financial health through
the year 2016 for our entire future lives so that we all achieve financial
emancipation. And once we achieve financial freedom, we would be able to live a
worry free life, we would be re-introduced to our dreams and get the courage to
live our dreams and then achieve our higher self actualization goals.
Let us
now understand the 10 Financial Goals for New Year 2016:
Goal 1: You shall strive to increase your current income and make
money work for you
I or
infact nobody can teach you to increase your income. God has given each one of
us certain unique talent and some special gift. It is upon all of us to
recognize our those special talents, believe in our onwselves, sharpen those
talents and convert it into some meaningful gainful income generating venture.
Without income there is no scope for financial security but just by having
income it does not mean that you will achieve financial independence. And once
you start earning, don’t just work for money but make money work for you
because if you keep working for money than you will just keep doing that your
whole life.
Goal 2: You shall do proper budgeting
In the
modern technologically fast changing world, we pay everyone including government
income taxes, bank loan EMIs, children school fees, medical bills and even our
servants and drivers. Some forcefully and illegally take away money from our
pockets like robbers and fraudsters while some others forcefully but legally
take away money from our pockets like government, bankers etc. To some like
parents, children, brothers, sisters and friends we might give money out of
love while to some others like doctors, lawyers, teachers, drivers, milkman etc
we give money out of the need for their goods or services. But then when we
draw our monthly budget list, do we put our own name on the list? Do we pay our
owneselves? Unless one learns to pay themselves, money will just come from one
hand and go out of another hand without actually entering your pockets. So,
make payment to yourself a “necessary expense” and always “pay yourself first”
which will be your second financial goal for the New Year.
Goal 3: You shall not merely save but wisely invest money
We shall
understand and accept the fact that savers are losers in today’s fast changing
currency world wherein they save in terms of paper money whose value keeps
depreciating due to more money printing and loses value to inflation. Hence, we
would invest in those assets like equities, rental real estate, commodities etc
whose value over a longer period of time keeps increasing due to inflation.
However, we would realize that these assets move in long term cycles of their
own and would never give linear continuous returns.
Goal 4: You shall do proper asset allocation
Asset
Allocation is the primary premise for investments. Long term statistical
analysis has shown than 90% of the portfolio variability is due to asset
allocation while only 10% from investment selection and market timing. For
example, say there are 4 major asset classes, viz., equities, debt (fixed
income), real estate and commodities (gold). Now, say you allocate 25% to each
of the four mentioned asset classes. For whatever reason if tomorrow equity
markets were to crash by 10% in one day, your equity value will come down by
10% or to Rs.22.5 but the overall portfolio will just come down by 2.5% or to Rs.97.5.
Over a period of time, debt portfolio will earn return which will make up for
loss in the equity portfolio. Moreover, when equities fall due to turmoil in
financial markets, gold because of its perceived safe haven status might rise
which would balance out your overall portfolio performance. Hence, asset
allocation would be your automatic portfolio insurance.
Goal 5: You shall not do reckless spending
People
spend their time earning that money which they don’t value, take those loans
which they can’t repay, to buy those things which they don’t require to impress
those people who don’t matter! We shall not save what is left after spending
but infact spend what is left after saving and investing. Working for money is
a sad way to spend your time which you have in limited quantity for someone
else’s money, which is available in abundance. If you keep buying things which
you don’t require than very soon you will have to sell the things which you
actually need. Reckless mindless spending will lead you to the doors of
lifelong financial slavery. Therefore, we shall not fall into the trap of
reckless spending; infact we will spend where it is necessary and spend to get
rich.
Goal 6: You shall learn the difference between positive and
negative leverage
Learn to
distinguish between good and bad debt. According to me, bad debt would be that
debt which is used to create bad assets or liabilities like car, holiday home,
costly vacations which take away money from your pocket. On the other hand, positive
leverage would be that which helps you in creating an asset which then puts
money in your pocket (income) as well as scope for future capital appreciation
e.g. rental property which earns rent, shares which earn (tax free) dividends
and both having potential for future capital appreciation. Never borrow to
incur a revenue expenditure like foreign trip or bad capital asset like a car,
holiday home because they will not only take away money from your pocket in the
form of interest payments but also put you into recurring waste revenue
expenditure in the form of maintenance of those assets or shall I call
liabilities like petrol, repairs, property taxes etc.
