We all realize the need for financial planning . Without a plan goals will remain dreams or wishful thinking . However planning is only the first step towards achievement of your financial goals .
Then how to stick to our financial plans . The trick lies in knowing ourselves . Most of the times we assume our motivation will take us through . Many a times we fail because we make the wrong promises to ourselves .
Someone who has never lifted heavy weights cannot start with 100 Kg on day one .
Same for our mind. So the steps to ensure that we can stick to our financial long term plan are as follows :
This applies to any goals that you may to set for yourself . It can be financial or non financial .
Achieving freedom from debt trap becomes saving on the extra coffee and wasted groceries every day .
Write to us about your financial goals and how you plan to achieve the same . We will be happy to help you with your financial planning .
Achieving freedom from debt trap becomes saving on the extra coffee and wasted groceries every day . - 9rupee.com
( No stock Ideas or Economic analysis ahead . In this article we try to answer a more deeper question of why we do what we do.)
Does more money always translate to more happiness ? Money unlike other commodities allows us to buy whatever we want .
My kid loves Ice Cream.Today evening I buy her a chocolate iceream (her favourite ) and she is very happy . I buy her one more and she says Many Thanks !!. Then I buy one more , and she says Thanks! and offer it to her mom .
This is the simple theory of marginal utility . As we get more of the same stuff our total utility goes up , but marginal utility ( additions joy out of the extra unit ) for the additional units keep reducing .
However theoretically this should not apply to money . As with money you can also buy the car , the house , the vacation and all the other stuff you are yet to possess.
But in actual life we know things are a bit different . Lets look at a hypothetical situation :
Day 0 : Let's say Mr LoveMoney buy 100 shares of Infosys before the results are out .( Say Rs 100 per share ) He feels happy but apprehensive.
Day 1: Infosys results comes out , the results are above market expectations and the price shoots up by 4 % . ( Rs 104 ) Mr Lovemoney feels elated. He wants to make more investments in shares of companies like Infosys. He wants to take a gold loan and requests Mrs Lovemoney to give her ornaments which are in any case locked in the bank locker for the last 15 years !!
Day 3: Fed has increased interest rates . Emerging market shares fall . Infosys ‘ due to no reason ‘ drops 2 % !!!! ( Rs 101.92 ) ( 98 % of 104 ) Mr Lovemoney is very sad . He feels he should have sold on Day 1. He wants to sell quickly before the little remaining profit vanishes . He feels very sad .
But why ? we think . He should be at least more happy than what he was on day 0. In fact his annualized return looks good even now.
But this is the story for most of us . There are a few takeaways from this story :
More money doesn't make us more happy . After we attain certain basic standard of living money is just a number to keep score . The luxury soon turns into necessities and our happiness returns to the base level as has been coded in our genes. Our mind quickly adjusts to the new normal and thrives for more ! We want to keep winning in this rat race !
After all what we do and don't do is to get more happiness .
Fortunately or unfortunately more money does not translate into more happiness.
While it will vary for individual to individual the major factors that affects happiness are as follows :
1 ) Genetics : YES !! More than 50 % of your happiness depends on the genes that your parents gave you !! So if you marry that happy boy who is always laughing , jumping and joking chances are your kids will inherit those happy genes !! So let's explore how we can improve on the balance 50 % - 40 % where we have some control !
2 ) Sleep : Good Sleep has a lot of benefits . Its relaxes your mind , enables you to do creative things and makes you feel more happy and fulfilled. Sleep recharges your body and mind.
4) Good health : As we know a healthy mind can reside only in a healthy body . We need to take care of our health to be happy . We need to laugh more , breath more and love more . Even in financial planning , your health becomes very important . Good health reduces the funds required for your retirement planning !
5)Get encircled by positivity : We are all social beings . We love to be loved and liked . Having positive friends and relatives around us makes us feel positive and happy . So choose the following to surround you a) Positive persons b) Meaningful relations c) Warmth d) Love e) Pets
Positive persons emit positive energy . They are like the morning sunshine . Surround yourself with positive people . This will make you feel positive even when things are bad . It is this positivity that will help us drag through the cloudy days of our life.
