THREE EASY STEPS TO SAVE MONEY FOR ALL FUTURE NEEDS

First Step: Prepare your goal chart

If you read my last blog HOW MUCH MONEY TO SAVE EVERY MONTH, I am assuming that by now you have made your chart of goals to be achieved similar to the one mentioned there. The chart is reproduced below:

Second Step: Find the current and future cost of your goal

After listing your goals, Find out how much does each of your goal cost today and then calculate its future value which will be obviously higher due to inflation. If the expense on your goal currently is Rs. 1,00,000, lets see in the table below on how much will it cost in future:

Third Step: Invest in accordance with your goal


For short-term goals (coming within one year or so) like ‘Buying a Tablet Computer’, Child’s Admission and Vacation etc, stock market can be risky due to their volatile nature. Simplest and safest choices can be an FD if you have the money and RD if you plan to save every month. Just divide the required amount by number of months and hope interest earned will cover the cost increase.

For medium term goals (3-5 years away) like buying a car or making your home down payment, you can look at Mutual Funds, preferably Balanced Funds and if you are a little aggressive investor….then at Diversified Funds.  Mutual Funds invest in stock markets, so it is difficult to predict precise returns and  required monthly savings (If somebody claims to know, he is trying to fool you). Therefore simply divide the required amount by the no. of months and invest that money. If you earn extra due to good markets, then you can buy a surprise gift for loved ones.


Unit Linked Insurance Policies or ULIPS (those investing in stock markets) are another choice but they have a lock-in of 5 years and deduct a lot of expenses from your investments due to which returns are likely to be lesser than MFs.

For long-term goals ( after 5 years or more), choices vary from Mutual Funds and ULIPs, PPF, PF to even Gold because you can invest in installments every month or quarter through Systematic Investment Plan (SIP). Property can be another one if you want to make lump-sum investment. How to invest your money is a vast subject and needs to be dealt with separately. Let's remain focused on how much money to save every month.

In the table below, I have taken three possibilities of 12%, 15% and 18% growth in stock market related instruments and I will call them pessimistic, realistic and optimistic scenarios (your definitions of them may vary). You can see return on investment of Rs. 1000 in these three cases.

Your question may be…what if I want as per chart on the top Rs. 15 lakhs after 15 years for my child's education in the realistic scenario, how much will I need to invest…..simple to calculate. As you can see that in 15 years, in the realistic scenario i.e. at a growth rate of 15%, your return on Rs. 1000 comes out to be 6,68,507. You have to simply put in this formula to calculate the required monthly investment amount.

(Desired Return / Return on Rs. 1000) X 1000

In the above case, it will be 15,00,000/6,68,507 X 1000 = Rs. 2,244 p.m. approx.

I guess that you are already feeling great about having calculated the savings required for your goals…Well, Congratulations for the journey so far!!! 

However, you will still need help to decide, which instruments to put your money in. Read my next blog ‘Where To Invest Your Money’ or take the help of a qualified investment advisor.

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HOW MUCH MONEY TO SAVE EVERY MONTH

“Saving is a habit…and if you don’t have it, may God save you” - Naveen Soni, 2011

The first part of this has been a long prevalent saying…many of you would remember it as your! dad or grand-dad’s words at the time of your first salary.

First salary!…have these two words taken you back to the day when you got your first paycheque. I am sure many would have bought some gifts for your folks..I did that too. The other thing that is nicely preserved in my memory is how we celebrated with the bottles of beer chilled in an ice-filled bucket.

But as time passes, you want to have a refrigerator to put your beers in.

Then you want a nice house where that fridge is kept…

and then one by one people start moving out as they settle in life forming families, which would sort of prompt you to have a house of your own

where you want to have all the best possible furniture, electronic gadgets and other stuff. And then, you don’t always want to stay at home and go on vacations.

Oh yes, you need a car to move with your girlfriend/family and then there are expenses on children’s education…and then their marriage after which you want to retire with same or better lifestyle.

head spinning??? Don’t worry…this is why I added the second part to the saying.

Also, not to say…if you don’t drink beer, you will never have the situations to earn and spend more.

Those living in parents home may have other goals... their motivation could be to make their own mark in life, to buy their own house…or if dad gifted a car, then to buy even a sexier one with better looks, style and power.

Everyone needs money now and in future.

Remember now was future yesterday and future will be now tomorrow. So the conclusion is you have to keep saving money for all your future requirements.

We are therefore, back to our original question….HOW MUCH TO SAVE EVERY MONTH.

Guys, I guess we are not yet ready to answer it yet.

