HOW I GOT RICH WITH SIMPLE (PERSONAL FINANCE RULES)
welcome back to another video guys in this video i'll tell you how i got rich following very simple things in the financial markets i've divided this video into two parts in the first part that is the current part you're watching i will be explaining a lot of things about personal finance the key rules that i follow and in the next part that will come out next saturday 10 30 a.m i'll be explaining about key rules that i follow in investing and trading and i'll be giving out a lot of details that i've not covered earlier so just keep the notifications on this video will be coming out on saturday 10 30 a.m with respect to personal finance my personal take on this is that you can have the greatest of strategies and systems in place but unless and until you're good at personal finance that is managing your own money none of the strategies will matter in the trading and investing world so just stick around for the next 15-20 minutes i will change your perspective about personal finance forever and this is not a get rich quick kind of video but if you follow the rules that i'll tell you over a period of time you will accumulate substantial amount of wealth so just keep an open mind and let us now begin with the rules of personal finance so before we move forward please note that there are over 200 free videos available on this channel for you to learn trading and investing just go to the link here i'll make sure the link is easily visible also when you click on the playlist each and every video has been organized in a playlist so that you can learn in a proper sequence take notes and get better at trading and investing and make sure you have clicked the subscribe button and the bell icon this is the only way you will get notified when a new video is released on this channel so let us begin with the first rule i follow in money management take a screenshot of this and all of the calculations i'm showing are on a post taxation basis so the way i like to divide my money is that i allocate 20 for savings 20 for investment 50 for paying your basic expenditure bills that is electricity children fees all of those kind of things nine percent i allocate for entertainment and travel and donations i set for one percent this is something you can follow especially if you're starting out practicing important rules about money management take a note at this data here debt always has to be zero percent don't take out your credit card and swipe it all the way around to accumulate a lot of debt in your life don't do this mistake in general try and divide your money this way see the thing is my formula for money management if you see is savings plus investments plus basic expenditure plus entertainment and travel plus donation this is what i follow and if you add all of this up this comes to 100 so let's say you have a monthly income of something like 50 000 out of this at the first 20 should be removed for savings then 20 for investment after this you'll still be left with 60 of money in which you will have to manage your basic expenditure that takes place your day-to-day expenditure that is and then it will also include entertainment travel and donation this is how i structure my money and over a period of time this really helps out the next thing in money management that you need to understand is the four stages of personal finance the first stage is when you recognize the fact that you cannot live from paycheck to paycheck you need to plan for the next 10 years if you think 10 years is a lot of time let me tell you it will just flash by and the next decade will already be over that is why take a look at all the people who are around you 90 of people are not even thinking this way and if you start thinking in terms of planning your financials over the next 10 years then you will be ahead of majority of people and you'll be reaching a stage where very few people reach the next stage in personal finance is about the habit of saving if you talk to any successful professional trader investor in the market you'll realize that apart from the fact that they have skill in trading and investing they have immense skill in saving their money i'll come to some specific examples in the next slide the third important stage is to live a frugal lifestyle what do i mean by frugal lifestyle in this whatever money you're making you live below your means that is you can afford any number of things but you choose not to do so you sacrifice today you live a very minimalistic lifestyle and you delay any big expenditure that takes place in your account because this is the money that you will save which you will diversify into various assets which will over a period of time grow your money we are living in times when we need to have the latest car latest gadget all those sort of things but the people who run behind those sort of things they will never get wealthy over a period of time learn to save money learn to live a frugal lifestyle initially there will come a time where you will be able to afford anything in life and then you need to diversify your money so i'll now explain a few things about savings because this is the most overlooked aspect when it comes to trading and investing and almost no book covers this subject so if you look at this data i'm starting with the amount of one lakh i've taken very modest numbers so that everyone can understand this this is 20 000 monthly contribution to the savings account and the rate of interest is six percent you know what happens in the period of 10 years if you begin here at the end of 10 year this will be your final amount it will be close to something like 36 37 lakhs just by developing a simple habit of saving keeping this money aside you can get this amount at the end of 10 years again you must be thinking 10 years is a lot of time but just imagine how the last 10 years have gone past in your life again the next 10 years will go the same way so just by saving you can generate huge amount of money and this money you can either use for emergency purpose or you can even further invest this in the market i'll come to some more details about savings at a later stage but first let me cover the important concept of compounding now the one thing that really helped me do well in life is understanding compounding at an early age now i won't go into