Friday, February 17, 2006

Investment Principles

He Said

Investment Commandment
1. Even while throwing money into sea, count and throw.
2. Family is the most important wealth. Never forget that all these are for their welfare and safety.
3. Nothing is worse than being penny wise smart and pound wise foolish. Spend money when needed.
4. Teach the next generation on value of money and importance of saving, also teach them to give as they earn
5. Liquid money flows so turn them into solid investments (CDs, real estate).
6. Start investments early (early 20s) and aggressively (invest in high risk high return protfolio), then end with assest protection (as u age).
7. A penny saved from expenditure is better than a penny earned through income.
8. Just because you can afford things doesn't mean you should
9. Don’t invest in anything you don’t understand.
10. Avoid recurring costs to the extend possible.

Investment Rules
1. Continously evaluate the expenditure and trim expenses without too much comfort reduction
2. Live like college student till you hit 30.
3. Do free activities like visiting museum, fairs, park and spending time with family
4. Continous learning about investments
5. Buy things using Upromise and bondrewards
6. Subscribe to Kiplinger’s and Smart Money and begin a lifetime of learning about the world of investing and personal finance
7. The APY for all investment accounts (brokerage, kidsInvest, roth IRA and 401k) should be 11%.
8. Make the tax withholidings tuned such that you owe govt money during tax filing period (about $1k)
9. Keep copies of tax filings for atleast 3 years.

1 comment:

B&I said...

A note about the first commandment: Even while throwing money into sea, count and throw. As with most commandments, this one was "borrowed" from my grandfather (via my dad). A thing about my grandpa. He used to keep money in stacks after counting and its said that he can tell just by looking at the stack whether someone took money or not!.

You know, I never really understood that line and i hope, i will understand the deeper meaning as i age. yeah you should keep track of things and i always have. But now i believe that statement is all about the counting process. and you know what? its very hard to keep track of money. can you tell me how much you spend in a month? for what things? where are you spending most? Its so much easier to dump the money into sea than taking each bill, noting its value into a book and then throwing it into the sea. but when you do that, you bring in discipline (a strict operating procedure) and control (an account on what was thrown). but more importantly, when you go thru this pain of counting and throwing, you get numerous chances to think, to realize that you are infact throwing money into the sea. You see where the expense are and you become in control of yourself. Well suited for these comments i hear from people "i dont know where the money went, i know i got x amount of money this month, but by month end its gone!". "i made X amount this year, but my bank balance does reflect one bit of that".

All these days, I never kept track of money. So when I saw my friend keeping track of what bills to pay in excel, it struck me. Keep track of ur expenses in excel. So I fired up excel and started writing down every expense I incur (it’s a pain to start but after a while it becomes easy), essentially a worksheet for each month, and a row for each expense that includes date, what for, amount and paid using cash or CC. I also tally them into categories like groceries, gas etc. This was about year ago and I have cut down on wasteful expense. Why? Because while noting down a wasteful expense, I try to cheat myself. I think of all the ways and reasons not to write it down. finally I give up and write it down, so next time I am about to waste money, I think of the struggle I need to undertake while accounting and I am in control. Of course you do need to write it down, none can force you to write it down. This simple thing lead me to the next step. keep a budget. so by month end I see how expenses match up with budget. I do sometime overshoot my budget, but I know why I overshot and make adjustments accordingly. btw that does not mean that I became a miser. The fact that you should throw money into sea takes care of that!

If you ask me, I think my grandpa could tell the difference by looking at the stack, because he is so used to seeing what an x amount of money in stack look like. This is the only statement I take pride about my grandpa, and it truly is a outstanding one.