PERSONAL FINANCE MUSING 26 THE MAGIC OF SMALL SAVINGS- I FIRST STEPS TO THE JOURNEY OF THOUSAND MILES

PERSONAL FINANCE MUSING 26

THE MAGIC OF SMALL SAVINGS- I

FIRST STEPS TO THE JOURNEY OF THOUSAND MILES

My book, “Musings of a (financially) illiterate father- a common investor’s guide to wealth creation and retention is scaling new heights every day besides generating a buzz and having great sales. The book is now available in e-format too on Kindle, Kobo, i-books, and Google.

I will urge you to continue to share this post too as my book has been specially written to teach the alchemy of wealth creation and retention to our children-they deserve to learn it. Please support this mission of financial literacy by reading and recommending this book. The link is given below.

https://www.amazon.in/Musings-Financially-Illiterate-Father-Investors/dp/1643247263?tag=googinhydr18418-21&tag=googinkenshoo-21&ascsubtag=2cd97bc1-4bb5-4954-8f55-6fbb7070d8b9

My book is also being covered extensively by the Print Media, the latest being an interview by “The Pioneer” on 07 Sep. I am forwarding the link here, as also a transcript should you decide to read the interview here itself.

Brig Anand Saxena, a serving Indian Army Officer holds triple Masters Degrees and graduated with financial management as a core subject. In addition, he blogs on personal finance (andysfinancial@blogspot.com) and is also a qualified Helicopter pilot.

Question     Your book, “Musings of a Financially Illiterate Father” has quite an unusual title. Tell us the thought behind this title?

Answer       The financially illiterate father is me, who despite being very educated in the traditional sense was illiterate so far as managing his personal finances were concerned. In fact, the title is a metaphor for all those educated persons, the common investors, who find managing their money a challenge and happily hand it over to so-called financial advisors, who extract their pound of flesh in form of hefty fee while generating mediocre returns.

Question      Tell us your journey from a “financially illiterate” person to someone so knowledgeable that he could author a book on personal finance.

Answer       Around two years back, I did a financial health checkup for myself and realized that despite a regular and decent salary, my financial health was not too good. When I introspected, I realized that I never had a financial plan in my life and most of the investment decisions that I had taken were based on someone’s recommendation or advice, without understanding the fundamentals.       I then started reading books on personal finance. I also talked at length to the persons who had done well financially. As I did so, a precept of financial planning started to emerge in front of my eyes. I then decided to put my knowledge down in form of this book to benefit a common person who would not have adequate time to educate himself on personal finance.

Question     What as per you is the USP of your book?

Answer       This is the first book on personal finance in our country which can teach a youth, as he/she starts to earn, how to look after their personal finance and put their hard-earned money to good use.          The book has been endorsed by luminaries from both financial and non-financial sectors including Sri Sushil Kumar Shinde, former Home Minister of India, Krish Srikkanth, former Indian cricket captain, Mr Nirmal Chand, Regional Director, Reserve Bank of India, Mr Vikas Mittal, Deputy CEO of HDI Magma General Insurance Company Limited and many more.

Question     What message would you like to give to our readers- why should they read your book?

Answer       I would like to encourage the youngsters to read this book to learn the alchemy of personal finance management in an easy to comprehend manner. For grownups, this book will prove invaluable to affect a course correction in their financial planning and fortune.   The book is available on Amazon including Kindle, Flipkart, and other leading platforms.

          The series of posts that we begin today is on a seemingly mundane and unglamorous topic- the magic of small savings. In the times of booming stock markets and a myriad of attractive investment options, this “grandfatherly era” advice may be totally passed over by our readers- but only at their own peril. Let me illustrate.

          A couple who starts to invest just Rs 50 per day as soon as their child is born in a financial instrument (say Mutual Fund) which gives them a long-term rate of return of 12% (the annualized returns of diversified equity mutual fund in last 10 years have been 11.8%) will be having a corpus of Rs 10.67 lac on the child’s 18^th birthday and Rs 25.5 lac on 25^th birthday. Since this couple is financially savvy they inculcate similar investing discipline in their child. The child, flush with the gift of Rs 25 lac on his 25th birthday, starts to save Rs 100 every day and continues till his retirement i.e. 60 years. He retires with a corpus of Rs 1.65 crore, assuming the same rate of return. This corpus, when invested wisely and giving a return of 10% will result in a lifelong additional income of Rs 1.38 lac per month to this child (now a wise old man). See, how regular and disciplined saving can give you a huge corpus due to the sheer magic of compounding in the long run. The best part is that we are discussing such small amounts that you will not have to compromise on your lifestyle at all. In today’s post, we will look at some easy ways to pinch this small amount from our income- daily, weekly and monthly, and create a big corpus in the long run.

          Look at your car insurance scheme- have you really got the best deal? I looked at the internet today morning and found that the car insurance premiums for my car, generally offering the similar benefits range from Rs 3,753 to Rs 13,491 per year (on policybazaar.com). That’s a difference of a cool Rs 10,000 per year. Next time your car insurance comes up from renewal; don’t blindly have it renewed from your existing insurance provider. Instead, do some research on the net and take a well-considered call. The same concept is true for all other kinds of insurance- health, general and so on. Never consider buying insurance until you have got at least 5 quotes.

          Look at your cable TV/DTH plan; are you using all the DTH channels for which you are paying? Mostly we end up watching only a handful of channels and pay for a multitude of them which we never see. A few minutes of thought can save a decent amount of money. In general, all annual plans will work out costlier in the long run for the reasons enumerated above. Another way is to go for devices like Amazon Fire Stick or Google Chromecast, which cost just about Rs 3,500 and convert your TV to a Smart TV. Thus you can discontinue your DTH subscription altogether, as we have done, and enjoy HD real-time streaming of your favorite programmes.

          Look at your Mobile call and data plan, chances are that the bundled plans that your mobile service provider has given you can easily be tweaked. A data plan of 25 GB data per month, with a broadband internet connection at home, will never be used, so why pay for both? Same is true for the money being paid for the number of free calls and SMSs- simply a waste as the limit is never reached.

          Look at your Home Loan closely. Go on the internet and do a research, are you having the best plan being offered in the market? Has your bank revised the interest rates periodically- six monthly reviews will be a good option? You can easily end up saving a couple of thousand rupees per month on Home Loan alone.

          Like I mentioned above, review all the annual plans that you have- gym membership, e-magazines/newspapers, DTH et al, even if they are giving you a smashing one month / 10% off. Just taking this handful of actions will save you anything between Rs 3 to 4,000 per month. If you feel this amount is too small, go through the examples of the magic of compounding given earlier in the post.

          I will stop here and hope that the list above has given some food for thought to look at your expenditure pattern and find more places where you can squeeze out some money and put it to work to create long-term wealth for you. Go ahead- your imagination is your only limitation.

          In the next two posts, we will discuss two specific concepts of small savings- the Latte factor and the Gazingus Pin, both interesting and effective.

My book (paperback) is currently available domestically on Amazon.in, Flipkart, Infibeam and Notion press, and internationally on Amazon.com and Amazon.co.uk. The e-Book version is available on Kindle, Kobo, i-books and Google Books.

For now, enjoy your Sunday while reading my book- you have earned it.