Meaningful relations : Relations calls for long term commitments . It calls for gratitude , love and sacrifice. Where giving comes before taking . Where the interest of us is more important than I. As we grow old this is all we have to show as our progress report . This web of relations supports us and helps us to grow .
Warmth : We always remember that friend who took that long detour to drop be back to my house while we returned from school . That strong handshake. I remember when I called this childhood friend of mine after ten years and he immediately recognized me by my voice . In this age facebook likes and status updates it is this warmth that makes the difference. This is beyond the world of Facebook’s ‘Life less smiles and mindless Likes’ . It's time you take up the phone and call your friends !
Love : An over abused word which begs reinvention . However in the right context it makes us happy to love and be loved . We all want selfless love . Are you ready to start the cycle and be the giver to start with ?
Pets : I was wondering whether among st all these higher thoughts if writing about pets and how they make us happy will be a bit out of place. But in the land of Mahabharata , when Yudhishthira walked towards heaven it was the dog ( Dharma disguised as dog) who followed him till the end ! Yudhishthira was willing to give up heaven when he was told to leave the dog behind !
It is this bondage of love and dependence that makes pets so special .
8)Gratitude : Being grateful for all that we have makes us happy . Say thank you in your own way to all those who have added meaning to your life. Being grateful makes us content and encourages reciprocation from people around us.
9 )Grows when shared : Happiness is like light . Once you switch on the light , everyone in the room get illuminated. As we share our happiness with others it grows and multiplies. Call it domino effect or multiplier effect it travels far and wide from where it originated . It touches the lives of people whom we have never met or known .
10) Use the strongest word Sorry : Michchhāmi Dukkaḍaṃ is an ancient Prakrit phrase literally meaning — may all the evil that has been done be fruitless. (https://en.wikipedia.org/wiki/Micchami_Dukkadam)
Nothing is so powerful as saying sorry and asking for forgiveness. It allows us to forgive ourselves and repent for our mistakes ! So in whatever form and language , say sorry from the core of your heart to all those you have been hurt by your actions .
Forgive yourself and others to attain happiness !
So that we can pray and thank Nature for all that we got : So that we can say :
I am happy for what I have
I am happy for what I don't have
I am happy for all that I received from life
I am happy that you forgave me
I am happy that my sleep have no nightmares!
Does increasing spending to more than 90% of one's credit limit on a credit card ruin one's credit score? If so why?
It does affect your credit score in the short term. As one of the factors that determines your credit score is the ratio between credit used and credit available .
The lower the percentage of credit used as compared to the credit available the better it is for your credit score . Over utilization of your credit limit shows that you are over leveraged and in case of exigencies the probability of default / delay in payment goes up . Thus the risk profile increases in such case .
However if it's a one off case the rating agency will give low weight-age to such events as time passes.
Cut your coat as per your cloth
1) Write to all your credit card companies expressing your willingness to pay them back and request them to give some reductions in interest charges .
2) Negotiate with the credit companies to convert your balance into EMIs with the option to prepay and get waivers on interest in case you can do so.
3)Start paying back as agreed. Try to prepay the card with the highest interest rate , followed by the cards with lower interest rate.
4) Calculate your funds available .( Income - Mortgage payment - EMIs- Funds to be saved for emergency expenses - Insurance premiums = Funds available for expenses and future savings)
4) Start saving for an emergency fund .
5) Cut back on all your excess expenses . Bring down your excess expenses and plan to live within your means.
6) Once your debt is paid off , just have one credit card and keep it under lock and key . Use it only when you have to , and pay back on the due date .
7)Try to start a small business / take a second job and develop multiple streams of income .
8)Do not forget to celebrate small successes on the way and reward yourself !! If there is no one around to pat your back then pat your own back and congratulate yourself for having started the journey !
9)Enjoy and fight for your financial freedom.