If you found yourself out of a job or face a steep wage cut, you must not despair. You must take control of your Finances even more now and follow a rigorous budget
Here are some budgeting tips for people who feel cash-strapped during this crisis.
Understanding the current financial situation of his family, the first thing to do is list all the expenses of the previous three months, including grocery costs, utility bills, insurance premiums, dining and entertainment expenditure, education loan EMIs. Cut down on unnecessary expenses, including on non-essential shopping, watching movies at the theatre, and dining in restaurants. Some of these expenses would anyway not figure during the lockdown.
Review your portfolio carefully. Too many traditional insurance policies that you don’t need, consistently underperforming mutual funds, or a portfolio with too many liquid fund investments with negligible balances in each, but when combined make a tidy portion can be a contingency corpus in this situation.
Ankit has an education loan to repay. In the month of May, after losing his job, he opted for a loan moratorium. In case he doesn’t get another job even after the moratorium period ends on August 31, 2020, the EMI will be an added burden on his savings. So, he plans to discuss with the bank regarding his financial situation. Prashant Bhonsle, Head Student Loan, and CMO, Incred says, “If the bank finds your application legitimate and claim to be genuine, it may extend your loan tenor. This will reduce the EMI burden immediately.”
Cancel any membership and claim for a refund for any club memberships you may have. Given that sporting and group social activity would anyway be disallowed in these pandemic times, it makes sense to give up such memberships. The refund may be given after deducting charges. But it would still help your cashflows.
You might have paid software installed on your mobile phone or laptop. You would be charged on your credit card every month. If you haven’t used that paid software in the last three months, then consider opting for a free version. This will also save on recurring expenses.
Also, restrict yourself to one video streaming app. You could also check for a bundled plan with your mobile network service provider. For instance, Vodafone red post-paid customers can avail free subscription to Netflix for one year.
While shopping for monthly groceries and essentials, use the debit/credit cards, mobile wallets, or net banking services wisely. These days, there are multiple instant cashback schemes available on e-commerce websites while making payments digitally. Use these payment options as a priority instead of cash. You also get cash-back for paying utility bills (telephone, mobile, electricity, piped gas, etc.) on Paytm, Amazon pay, FreeCharge, etc.
The easiest way to make your money while you sleep is by investing. However, if the investments are not done in a planned manner with a proper objective in mind, it can even jeopardize your financial future.
So to help you invest in the right manner, find below the things that you need to be mindful of before you start investing.
There are many things that we want to buy or do in our lifetime. For example, we want to buy a house, a car, travel the world, gift our parents an expensive watch or a piece of jewelry. Now, most of these dreams can be achieved by turning them into investment goals; and then figuring out how to attain them in a timely manner.
There are many goals that are common to all like saving for retirement, saving for one’s child education, etc. And then, there are goals that are specific to each individual, like buying a Rolex for your father, watching the Wimbledon Finals, etc.
So, the first thing that you need to determine is what you are investing for. And then, exactly what is the amount of money that you would need to achieve that goal. For example, you need Rs 20 lakh for making a downpayment of a house or Rs 4 lakh for watching the Wimbledon Finals.
Once you are clear about your investment goal, for example, saving for your child’s school admission. Then you get an idea about by when you need to achieve that goal. Say your son/daughter is 2-years-old, then you know you would need to save that money within one year. And knowing the timeframe of the goal will help you understand whether it is a short term goal, a midterm goal, or a long term goal.
Once you are aware of the timeframe, it will help you determine where you should invest your money and how much you should invest to achieve that goal. This will also help you to stay focused on the goal. Since you know being irregular with your investments can result in a shortage of funds, you will remain disciplined with your investments.
Every investor needs to find out his/her own risk tolerance. Some products can give higher returns than others, but there might be more risk involved. For example, mutual funds usually provide higher returns than FDs but being market-linked they are riskier. Decide whether you have the stomach to tolerate that risk. Taking more risk than you can tolerate can give you sleepless nights which can eventually make you stop the investment before achieving your goal.
Different asset classes perform well at different times and hence if you have different asset classes in your portfolio it will ensure that investments are well-cushioned all the time.
For example, the return from gold remained low for a long time before going up since last year. Meanwhile, equities were delivering amazing returns before they crashed during the pandemic; however, during that time gold continued delivering great returns. Now, as an investor, if you have different asset classes in your portfolio, if one asset is not performing well during a phase, the other well-performing asset at that time would cover the loss.
But how much you want to allocate for each asset class will depend on your risk appetite and not how much return it is generating at the moment.
