Money Tree

The relationship or the lack thereof between money and trees has been talked about from time immemorial via the classic cliche – Money does not grow on trees ! Alrighty ! But, could there be a connection between money and trees? Allow me to quote from George Clason’s book:

“Wealth, like a tree, grows from a tiny seed. The first copper you save is the seed from which your tree of wealth shall grow. The sooner you plant that seed the sooner shall the tree grow. And the more faithfully you nourish and water that tree with consistent savings, the sooner may you bask in contentment beneath its shade.”

If you haven’t planted your money tree yet, now is the time; Just do it !

Why save money?

You might think that money must be saved and saving money is a given. Well, the truth is there are many folks out there who ask – why save money? What’s the use of saving money? Why can’t I just spend what I earn and live life to the fullest, in the present and without a care for what tomorrow might bring?

Well, who am I to ask you to not blow up your pile of cash. However, if you have had this question ringing in your mind, here are a few reasons why you must save money.

• For emergencies and to have some preparation for the unexpected
• For Purchases (automobile/home/vacation/etc)
• For Maintenance (automobile service, home repairs, etc.)
• For Education
• To Retire
• To work as you wish – do what you love, when you want, where you want to

These are a few important reasons to save. We’ll go over each of the above in upcoming posts.

The Five Laws of Gold

These laws are from George Clason’s classic book on wealth, “The Richest Man in Babylon”. This is a recommended read for anyone at any stage in your investing journey. The book was published recently in 1926 ! OK, but that doesn’t make it any less relevant in this day. The lessons in this book are explained by means of simple parables.

Here are the five laws of Gold (you can replace gold with money and voila ! they become modern laws) –

1.Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.

The more money I have, the more money I seem to attract. The money I save earns more and the earnings earn even more and then the eight wonder of the world (as per Albert Einstein) a.k.a. compound interest ensures this first law is fulfilled. This law states that one should save at least 10% of one’s income for the future.
2. Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.

This boils down to investing your savings wisely! Invest wisely and watch your money grow and multiply. Simple, isn’t it!

3. Gold clingeth to the protection of the cautious owner who invests it under the advice of wise men in its handling.

Be cautious while investing. Seek suitable advice from the right experts. Do your homework. Research and be sure before you plonk down your stash.

4. Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keeping.

Invest in something you do not understand, invest based on tips, invest because everyone else is doing it, invest because someone tells you to, the list goes on …. all recipes for money and you to part ways !

5. Gold flees the man who would force it to impossible earnings or who followeth the advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.

If something sounds too good to be true, it probably is.

Summary: save a portion of your income (at least 10%), make the effort to learn and understand about investing, invest carefully after you have done your homework

It is OK to fail

I am referring to failure of the financial type. If you have been investing for any reasonable time frame, chances are you have encountered some degree of failure. Everyone goofs up ! And there’s no exception. Everyone, Warren Buffet included makes mistakes. However, the important thing is to not lose the lesson in your failure.

 I have failed spectacularly early in my investing journey. It was painful and  frustrating. However, my monumental failure was one of my most expensive lessons ever; much more than all that I had spent on my college education! It was a very high fee to pay for a set of lessons i’d never forget.

When you lose, do not lose the lesson.

Way to riches and wealth

How do I get rich/wealthy? Ask this question and you are guaranteed to be bombarded with a gazillion pages of information! After you cut out all of the flab, garnish, gloss and wrapping, you’ll realize that it boils down to one simple principle –

And that is, to spend less than you earn. Yep, that is it! Can it be that simple? But hey, that isn’t a simple thing to practice consistently.

If you have been reading PF blogs you will recall that this simple principle has been flogged to death more times than you could count. Yet, this timeless principle is the basis of your financial independence journey. Can there be another way then? Well, there is another school of thought that would say –

Earn more than you spend.

Are these two principles the same? Well their intent it to produce a similar outcome, however, their approach varies.

The spend less than you earn brigade exhort you to live within your means and tighten your belts to “defend” every rupee, dime, nickel, whatever from leaving you! Every unit of currency is a determinant of whether you would turn out richer or poorer in the longer term. The focus here is to hold on to every unit of money and figure out creative ways to save (and invest that saving). The max you can save is limited by your earning; for example, if you earning 1000 rupees/dollars/<replace with your favorite currency> per week, the absolute maximum you can expect to save is the 1000 units of whatever currency you are raking in.

The earn more than you spend folks say that you should not deprive yourself of whatever it is you are spending on now but instead figure out ways to increase your earning so that there is a difference which may be saved for your retirement/financial independence. The greater your earning (assuming your spending remains at constant levels), the faster you get out of the “rat race”. The upper limit to saving in this paradigm is virtually unlimited (alright limited by your own ability to earn!) Of course a gating factor would be your ability to retain your spending at existing levels. Most often, the problem with increased earning is the corresponding increase in spending a.k.a. life style inflation that leads to increased consumption with little left behind for saving and thereby investing.

Which of these models do you think is best? It is ultimately your choice. However, a combination of both approaches yields the maximum results. Play great “defense” – via pursuing every opportunity to reduce spending while also playing great “offense” – via pursuing every opportunity to maximize your earnings. I must admit here that not everyone is/can be good at playing “great” defense and offense. Many are below average or poor in both areas. Some reach an average level in either area. However, if there’s one skill that you want to develop right now, shore up your defenses (assuming you have a fairly average offense going).

A new blog is born !

A new unique blog is born, just like every other blog out there !

This blog is about my thoughts and learnings on –

1. Money: well, of course! Who wouldn’t want to add another personal finance blog to the zillions of pf blogs out there! Whats new? I hope to present some of my learnings and my own financial journey
2. Life: oh yes! another chance to preach to the world ! Ok, some real world insights and inspiration, thats it

I hope you find this blog to be a kick in the butt, a nagging reminder, or possibly even a tiny dose of inspiration! Eitherways, i wish you make this blog your regular stop!