Money Saving Tips - Not Shortcuts

Hello My Rich Readers,

I know that as readers of this blog, you need hardcore information which Is my foremost aim to provide troubled people. So, let me start off straight with some practical ideas which are very essential to earn money & yes retain money.. So here are the ten tips….

TEN TIPS(NOT SHORTCUTS) FOR MAKING AND RETAINING MONEY:

In these troubled times of financial crisis, I know many of the people must be working to just meet ends meet. Many layoffs, pink slips have been given by big firms like Motorola, etc so is common for all the employees and common man.

Credit card crisis is not at all an exception!! Isnt’t it?
My friend recent took a credit card just to pay bills of his previous credit card.. Poor chap.. Stuck in the credit card vicious cycle.

Do you see yourself in my friends place? If yes then there are some steps you need to start following as soon as possible. These wont make you very rich or something but yes they will definitely save a lot of time and effort and save a lot of money..

These 10 steps are the initial stepping stones for success. These steps seem simple but even very big investors find it difficult. Rich people often end up broke as they do not follow these steps.

The good news, however, is that it’s never too late to learn from your own mistakes or those of others.

Here are the top 10 financial mistakes people generally make:

1.DO NOT EXPECT SOMETHING VERY UNREALISTIC :

It is human nature to expect the best out of his/her investments.
Well.. Nothin wrong in it.. But yes, expecting and assuming something unrealistic is not the certain way.

Like suppose, The Sensex (Bombay Stock Exchange) gave great returns over the period of 2006 – 2008 (start). However, that did not mean it will continue to give returns at the same pace. This global economic slowdown has just proved that.

So, the moral of this module is to set a goal which seems all the more realistic. Being a more prudent in attitude is essential.


2.DIVERSIFY:

There are 2 types of people.
1. The Safe Players
2. The Risk Takers

Now, consider the first case:

The safe players are of the opinion that keeping the savings in the bank is the best option.
This means that their money is not working for them as much as it should.

How much does the bank pay you in interest?

PEANUTS! Yes.. Peanuts…

However, they are happy and don’t wish to diversify into other investment vehicles. They would rather sit SAFE.

So, not diversifying their portfolio has blocked their way to many wealth creating options.

Let me now elaborate the Second case:

The risk takers are of the very aggressive stance. Suppose, these people have had some good return on equities sometime of their life. What these people tend to do is that they concentrate all their resources on the equity market. This can be a catastrophe if that particular sector goes in a slump.

The Conclusion:

There are many investment vehicles available in the market. It is of prime importance that a optimum balance be created in these vehicles for our resources. This will protect the portfolio from getting filtered off to unforeseen circumstances.

3.Relying on tips

This is often a problem with new investors. It is the herd mentality. What would you do if you do not have knowledge about a location in a city but want to get to your friends place in that area?

Surely, all will agree that they will stop by and ask some person who knows the area as being a local.Similar is the case with investing. People themselves do not want to enter into learning about investing in stocks, rather they would take tips about what is going to rise and what is going to fall from some self proclaimed market gurus as it goes with the human nature of laziness.

I feel irritatted. 95% of the times i was taken on a ride by such tips. So, i now nowhere believe on them.It is always better to invest some time in learning some tricks of the trade.

"Beware of the glib helper who fills your head with fantasies while he fills his pockets with fees," warns Warren Buffett, world’s greatest investor.

Also, as the investor starts losing money, he feels that investing is risky, however i am in complete agreement with Robert Kiyosaki whwn he says that "Investing is not risky,Investor is!"

4.Inadequate insurance cover:

Insurance is surely an asset because it works as a safety net in case of an unfortunate event. However, besides having no or inadequate insurance cover, people in today’s scenario are buying insurance as investment which may not be appropriate.

5.You Are Worth How Much You Are CASH!!

There was a beautiful movie starring Sanjay Dutt, Arjun Rampal called EMI which highlighted the viscious EMI circle linked with credit cards and how banks are looting and luring people into such traps.

Credit cards availaibility is very easy nowadays. Almost, every other break i find a mail in my inbox persuading me to get a credit card for myself. Forget the stupid calls which are highly frustrating.

Again,herd mentality, who would not like to buy a great poolside house, a higher luxury sedan, a great clubbing membership and not the least a fantabulous foreign vacation.

People start living on borrowed money once they confuse their ability to pay with their ability to afford. And the availability of easy money - particularly plastic money and the growing EMI culture - fuels their dream.

People feel that they have adequate resources to repay long time but do not take into account unforseen circumstances.

However, paying interest as a result of failure to pay off credit card bills makes the price of the charged items a great deal more expensive, sometimes taking decades to clear the dues.So, its better we always measure our worth in the cash we sit on and not on the assumptions. Liquid assets is all that matters.


6.Always Have A Contingency Fund
The need for having an emergency fund, particularly keeping some cash at home or in a bank account, has always been emphasised by investment planners.

"Even standard financial principles suggest that you should keep aside cash to cover three to six months of living expenses, which would also be able to cover most emergency expenses,".
This is very important. A time tested lesson which can be testimonialised by innumerable people. Such a simple lesson with such a vital message is simply unavoidable. A must follow.

7.Invest In Wealth Knowledge:
It is routine for a person to return from work, eat,watch a bit of television and sleep off. I suggest investing some time & money in getting some self help books, some business magazines, a pink paper everday. Start by reading small articles and trying to understand some terms. As you read everyday, you will get very strong day by day and will love the finance world. You may start with your favorite televison. Watcha a bit of CNBC or CNN!!!

8.Ignoring the power of compounding
Investors often overlook the power of compounding. After all, the first lesson in even the most basic investment guide is to let the ‘magic of compound interest’ work for you.

Compounding investment earnings, in fact, can turn your small investments into a whopping sum after a period of time. Its power is so immense that your investments will multiply 30 times in 30 years, assuming a nominal return of 12% per annum. And that being a one-time investment only.

What if you are investing every month or at least a year? No wonder even Albert Einstein called the power of compounding ‘the greatest discovery of all time’, and Benjamin Franklin described it as ‘the eighth wonder of the world’!

A majority of investors, however, still believe that it takes a lot of money to make big money.

Will be back with more tips soon.