Goal 7: You shall take proper insurance protection
Never confuse
insurance with investments because investments are supposed to grow your wealth
while insurance is primarily for providing you with protection. You shall take
proper insurance cover of atleast 10 times your annual after tax expenses
(revenue and average of past 3-year capital expenditure). You shall also take
proper medical insurance. Before starting to build fresh wealth, it is our duty
to protect our existing assets. Assets like house, flat, or car should be
insured against accident and natural perils. The event of earthquake or
terrorist attack to our flat/ house seems to be remote but the impact of such
things could change our financial stability upside down. So protect your house
and other major assets with proper insurance.
Goal 8: You shall buy your own house for self occupation
If you
already don’t have than you shall look into buying your own house for self
occupation in the year 2016 with some bargain and discount from the developer
while trying to time it in the middle of the interest rate reduction cycle
(because you may not be able to get your house at a discounted price at the
lowest interest rate).
Goal 9: You shall not over invest in speculative items
This would
include speculative or penny stocks, junk bonds, non cash flow generating
commodities like gold or silver and non-revenue generating posh real estate
like holiday homes and beach houses. Investments in these can be done only when
you have a clear view on the above asset class and expecting to gain from the
price movement in it. But, you have to remember that they are speculative in
nature and will not go up in perpetuity and hence you should not marry with
those investments but sell it when the right time comes.
Goal 9: You shall make a proper retirement plan
If you
want to enjoy the same life style which you are currently are living even after
your retirement or have the joy of bequeathing your wealth to your children
then start planning for it today. And be realistic about it – make an estimate
of your needs which will keep evolving with your age and time and also consider
inflation in your computations.
Goal 10: You shall remember these principles while investing in
equities:
Ø Bull
and bear markets run for several years. Hence determine the primary trend of
the market and don’t generally go against the primary trend
Ø Market
is supreme and above everybody - no Government, Central Bank, Industrialist or
Operator can alter the primary trend of the market – they can only complicate
the wave structure
Ø Once
a low is made – it gets and has to be tested once or twice – if it gets tested
again and again it means that it was not the low and market is eventually going
to break it
Ø Right
asset allocation and getting the macro view right are far more important and
profitable rather than individual investment ideas
Ø Never
invest or trade more than you can reasonably afford to loose
Ø Put
stop loss at a logical, not convenient, place and always adhere to it
Ø Cut
losses and let profits run. Don’t let a profit get converted to loss
Ø If
you wait too long to buy, until every uncertainty is removed and every doubt is
lifted at the bottom of a market cycle, you may keep waiting and waiting
Ø Act
on your own judgment or entirely on the judgment of another
Ø Tips
are for waiters and not investors
Ø When
in doubt, stay out and don’t get in when in doubt
Ø Don’t
overtrade
Ø Don’t
invest or trade based on hope
Ø Learn
to accept your mistakes in the market (otherwise market will make you accept it
in a cruel way) and then analyze and learn from your mistakes
Ø Wherever
possible, trade liquid markets
Ø Don’t
believe everything which a corporate official says about his / her company’s
stock
Ø When
opinions in the market are too unanimous – beware because markets are famous
for doing the unexpected
Ø Never
be sentimental about an asset class or individual stock
Ø Market
is more of an art rather than science
Ø Simple
logical things work far better in the market place rather than complex
algorithms, theorems, valuations principles, DCF etc
Ø Buy
the stocks of companies that have shown consistent growth in earnings and
producing those goods / services which people cannot do without
Ø Last
but not the least - Never try to catch the top and the bottom because only
fools can do it
Learn
before you earn, protect before its taken away from you, budget before you
spend, save before you invest, create cash flows as you invest, leverage before
it can grow, insure before you risk, love before you die. We are not human
beings having a spiritual existence but spiritual beings having a human life.
Money is of no use if it does not help us in achieving our higher self
actualization goals. When God blesses us financially, we should not raise our
standard of living but our standard of giving. When we are ready to give back,
the process of receiving automatically begins. Money is a necessary instrument
in the physical world to help us grow spiritually. Money may not make us happy
but it surely can help us in making others happy. Financial freedom frees our
soul in the physical world opening a vast universe of opportunities. People
might be ridiculing or making fun of our efforts but we have to remember that
if people are not making fun of us that means our dreams are too small. And
never believe in the greatest lie which the world will sell you in the name of
success – that your dreams cannot be fulfilled. Remember that if you can dream
than you can surely achieve it because the divine would never allow you to
dream something which you cannot turn into reality. We are all connected to
each other at a higher invisible level and when you start working for your
higher self actualization goals your soul converges with the soul of the
universe and then the Kingdom of Heaven through the hand of the Lord, the power
of the sun, blessings of the stars and wisdom of time, all converge and
conspire to help you achieve your dreams.
All the
very best for a very glorious New Year 2016 and future life ahead.