Finally, you have to zero in on the product you want to invest in as per your investment goal. There are two things that you need to be cautious about while selecting an investment product? first, it should be as per your risk appetite and second, it should be as per investment tenure.
The objective for each investment is different, so should be your investment tool.
There’s an old Chinese proverb you’ve probably heard a million times:
“A journey of a thousand miles begins with a single step.”
But you know what comes after that first step? Another one. And another. And before you know it, your fitness tracker thinks you’ve run a marathon and starts recommending you for the Olympics. 🏃♂️🏅
I recently came across a post that made me pause and say, Wow, that’s brilliant! It was simple yet powerful:
📖 Reading 20 pages per day = 30 books per year.
🚶 Walking 10,000 steps per day = 17 marathons per year.
💰 Investing ₹1,000 per day = ₹3.65 lakh per year.
The lesson? Never underestimate the power of small, consistent actions.
We all have big dreams—owning a house, achieving financial freedom, getting six-pack abs (only to cover them with a sweater in winter). But when goals feel too big, we procrastinate.
“I’ll start next month… next year… after this one last gulab jamun. Or maybe after the wedding season. Actually, let’s just call it a New Year’s resolution.”
Here’s the truth: Every big goal can be broken down into tiny, manageable steps.
And consistency beats occasional brilliance. Showing up every day—even at 80%—is far more effective than going all in once in a while and then burning out.
A 19-year-old investing ₹5,000 per month until age 60 could end up wealthier than a 30-year-old investing ₹15,000 per month, simply because of an 11-year head start.
📈 Want to see the difference?
Despite investing more than twice as much in total, the 30-year-old still ends up with less money than the 19-year-old.
That’s the magic of starting early. ✨
💪 Want to get fitter? Start with 10 push-ups a day. By next year, you’ll finally feel confident enough to walk on the beach without a t-shirt. 🏖️😎
📖 Want to be well-read? Read 5 pages a day. By next year, you’ll be that person who casually drops book references in conversations.
💰 Want to grow your wealth? Start with a small SIP. By next year, you’ll be that friend who never worries about money while planning a vacation. 💰
🚀 Playing the long game and avoiding the temptation of instant gratification is the key to extraordinary results.
Whether it’s wealth, health, or personal growth, the formula is the same—small steps, taken consistently, lead to extraordinary results.
So, what’s one habit you can start today? Take the first step.
Your future self (scrolling through travel destinations instead of bank statements) is cheering for you! 🌍💸
There are rules of thumb for everything. In terms of investing, there are certain thumb rules that help us ascertain how fast our money grows or how fast it loses its value. Then, there are rules to make our investment process easier. Like how should we do our asset allocation in mutual funds, how much to save for retirement and for emergencies etc?
we will talk about the 10 most popular thumb rules in the world of investing.
First, let’s look at the 3 rule to understand how fast your money can grow
We all want our money to double and look for the ways it can be done in the shortest amount of time. Well, calculating the number of years in which your money doubles is very easy with the Rule of 72.
Take the number 72 and divide it with the rate of return of the investment product. The number at which you will arrive is the number of years in which your money will double. For example, let’s suppose you have invested Rs 1 lakh in a product that provides you a rate of return of 6 percent. Now, if you divide the number 72 with 6, you arrive at 12.
That means, your Rs 1 lakh will become Rs 2 lakh in 12 years.
Like the? rule of 72′ tells you in how many years your money can be doubled, this rule tells you how many years it will take to triple your money.
The mathematical formula for Rule of 114 is similar to Rule of 72. For this, take the number 114 and divide it with the rate of return of the investment product. The remainder is the number of years when your investment will triple. So, if you invest Rs 1 lakh in a product that gives you an interest rate of 6 percent, then as per the rule of 114, it will become Rs 3 lakh in 19 years.
Two multiplied by 72 is 144. Hence, you can simply understand that? rule of 144′ helps you calculate how many years your money will grow four times if you know the rate of return.
For example, if you invest Rs 1 lakh in a product that gives you a 6 percent interest rate, it will become Rs 4 lakh in 24 years as per rule 144. All you need to do is divide 144 with the interest rate of the product to calculate the number of years in which the money will grow four times.
Now, as much as it is important to understand how fast your money grows, it is equally essential to know how fast the value of your money diminishes.
Let’s look at the rule that helps you determine how fast money loses its worth
This is an excellent rule that helps you determine what your current wealth will be valued at 10 or 20 years down the line. Even if you do not spend a single penny from it (neither invest), it’s worth will be much less than what it is today. The reason is inflation.
