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How Rahul earned less than Manoj and still got richer?

Rahul earns Rs. 60,000 a month in a multi-national company, while his boss, Manoj earns Rs. 90,000 a month. After having worked for 15 years in the company, both of them wanted to buy a home for their family. Rahul bought a 3 BHK for his family, but Manoj is still figuring out ways to get money from somewhere to pay for the house. Bizarre? If Rahul was earning much less than Manoj, how did he end up getting richer? How could he afford a house with ease while Manoj finds himself at loggerheads managing the money?

To get an answer, let us dig deeper into their financial habits. Rahul’s elder brother is a financial advisor and hence Rahul always had the requisite guidance about how he should be making the best use of his money. Right from the first month of his job, Rahul started an SIP of Rs. 10,000 in three equity funds.

On the other hand, Manoj was a shopaholic. He loved to spend his Saturday afternoons in the mall, Saturday evenings on lavish dinners and his Sundays on online shopping websites. He had all the high end gadgets and he loved to upgrade them every time a new model was introduced. Luxury was his way of life. However, this lifestyle meant that by the end of the month, he had nothing left in his bank account. Neither did he take any advice from a financial expert about how to plan for his goals. As a result, he had little money left in his kitty to finance his house. But Rahul had a handsome sum of over Rs. 50 lakhs, more than sufficient to pay a sizeable portion of the cost of his house.

This is the power of investing your savings. Proper financial planning with a lesser in-hand salary beats a lavish lifestyle any day. The effect will not be immediately obvious, but trust us when we say, it will totally be worth the wait. The advantage of saving and investing from early on gives us the advantage of compounding. And with compounded returns, we are in a much better situation to meet our goals.

Both Rahul and Manoj are going to retire at some point in their lives. Who do you think will be more happy and satisfied? No brownie points for guessing the right name. It will be Rahul who will not only be happy but also satisfied as he has planned for his goals well in advance. A disciplined investing habit that he inculcated very early in life will enable him to take care of himself as well as his family.

Set apart the monetary benefits that investing gives us. When we start saving early on, it inculcates in us a sense of responsibility. We then have a tendency to keep a check on our expenditures and reduce any unnecessary expenses, if any. Rahul, in addition to being richer than Manoj, will also turn out to be more disciplined towards his responsibilities. A habit of investing early on, limiting expenditure and taking help of a financial advisor for goal based financial planning is the recipe for a comfortable and fulfilling life.

How do we help?

At CAGRfunds, we strive to become your partner throughout your financial planning journey. We not only help you plan the right investments for your goals but also be available to answer any query that you might have with respect to your money. We understand that managing money is complex and therefore we do everything we can to make it extremely simple and enjoyable for you.

Put your comments below if you want us to reach out to you!

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Starting a new job? 7 things you should know about your finances

We have all been through the stage when we feel too damn excited about our new job, haven’t we? Our joy knows no bounds especially when we receive our first pay-cheque. After having spent the required amount of money on our different necessities, one obvious thought looms large: What next? And this is where financial planning steps in – and like someone said “One does not become rich by what he earns but by what he saves”.

Don’t worry, we have you covered on how to plan your finances at this new juncture of your life.

Understand the Different Components of Your Salary
Ever encountered a case where your take home salary is much less than what you were expecting? There are different parts that constitute the salary such as the Basic Pay, House Rent Allowance, Dearness Allowance, Provident Fund, Gratuity, etc. An optimum plan can be developed once you have thoroughly understood each of the components.

The 50/30/20 Rule
Having received your pay, what should be the next course of action? It is recommended to spend 50% of your income on fixed costs, 30% on your lifestyle expenditure and the rest 20% should typically go into your savings. While it is not a strict rule to be followed, at least 15-20% of the income should be saved so that it can be put to a better use.

Reduce Taxable Income, Save More
We have all been victim to the necessary evil that comes in the form of taxes. A lesser known fact is that we can substantially reduce our taxable income through some expenses that are allowable as deduction under the income tax act. Examples include part of house rent, medical insurance premium, donations to charitable institutions and so on. After all, who doesn’t like to save more?

Invest Savings, Don’t stash them in a Bank
A common mistake is that we stash our savings in our bank accounts without realizing that with time, inflation will erode out savings gradually. At this juncture of our professional life, we have time on our side and that allows us greater aggression. But the aggression should be utilized with wisdom. Idle money in your bank accounts is money lost. So get up, talk to an advisor and start building a portfolio.

Learn And Invest, Not the other way round
We should not invest without having any prior knowledge about the financial markets. It is always nice to get some sound knowledge from a professional expert. Better to be safe than sorry.

Get Insured
An understated objective for working professionals is the importance of insurance. While a life / term insurance seems to be of little value at a young age, it becomes imperative if we have dependents. Also, by starting an insurance early, we save on the additional costs of a delayed start. For health insurance, while our organizations may be covering this aspect, it is always better to get a separate health insurance cover too.

Understand the Government initiatives to Reduce Taxable Income
The government offers several schemes which enable you to reduce the taxable income. For example: The amount of health insurance premium you pay in a year is deductible from taxable income up to Rs. 25000. You should be aware of these benefits as they contribute significantly to saving taxes.

How do we help?

At CAGRfunds, we seek to become your financial partners throughout the course of your investment journey. As you embark on a new journey of self sufficiency, we help you take better decisions related to your wealth. Want to manage your expense better or have a query related to your education loan – we have it all covered!

Shoot all your queries as comments to this post. Or just whatsapp us on +91 97693 56440.

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5 things you should do at the start of every financial year

Rebalance and diversify Your Portfolio

Do you park all your surplus funds in Fixed Deposits? Or are you someone who is an avid believer of investing in stocks? The risk associated with investing in a single instrument is fairly large. Diversification across asset classes is essential to ensure we do not suffer a major setback during years of softer performance. Roughly, 100 less our age should be our ideal equity exposure. And remember to count your PF as part of debt exposure.

 Salary increment? Increase SIP amounts

To keep pace with the rising expenditures, it is essential to invest more in our SIPs (Systematic Investment Plans). It will not only keep a check on our rising expenditures but also prove to be a reliable source of money in the long run. So top up your ongoing SIPs with a portion of your increment.

Start an SIP now, if you haven’t already

The concept of building a corpus bit by bit is something we all learn in our childhood – Flashback, the good old “Gullak” days! But as we grow up, we tend to get busy with other supposedly more important things. It is time we get to the basics and bring that habit back in practice. SIPs are a great way to build wealth over the long run. They not only inculcate discipline in our investment habits but also cater to a range of our medium to long term goals. So what are you waiting for? Start small but start now.

Open NPS Account

The National Pension Scheme (NPS) is a government initiative to reduce the taxable income of an individual. While we all look for ways to plan our tax, starting an NPS account will help us to reduce our tax by up to INR 15,000 annually (If you are in 30% tax bracket). Now that is some healthy saving!

Get Health Insurance

With an increasing workload on an individual, there is a tendency to avoid health issues. And if we haven’t got our health insured, things can get really complicated in case of emergencies. At the start of this financial year, let’s make health our priority and get a health insurance. It will not only cover any medical contingencies but also give us tax benefits under Section 80C of the Income Tax Act.