You have to as first and most important step note down your financial goals, which in simple words is when do you need what e.g. when and how much money do you need for your laptop, car, house, vacation, retirement or even setting up your own business.

This is no theory. This is THE first essential step. Your goal list can look something like this:

Your list may be shorter or longer than this. It may have lesser or more expensive goals, but the important thing is you have to sit and jot them down.

Do this with your close ones....it will be great fun, maybe at the risk of including a diamond necklace or a computer game :) ! What to do next....I am going to step by step take you there and suggest you on how you can achieve these goals comfortably and I can promise you this planning is going to be fun.

After you have finished preparing your Goal Chart, read THREE EASY STEPS TO SAVE MONEY FOR ALL FUTURE NEEDS to work towards achieving your goals.

ALL THE BEST!

WHAT DO YOU WANT...A MONEY TREE?

I am not asking that from you...but asking you to ask that to yourself. In a world, where needs and wants have become interchangable depending upon one's social status and stage in life, i think you must brace yourself for your financial future, a term that i often prefer to use than the plain word 'future'.


I would like you to rethink of the blockbusters 'Jab We Met' and 'Om Shanti Om' (well, i am assuming you have seen atleast one of them) and remind you of a dialogue where 'Geet' in JWM and 'Om' in OSO say 'if you really want something from the bottom of your heart, you get it for sure'.

So what do you want..is it the car that your boss owns or that celebrity flaunts...? Is it a world tour because your company doesnt send you on one...well you dont have a choice but to do it yourself? Is it a big bunglow or that plush apartment in a luxury project? Awww, how can i forget something thats foremost on Indian parents' agenda...a fancy career for your children... better than anyone else in the family, friends or locality and yes that 'decent' wedding for which one would almost always stretch beyond the limits.


By the way, whats the common link in all these wants of yours....OF COURSE MONEY...and i am not giving away any prizes for guessing. And are these the only things that you need big money for...NOOOO...you also need money for a sleek laptop, a branded pair of sunglasses, your wife's pregnancy, your kids tutuion fee, latest mobile...blah blah blah...I know, I know the list just doesnt end...but the thought ends on the fact that YOU NEED MONEY FOR EVERYTHING. THEY SAY THAT MONEY DOESNT GROW ON TREES...BUT I SAY JUST THE OPPOSITE.



PLANT YOUR MONEY TREE WITH INVESTMENTS.

क्या आपने अपनी और अपनी family की financial planning कर ली है???

मुझे लगता है हरेक के लिए ऐसा करना बहुत ज़रूरी है। चाहे आपकी ज़रूरतें अलग अलग हों, लेकिन आपकी मंजिल पर पहुँचने के लिए साधन एक समान हैं... फ़िर चाहे बात retirement planning की हो या फ़िर आपके बच्चों की education या marriage की या अपना घर लेने की। वैसे कल अगर आप दुनिया घूमना चाहते हैं या बड़ी गाड़ी लेना चाहते हैं तो भी आपको financial planning की ज़रुरत है, ताकि ज़रुरत पड़ने पर आप बिना किसी दिक्कत के वो कर सकें जो आप करना चाहते हैं।

सब से अच्छी बात यह है कि अगर आप वक्त से शुरू कर दें तो आपको धीरे धीरे बस थोड़ी-थोड़ी savings करने कि ज़रुरत है। एक छोटा सा उदहारण लीजिये अगर आपको अपने अभी पैदा हुए बच्चे को 18 साल की उम्र में 25 लाख रुपये gift करने हैं तो आपको हर महीने बस 2264 रुपये जोड़ने की ज़रुरत है, बशर्ते कि बाज़ार 15% की growth rate दिखाए...और अगर इस से ज्यादा की बढ़त मिलती है तो और अच्छा है।

मुझे बहुत ख़ुशी होगी अगर मैं अपने 10 साल के experience की मदद से आपके लिए कुछ कर सकूं। अभी तक मैंने दूरदर्शन, CNBC TV18 या ज़ी बिज़नेस के ज़रिये हज़ारों निवेशकों से बात करके उनकी मुश्किलें हल करने की कोशिश की है और मेरा यह प्रयास अब भी जारी है। चाहे आप किसी शेयर पर सलाह चाहते हैं, या फिर किसी mutual fund पर राय या फ़िर किसी insurance पॉलिसी को चुनने में मेरी मदद, आप बेहिचक मुझे e-mail लिख सकते हैं। मैं अपनी खुद की जानकारी या अपने उन expert दोस्तों की राय के ज़रिये आपको कम से कम समय में solution देने की कोशिश करूँगा।

जय भारत