If you want to become fit, you need to follow a healthy routine for months together. Then only you can become active and fit. The in between period of becoming fit is the process time where you need to believe in yourself and continue the routine.
If you want to be financially free, you need to follow a savings & investing routine. You need to control the temptation of spending your accumulated money, give up your emotions of investing in wrong places and then you can be financially free.
In this episode listen to some tips on how to practice and achieve financial freedom.
You can’t trade and accumulate money quickly, as you can’t do by part time and it needs serious effort
You can’t do it thru any form of get rich schemes, as you may be duped at one stage.
You can’t do it thru lottery, crypto etc as the money you received quickly will go off quickly by some means.
Below are some of the financial rules which you can follow for getting your financial freedom.
- Rule of 50-30-20
- Rule of 15
- Rule of 72
1) Rule of 50-30-20
This rule will give you an idea to save & invest your money on monthly basis.
50% money for your needs which is for your monthly expenses.
30% money for your wants in life, which is for your needed things in the next few months.
20% for your savings & investments. You can allocate for your financial goals.
If your income is lower, focus on increasing your income as the first step. No one will be able to meet this criteria in their early stages of life. As you keep making more money in life, start following this simple rule. Till that time keep saving at least 10% of your income.
2) Rule of 15
Rule of 15 will give you an idea to invest in mutual funds for long term.
Invest 15,000 for 15 years at 15%, you may accumulate 1 crore.
There are many funds which is in the market for more than 3 decades. Nippon India growth fund was started in 1996 as Reliance growth fund and renamed once Nippon AMC had bought Reliance AMC.
From 10Rs as the starting NAV, this fund NAV has grown to 2514 Rs now in July month. It has grown at 22% till now. Though this fund had its up and down, it has grown steadily till now.
If you had applied this rule and invested for 15 years means for sure you would have accumulated 1 crore in 15 years.
If you have been investing 15,000 per month from 1996 till now, you would have accumulated 19.56 crores.
5,000 per month till now would have fetched you 6.5 crore. This is the power of compounding.
This investing method would have made you financially free.
3) Rule of 72
Rule of 72 would have helped you in choosing the right investment products.
Say you are earning well and you are planning to invest in any of the investment products.
Your money may double in 6 years or 12 years depending on the product you choose.
Say your investment is in mutual fund and benchmark return is 12%. Divide 72 by this returns % which will give you the time period. In this case it will double your money in 6 years.
Incase of fixed deposits, let us take returns as 7%. It will take 10 years to double your money with fixed deposits.
Real estate may perform in double digit or single digit or there may be no returns at all. It all depends on multiple factors when it comes to real estate investing.
How to much percentage should I allocate for spending on monthly basis ?
As per rule of 50-30-20, allocate 50% for your regular monthly spending like groceries, rentals, subscriptions etc
How soon I can become a crorepati ?
Follow this rule of 15 which is investing 15,000 per month for 15 years at 15% returns and you may also become a crorepati.
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