Wednesday, January 28, 2009


Time has come to put the body and soul of financial planning together so that a spinal cord can come into existence. This spinal cord, I trust, would be the place of reference whenever any doubt or clarification is required on this subject.

Fact # 1
Financial planning can be done by every one: males and females, young and old, rich and poor, white and black-with all shades in between.

Fact # 2
Financial Planning is no rocket science. It can be understood in simple layman’s language or in highly technical jargon. The number and variety of flavors that can be made of each concept is unlimited. Successful planning can still be done without any flavors. This is its beauty.

Fact # 3
The mantra of financial planning is that since one cannot work hard enough to earn the amount of money one requires- one should find ways to make the money work to earn more and more money. Planning shows the way.

Fact # 4
All infrastructures take time to build-this is also true of financial infrastructures. Excessive speed and / or greed will be disastrous. Once in place these structures will serve generations. Always follow the basic time tested concepts which also provides for shortcuts for risk takers. Those who leave the beaten path should be prepared for meltdowns.

Fact # 5
Investments should be equally distributed between debt [negligible risk] and equity [high risk]. Investments should start with debt [bank fixed deposits (FDs) with over draft (OD) facility]. The safety net should be provided from early stages itself.

Fact # 6
Once the financial infrastructures are in place, the transition to change will begin. Money will start working to earn more and more money.

FACT # 7
Power of OD is stupendous. One has to understand it and then harness it. Same is the case with payment of EMI from returns on savings. Their stress busting qualities will enhance ones performance and make the period between jobs seamless and stress free.

Fact # 8
OD is nothing but creating a negative balance equivalent to little more than a months salary by putting it in FD from ones bank account by using the facility created in Fact # 5. The salary starts earning interest from the day it is credited to the account. Salary amount reduces the negative balance, hence on the principle of interest saved is interest earned ones wealth creation process starts functioning.

Fact # 9
Stop making purchases with cash or debit cards. All purchases should be with credit cards only. This extends the days interest is saved / earned on salary amount by the period of days credit card payments takes in getting debited to ones account or payment cheque is received by the credit card company. In simple language the account has a low negative balance for longer duration.

Fact # 10
By the time this cycle gets completed, hopefully next salary cheque should be on the way. The difference between interests earned on FD and interest paid to bank for OD is the MONEY EARNED BY MONEY.

Enjoy the journey on the path of becoming a HNI.

For full details on all posts written under this series refer here
For previous post in this series; click here

1 comment:

Toonfactory said...

Woww....this one was great again...I never thought I can use my credit card in this way :)

waiting for a sequel. Dont make us wait

Do you think this is the time to exit Indian stock markets?