New year advice to become financially healthy by Warren Buffet

We begin this New Year with dampened enthusiasm and dented optimism.

Our happiness is diluted and our peace is threatened by the financial illness that has infected our families, organizations and nations. Everyone is desperate to find a remedy that will cure their financial illness and help them recover their financial health. They expect the financial experts to provide them with remedies, forgetting the fact that it is these experts who created this financial mess.

Every new year, I adopt a couple of old maxims as my beacons to guide my future. This self-prescribed therapy has ensured that with each passing year, I grow wiser and not older. This year, I invite you to tap into the financial wisdom of our elders along with me, and become financially wiser.

Hard work: All hard work brings profit; but mere talk leads only to poverty.

Laziness: A sleeping lobster is carried away by the water current.

Earnings: Never depend on a single source of income.

Spending: If you buy things you don't need, you'll soon sell things you need.

Savings: Don't save what is left after spending; Spend what is left after saving.

Borrowings: The borrower becomes the lender's slave.

Accounting: It's no use carrying an umbrella, if your shoes are leaking.

Auditing: Beware of little expenses; a small leak can sink a large ship.

Risk-taking: Never test the depth of the river with both feet.

Investment: Don't put all your eggs in one basket.

I'm certain that those who have already been practicing these principles remain financially healthy.

I'm equally confident that those who resolve to start practicing these principles will quickly regain their financial health.

Let us become wiser and lead a happy, healthy, prosperous and peaceful life. - Warren Buffet

Lehman's crisis - Learning new lesson in life

An interesting article by Yogesh Chhabria.

LATELY, I have been thinking a lot about the Lehman crisis . Spending money that they didn't have and going beyond their means is one of the main reasons for their situation today. In fact that is the cause for the current economic crisis in the US.

When I see all this happening, I can only remember the good old days. Then, karz was bad. People looked down upon those who took loans. Parents would not give their daughter's hand in marriage to a man with loans.

But of course, the times have changed now. Everyone I know has a loan. The buzz word is EMI (equated monthly installment). Today, you can buy everything on EMI - a house, a television, an i-Pod. In fact I know of someone who just bought a fancy BMW 3 series on EMI, instead of buying a cheaper car outright with cash. I mostly prefer to take public transport, but then I am an old man with old thoughts!

Anyway, coming back to what caused the crisis. Imagine having Rs 2 lakh in your bank account, no regular income, yet buying a house worth Rs 65 lakh, in the hope of selling it for a higher price. Even if the price of the house fell by just 5 per cent (that is Rs 3 lakh), you will go bankrupt. This is what Lehman Brothers did; with around USD 20 billion they went and bought assets worth over USD 600 billion. Isn't it suicidal and simply foolish?

I am sure things would have been different, had I been the head of Lehman brothers. But who wants an old conservative man like me to head a complex financial institution.

But there are a few lessons that we can learn:

1. Live a balanced life and avoid overspending.
2. Don’t buy things we don't need.
3. Don’t buy Branded good’s.
4. Don’t buy excess Food, Cloths, Cosmetics, Footwear, electronics and Fashion accuracies just think before you buy.
Tip: World still has a lot of growth ahead and the future holds immense opportunities for us. Let us make the most of it and save and invest it wisely instead of wasting our precious little on things we don't need.
5. Try to balance life with work (No one is happy to work in there profession’s).
6. Don’t stress out your self, after work try to do some extra activities like swimming, yoga, walking, running where you can divert your mind from stress.
A thumb rule: Health is more important than money.
7. Try to understand each other (Wife and Husband) in financial matter’s and help each other.
Tip: As soon as you get your monthly salary, set aside a fixed amount, usually 35 per cent, for insurance, savings and investments. You can then spend the rest.
8. Not all loans are bad. Loans that are 'need based' (home loans, education loans) can always find a place in your finances against those that are largely 'want based' (Credit cards, personal loans, car loans).
9. Borrow only if repayment is financially comfortable.
A thumb rule: Keep EMIs within 35 to 45 per cent of your monthly income

In that respect, there is one American who I really respect - Warren Buffet. He has lived in the same ordinary house for over three decades, drives his own medium sized car and leads an extremely regular 'middle class' life. If that's all it takes for the richest person on earth to be happy, why do all of us need to take extra stress just so that we can get things which aren't even essential?