andysfinancial

MUSING 3: COMPOUND INTEREST THE EIGHTH WONDER OF THE WORLD There is this famous story, probably apocryphal, that Albert Einstein once termed the Compound Interest as the Eighth Wonder of the World . While this may or may not be true, if there is only one concept from this book that I wish to leave with you, it is to understand and internalize the power of compound interest.   Like all great powers it can be harnessed to achieve absolute financial freedom or conversely it can land one into penury in the sunset years, all other factors remaining same. To explain this and subsequent concepts, let me first introduce you to the gender neutral protagonists of this fable-Anshreya and HoneyCool. We will also recapitulate as to what we mean by Compound Interest.           Compound interest  is the addition of  interest  to the  principal sum  of a loan or deposit, or in other words, interest on interest. It is th...

MUSING 2: DON’T EVER SAVE Your Piggy Bank Eats Money .    Let’s say you get attracted to a real cute dress at H&M (Hennes & Mauritz) at the nearby mall but don’t have money to buy it because it costs Rs 5000. Your fiscally prudent parents ask you to save out of your pocket money in order to buy the dress after some time. So you start saving Rs 500 out of your pocket money each month and keep putting it in your piggy bank. After 10 months you rush to the H&M outlet to buy the dress but find that you fall short by Rs 500 since the dress costs Rs 5500 now. What happened? Did your piggy bank eat Rs 500 over last 10 Months? Or, the price of the dress went up by Rs 500 in this intervening period? Actually, it is a bit of both-yes, your piggy bank actually eats money. No kidding.           What actually happened was that the purchasing power of your money got eroded by a phenomenon called Inflation which is nothing bu...

One would expect a blog on financial wisdom containing great investment Mantras to be helmed by a rich business tycoon or a successful entrepreneur or a stock market wizard. I clearly fit none of these or any other such roles even remotely. Indeed, whatever I have achieved financially over last three decades is rather modest, verging on the side of below average. Why then am I bothering you to even read what I have to tell you about financial wisdom? If I had this wisdom wouldn’t I have done better financially myself?   Please read this blog to learn what I did not do towards my personal finance, or did it too late to give me a peace in life. I am not uneducated, in fact far from it. I hold triple Master Degrees-Master of Science, Master of Philosophy and Master of Management Studies, where one of the subjects was Financial Management. But I consider myself financially uneducated as I could not translate my theoretical knowledge into tangible personal financial outcomes . This ...