To calculate this, take the number 70 and divide it by the current inflation rate. The number that you arrive is the number of years your wealth will be worth half of what it is today.
For example, let’s suppose you have Rs 50 lakh and the current inflation rate is 5 percent. So going by the rule of 70, your Rs 50 lakh will be worth Rs 25 lakh in 14 years. For this, we simply divided the number 70 by 5 to calculate the number.
And now that you know how fast your money goes up and down, let’s look at some other rules that help you in the investment process.
Let’s look at the 5 thumb rules you can use while investing
When we invest or even think of investing money, the first thing that we usually look for is the rate of returns that we will get from our investments. The 10,5,3 rule helps you determine the average rate of return on your investment.
Though there are no guaranteed returns for mutual funds, as per this rule, one should expect 10 percent returns from long term equity investment, 5 percent returns from debt instruments. And 3 percent is the average rate of return that one usually gets from savings bank accounts.
As the name suggests, the money kept aside for emergency use is called an emergency fund. It is a good practice to keep six months to one year’s expenses as an emergency fund. While calculating your expenses you should include expenses for food, utility bills, rent, EMIs, etc. And instead of keeping it idle in savings bank accounts invest in liquid funds. These funds provide a little more returns than savings bank accounts. At the same time, like saving bank accounts, liquid funds are highly liquid, i.e. the money is available in very short notice.
The 100 minus age rule is a great way to determine one’s asset allocation. That is, how much you should allocate in equities and how much in debt.
For this, subtract your age from 100, and the number that you arrive at is the percentage at which you should invest inequities. The rest should be invested in debt.
For example, if you are 25 years old and you want to invest Rs 10,000 every month. Here if you use the 100 minus age rule, the percentage of your equity allocation would be 100? 25 = 75 percent. Than Rs 7,500 should go to equities and Rs 2,500 in debt. Similarly, if you are 35 years old and want to invest Rs 10,000, then according to the 100 minus age rule the equity allocation would be 100? 35 = 65 percent. That means Rs 6,500 should go in equities and Rs 3,500 in debt
When we start earning in our early or mid-twenties, saving for retirement is the last thing in our minds. But starting to save from your first salary, no matter how little the amount is, you will be able to create a huge corpus for retirement. And ideally, it should be 10 percent of your current salary which you should increase by another 10 percent every year.
For example, let’s assume that you are 25 years old and earn Rs 30,000 a month. You have decided to invest 10 percent of your salary, i.e. Rs 3000, every month, and increase it by another 10 percent every year. Let’s calculate the retirement corpus you will be able to create by investing in an instrument that provides 10 percent returns.
So, simply by investing Rs 3,000 every month, and stepping it up by another 10 percent every year, you would be able to create a corpus of Rs 3.4 crore.
A great way to build your retirement kitty is by investing in NPS following the 10 percent rule.
If you want your retirement fund to outlast you, then you should follow the 4 percent withdrawal rule. As a retiree, if you follow the 4 percent withdrawal rule, it will ensure that you have a steady income stream. At the same time, you have enough bank balance on which you earn enough returns.
For example, let’s suppose, you have a Rs 1 crore retirement corpus, and you should withdraw Rs 4 lakh from it every year, ie Rs 33,000 every month.
Now some retirees follow this rule for the entire retirement years, but the rule also allows you to increase the amount owing to inflation. For this, you can increase the withdrawal rate by the inflation rate declared by the reserve bank. Let’s understand this with an example.
Suppose your retirement corpus is Rs 1 crore, and the inflation rate is 5 percent. So if you withdraw Rs 4 lakh in the first year, you should withdraw Rs 4 lakh 20 thousand in the second year and Rs 4 lakh 41 thousand in the third year. That is every year you should increase the withdrawal amount by another 5 percent (which is considered as the inflation rate).
Finally, if you want to know whether you are wealthy, then follow this rule
Even to know whether you can be called wealthy, there is a simple mathematical formula.
For this, multiply your age with your gross income and then divide it by 10. If your net worth is equal or more than the remainder, then you can be called wealthy.
In India, the experts say the divisor should be 20 instead of 10. So for example, if you are 30 years old and your gross income is Rs 12 lakh, then your net worth should be at least Rs 18 lakh to be called wealthy.
This formula was used by Thomas J Stanley and William D Danko in the book? The next-door millionaire’ to determine how self-made millionaires made their money.
The rule of thumb or popularly referred to as thumb rule is an easy way to learn or apply things. And these practices are based on practical experiences. So as much as you can apply these things in real life and get results from it, these rules should never be considered as absolute truth.
