I passed out of XLRI in 1989 and for the first ten years, despite having a decent career, my financial journey was directionless.I started on the right financial path ten years after my MBA. I educated myself through books and learnt from people around me who knew more. I put an effort and changed some of my financial habits.
In just a few months, I could see the difference.Within seven years, in 2006, I became financially free, meaning, I did not have to work to maintain my lifestyle. My investments worked hard for me and earned me my living expenses every month.
Here are some of the things that I learnt and recommend for you:
1.Building financial security is not about how much you earn – it is about what you do with what you earn.
2.Do not spend all that you earn. Save about 30% of your earnings (this percentage for those with a salary between 4 lacs and 10 lacs per annum and are bachelors).
3.Do not save what is left after spending. SAVE FIRST. Spend what is left after saving.
4.Remember this Warren Buffet’s saying – “If you buy things that you do not need, soon you will have to sell things that you do need”. Make sure that you do not spend unnecessarily.
5.Your college has prepared you to get a good career and a good salary. But getting a good salary will not make you rich. To get rich, you will need to learn investing. They do not teach you investing in college.
6.You need to be financially disciplined, set up a long term investment strategy and stick to it in good and bad times. Plan your financial life. Make a cash flow plan for the next decade. Extend the plan for the next two decades. For more details on how to make a 20 year cash flow plan, you can read my book “How to get rich and retire early”.
7.Get into the habit of investing your savings every month through equity Mutual funds. Start an SIP. Starting investing early and staying invested for long is the single best thing you can do.
8.Aim at a 15% plus post tax returns on all that you have saved. Albert Einstein called compounding the most powerful force in the universe and by getting 15% returns throughout your life, you could be a Dollar Millionaire in a decade.
9.After a few years of working, invest in real estate as well. Remember that India is urbanising very fast. Every Urban real estate will appreciate in value over the next few decades.
What matters in the long run is not how you start –but how you finish. If you follow the points given above, you will surely finish really well.