Money - Fundas

Money:

Introduction:

Money, A magical word in everybody’s life and it is the only magical word, which gives popularity, fame and luxuries and which spoil entire lives if it is not utilized properly.

Many used to say money makes many things but I can say Money Makes every thing in this damn life. Money is the ultimate power. I definitely contradict with the people, who generally say love is everything and love is important than Money. Of course Love is important but Love can not survive longer with out money because for everybody love is not the basic need but money is. Ask anybody, who says love is ultimate, to stay for one week with out money, they can not survive but they can survive with out love for more than one week or longer. I have a friend, who generally agrees with me that money is ultimate power and we both can argue with anybody on this case because we have gone through the circumstances and situations, where we could not do any thing with out money including the basic need of life that is getting food. So any thing in this life comes after money and every body follows money.

Here let me discuss about some basic questions like what is money? Why all are striving to get the same? What difference it makes if money is there in some ones hand rather than not having money?

It comes from our ancestors, who used to exchange goods for goods with out involving money. That is called Barter System. After that things had been changed and people thought that there should be some thing that is generally accepted as a standard of value and that should act as medium of exchange and that medium of exchange is money.

Money is some thing, which floats around the world (Irrespective of the countries like USA, Japan, India, China or Philippines) for exchanging goods. Money, which is idle, means it is not serving its purpose so; the purpose of money is floating.

Everybody is striving for the money because all those who strive for money has got some needs, whether it is daily basic needs, luxuries or anything else for that matter. Needs will be exchanged by money and luxuries will be exchanged by money. Here we can say the purpose of money is Exchange, which equals to floating.

It makes lots of difference having money in hand because in this uncertain world everything rotates around money as all the young people will rotate around a beautiful girl in the same area. Ask the people who are working in a quarry, what is the difference between him and his owner? The answer will be Money because if the quarry worker has money, he won’t work for the owners and at the same time he would have own another Quarry like that and makes the people to work under him. That s the difference money makes. I bet one can’t do any thing in ones life if he does not have money from waking up from bed to returning to the same because as I mentioned above that every thing in this world rotates around money.

The main painful thing here is why 90 percent of money is there with 10 percent of people, yes I am not wrong with figures because that is how things have been working in this world. Those 10 percent people are neither god, nor do they not have 30 hours in a day they are normal human beings as you and me. The question now is how the 10 percent people have so much of money why not with other 90 percent people?

The answer for the question is simple they understood the secret of money and they understood how money works for them and where it works for them. For Warren Buffet the money is working by the way he is investing. But unfortunately most of the people like you and me especially in India do not know where money works for us and how money works for us because our schools and colleges have not taught us how to make money work for us but they taught us how to get good marks, grades and getting a job and working for money. I bet on my life each and every employee (irrespective of small and big) in India are definitely waiting for first of month for every month after month.

I am not telling that we should not do the job but As Robert Kiyosaki told, try to build assets. This is the fundamental investment mantra for any individual whether he is an employee or self employed or Business man or Investor.

Here we need to know the difference between Assets and Liabilities

The simple definitions were given by Robert, Asset is some thing which puts money into your pocket and liability is some thing which takes out money from your pocket. Be very clear on differentiating the both because your investment life will go in tandem with buying assets or liabilities.

Let us see some of the assets:

Basic investment instruments like Bonds, Mutual funds and Real Estate

Some of the Liabilities:

Loans of House, Car etc

I am not telling that you should not buy house but before buying a house you should have acquired some of the assets to get the capital gain, which may compensate at least some part of the installments of your house loan or car loan.

I have seen some of my friends who have been suffering to repay the loan from the salary they have been earning monthly.

I will explain this situation practically and the story goes like this…..

ABC is earning 25,000/- to 30,000/- per month at his 26 years old.

If he decides going for a house loan it will be an absolute stupidity because house is the biggest liability. Only foolish people think that it is a biggest asset but for intelligent investors house is the biggest liability.

I have taken house as an example because all young people would like to go for the house loan to avoid the tax but they do not know they will be in trouble for their future 20 years.

Let us say for 25,000/- to 30,000/- salary ABC is paying 3,000/- as tax and to avoid that tax ABC goes for a house loan of 20 lakhs

If he has to repay that loan in 20 years he has to pay 20 thousand per month

For 2 to 3 years he will be happy in paying the loan because he is a bachelor and by 29 years his salary also went up to 40,000 and he is avoiding the tax but he is paying half of the salary as loan. Till now every thing is ok for him.

Still he has to pay more 15 years installments as 20,000 per years. His source of income is only job.

At this time he will be getting married and his expenses will go up. By 32 years age he will get a child and his position also will go up in the society then he will try to take one more loan for Car to go along with the society and take many credit cards.

Now he has to repay both the loans and credit card bills every month. Mean while his children will grow up and he has to pay donations for schools and all. For that he will try to take some more loans and by the time he completes his house loan, he will be having other loans to eat the money. So, his life long works for paying loans and credit cards only.

So try to acquire assets and by the capital gains of those assets you have to compensate your daily expenditure. Don’t forget that you should not stop acquiring assets through out your life.

By investing into assets also you can avoid taxes.

You can acquire House and car by loans but before acquiring them be sure that you need to have the assets to compensate the daily expenditure in your life.

ABC is 26 years old and has been earning 25,000 per month.

Let us say at 27 years he salary become 32,000 and in 28 years it will become let us say 40,000 and in 29 it will be 45,000 and so on……

Let us say he starts investing from 26 years old, if he invests 5,000 in mutual funds for every month till he becomes 29 years old.

End of 26th year 60,000 ₊ capital gain earned from past 11 months= 26^th total earnings--------- 1

End of 27^th year 26^th total +60,000 + capital gains for last 11 months = total 27^th years earnings ----------------2

End of 28^th year 60,000+ total 27^th years earnings +capital gain earned 11 months= total 28th year earnings----------------3

End of 29^th year . 60,000+ total 28^th years earnings +capital gain earned 11 months= total 29th year earnings---------------- 4

By this time you will having at least 4 to 5 lakhs as back up and you will be earning capital gains from them at least 5 thousand per month and let it continues.

Let us keep them apart…..

At end of 29 ABC has got 5, 00,000 savings and he is earning 5,000 per month as capital gains from the same.

At the end of 29 years his salary is 45,000 per month and 5, 00,000 worth assets, which gives 5,000/- as capital gains.

Like this once you invested or acquired some assets, you can look for acquiring house and car and any other liabilities but on the other hand you should not forget continuing the acquisition of assets.