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THE RICHEST MAN IN BABYLON 1 Let me change tack for a few weeks- and write about all the wonderful books that I have read, and their messages, as I have understood it. Readers are most welcome to modify the messages as per their understanding and world view. If I have to recommend only one book on personal finance to you, it will be “the richest man in Babylon”, a classic written by George S. Clason in 1926. The simple messages in the book, derived from parables from ancient Babylon, are still mint fresh. I will lay out ten important ones with my interpretation of these pearls of wisdom over next two blogs. 1.       Pay yourself First .       “A part of all you earn is yours to keep. It should be not less than a tenth no matter how little you earn. It can be as much more as you can afford. Pay yourself first.” I have devoted an entire blog on this concept which I will request you to read through. Clason recommends a figure of 10% towards this, which I too feel

MUSING 7: THE ONLY WAY TO BUDGET DON’T BE PENNY WISE AND POUND FOOLISH If there is one activity from conventional financial wisdom which is universally hated and thus NOT going to work, it is budgeting. I have tried all conceivable methods for budgeting - from very rudimentary to the most complex and trust me, they all don’t work. After weeks and mostly days of counting and accounting pennies, you stop budgeting altogether in sheer exasperation. However, after trial and error, there are two techniques I have found that work, and honestly these two are the only ones which are required to have a smooth monthly budget. Let’s discuss them one by one. Zero Based Budgeting (ZBB) Before we discuss ZBB, we should remember that budget is nothing but a plan to tell your money where to go instead of wondering where it went? The fundamental behind the ZBB is that there can be no ideal month so far as your expenditures are concerned. Even for planned expenses, and fairly large o

MUSING 6: SPENDING INVESTING BALANCE IN REAL LIFE ·         Yesterday we learnt the concept of 50:30:20 budget and resultant spending investing (SI) balance. Let us now see it in real life with our protagonist Anshreya who has got a brand new job at Bengaluru with a take home pay of Rs 50,000. Anshreya must not spend more than Rs 25,000 on his needs (50% of take home pay). So, he must manage his house rent, basic clothing and food needs and other utilities like mobile/internet bill, fuel for bike (if he has) or other transportation expenditure, electricity/water bills etc. out of this amount. The biggest chunk is likely to be for house rent . As a rule of thumb, not more than 50% of needs budget should go towards house rent-Rs 12,500 in this case. He may have to make compromise regarding location of the house, if a good house, close to his place of work is not available within his budget of Rs 12,500. Remember, other expenditure connected with house like water, electri

MUSING 5: SPENDING-INVESTING (SI) BALANCE “Life is a balance of holding on and letting go”- Rumi. The key to keeping balance is to know when you have lost it”- Anon. The two quotes above sum up what I intend covering in this and the following musings. Life is all about balance-as students it was about “study-play”, as adults it is about “work-life”, even to remain healthy it is about a balanced diet. Like a balanced diet must contain protein, carbohydrates and fat, a balanced financial life must also contain protein (your Needs), fats (your savings) and carbohydrates (your wants). These three ingredients finally translate to spending and investing in life-spending to keep you healthy in the present and Investing to keep you healthy in the future. Too much of indulgence in the present will adversely impact your future and too much of future consciousness will rob your present of fun, that you so richly deserve. After all, how long can you go on eating sprouts and boiled ve

WHAT FOLLOWS IN THIS BLOG? Well, this is not a Musing but just a post to update the readers about what is going to follow in the Blog. This very obvious lacuna, which I had not realized till today, was pointed out by a friend and I am thankful to him. I am outlining the broad topics that I intend covering in the subsequent musings, the sequence of which may vary. Of course, based on your feedback, I’ll keep adding more topics as we traverse this journey together. So here we go. 1.      Don’t Ever Save. 2.      The Eighth Wonder of the World-Compound Interest. 3.      Spending-Investing Balance. 4.      Understanding Assets and Liabilities. 5.      The Latte Factor-cutting out wasteful expenditure. 6.      Understand your Credit Cards. 7.      Good and Bad debts including debt thumb rules. 8.      Creating Breathing Fund-so that you sleep easy. 9.      Am I on track financially- Some important financial Ratios? 10.    Where do you invest? - The Asset Classes.

MUSING 4: PAY YOURSELF FIRST It is a great liberating feeling when you start earning, with money flowing in to your hands for which you are not accountable to anyone-except to yourself. And that’s the reason I’ll discuss this amazingly simple, yet profound concept- Pay Yourself First in the initial musings itself . This concept has been beautifully put together by George S Clason in his classic book on personal finance- The Richest Man in Babylon ; a book published in 1926 but still mint fresh in it’s simple yet insightful teachings. This concept has been further elaborated upon by many authors including Richard Bach in his book The Automatic Millionaire (both these books are available on you tube as audio books which one can listen to while commuting for work, during workout at gym or during morning jog-I have extensively used this dead time to enrich myself with wisdom of these and many other masters, for free) . You may well ask as to why someone should teach you to pay yourse