Posts tagged with "saving"
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How To Think About Return On Investment
Sometimes we may want to compare two investment opportunities and figure out which is a better one. Say for example should we rent or buy a house? One way go about it is by using the return on investment method. Basically we calculate how much return we might get going with each opportunity and pick the one with better returns. It is usually not as cut and dry especially if we are dealing with different risks. Yet, it is a good practice to at least find the numbers and later decide if the difference in returns is worth the risk. So in this post, I will discuss how I go about calculating the return on investment. You may have other metrics or different way to look at things, so don’t consider this to be the only option.
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Is Investing Early Really That Important
Many financial planners and advisors including yours truly will have you believe that it is important to start investing early if you want to have a comfortable retirement corpus. In fact this is the first step I propose in my five step plan to early retirement. After all it makes sense right? You have a long runway if you start early and it will allow compounding to show its effects. Compounding needs time. But is it really all there is to it? The genesis of this thought was an article that I recently read on the internet. While there is a kernel of truth, it is not all its made out to be. Let me try and explain using the information from the article.
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Why I Should Spend More
We have been pretty careful with money since I decided to retire early back in 2014. Ever since, every time we get tempted to buy something, we think twice to see if it is really worth it. Not whether the object is worth the price, but whether we really need it. By practicing this kind of thinking we were able to limit our spend considerably and increase our savings. The twin effect of spending less and saving more helped us to retire early. But these habits compound over time just like money. Now, everything feels like it is probably not worth the money. The only real kind of expense we feel that is worth is the ones we spend on experiences, not objects.
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Saving Strategy Of A Minimalist
The normal advice you hear from people is that you need to pay yourself first. Basically what it means is that as soon as you get your salary or other income, you need to save up for your goals first and then only spend what is remaining. Save up for your goals basically entails paying SIPs for each of your goals according to your plan. The advice is sound indeed. Otherwise some people may not be able to save enough to reach their goals. If they spend first and invest last then their expenses might eat up into the savings.
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How Much Money Is Enough
When it comes to money, everyone has a different opinion about how much money is more than enough. Some may never reach the point of having enough money by anyone’s definition. These are usually low skilled people who earn very little. For them, there is no question of saving or excess money. If they earn well, they eat well that day. When they cannot, they have to go empty stomach for the night. And on the other extreme we have people who are extremely rich by any standard. These are the Bill Gates of the world. They do not really need to work or earn more irrespective of how much they can spend. And then you have a wide spread in-between.
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Why Save When You Cannot Enjoy?
Some one asked "I don't have money before a job so cannot spend and have fun. After finding a job I have money, but I am saving for a future. So again I cannot spend. What is meaning of money? Spend it or save it or what to do?". That got me thinking. I gave them the reply and thought I should expand a bit on my blog so it might help others.
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More Ideas On Minimalism
I have already written a few articles on minimalism. Yet, from time to time people still ask me to teach them how to get started on minimalism. Unfortunately I don't know how to help them. There are perhaps some books and youtube videos on the topic. May be that will help. But here is one way to go about it.
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Not Saving For Kid Was a Lie
I've said this several times before that I've not been saving anything for my kid. It is high time that I come out with the truth. I was lying. Well, sort of. Every year on my daughter's birthday, her grand parents from both sides gift her money. The money is not a small amount. It is large enough that they transfer the money to my account asking me to save up for her future. I guess they don't like my radical thoughts when it comes to saving for kid's future? Either way, they have been doing it since my daughter's first birthday in 2014.
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