the detail because this has been covered in many books many videos but basically in compounding your money is making return over your capital and on the returns that you've already generated so just google about it this is a very simple concept but i just want to explain few things with the help of data in compounding there are three things that are important number one if you start early that is in your 20s 30s then that will be really helpful to you if already you are in your 50s and 60s don't worry about it teach this to your children so if you can get your children to watch this current video because that is when it will be really helpful that for them because they need to understand the basics of money management at a very young age and if you're a youngster 2030 get started in savings get started invest in your money and let compounding do its magic the next thing that works really well in compounding or rather matters in compounding is the number of years that you save money and you invest money again i'll put out some data with respect to this so that you can understand this better and if you're someone who does not have enough capital again compounding will work for you because as you do well in your life the amount of money that you will save and invest both will increase and so will the effect of compounding so let me just put out some specific data so that you can understand this better now to understand compounding let us take up three different examples and then i'll explain you a few things so what we are doing is investing for a period of 10 years in the first example we are starting with the initial capital five lakhs again a very modest amount most of the people in 30s 40s should be able to do this and then monthly contributions of 20 000 for the next 10 years and the rate of interest is 15 don't worry i'll show you how to get this 15 also so what happens to your money over a period of 10 years if you start today then over the period of 10 years your capital will grow to something like 67 or 68 lakhs that is just if you begin with the modest amount of 5 lakhs and then contribute 20 000 every month now if the rate of interest changes to 20 the same parameters remain 5 lakh initial investment 20 000 monthly contribution for a period of 10 years your capital then grows to something like 87 lakhs so in the previous example with 15 your capital grew to something like 67 lakhs in 10 years as the rate of interest increases to 5 percent more that is twenty percent it grows to eighty seven percent which means your initial contribution matters your monthly installment also matters but what matters more is also the rate of return now let us take a look at this example in this example initial investment is set at five lakhs monthly contribution has now increased from twenty thousand to fifty thousand rate of interest is fifteen percent now fifteen percent may be a huge number for you but just do a historical etf return of something like nifty bank of sensec of nifty 50 for nifty it is closer to 13 14 nifty bank it is 18 so this number that you see is not that difficult but again i'll explain a few things with respect to this number also so with these data points if you see your capital grows to something like 1.3 cr over a period of 10 years
so there are three things that were important in compounding one initial investment your monthly contribution and rate of return now let me just explain you a few things with respect to this so when it comes to compounding there are few things that textbooks never tell you in my experience there are two things that compound over a period of time the first is your money and the second one which is more important is your skill set that is skill as a trader and investor and both of these are linked and actually it is skills that is more important and as you learn more as you compound your knowledge that is when money will start growing exponentially so when it comes to understanding concepts in trading and investing i've always maintained that you just need to go through my free videos i've covered almost all aspects of trading investing that you require to succeed over a period of time you just have to click on the i icon here and access all the videos that i've done on this channel now a lot of you have told me that you cannot see the eye icon here on mobile device please do one thing for each video i link up relevant videos either in the description box below so below the video player you can just see the description box click on show more you'll get all the links else in the comment section i link up all the relevant videos so just click on the comment section link you will come to know the relevant videos on the mobile device if you see below the comment section again the first comment i always leave all the relevant videos please click here in case you cannot see the eye icon now why understanding of skills and the growth of money the link between these two is important is because as your skills will grow in the market you'll be able to achieve what i have explained here so if your skill set currently is that you can generate only four percent return in the year that is in your trading or investing account then it will take you 18 years for you to grow your capital that is double your capital now if your skill set is that you can generate eight percent return every year then it will take you nine years to double your capital and similarly if you have a skill set of twelve percent it will take you six years if you have eighteen percent skill set it will again take you four years to wa money if you can make something like twenty percent compounded growth then every 2.8 years you will double up your money and the reason why i've put up this example is because in countless videos i have told you that always aim for 20 to 25 compounded return the main reason being that it will take you roughly three years to double your money in the market and this is nothing but skill set there are a lot of people who do it 18 to 25 percent is what you should aim for again if you have seen my last three four videos this is what i keep repeating and this is the science behind it for those of you who are channel members please note that the video on strongest sectors and stocks and the current market structure has already been released i've just shown you how you should be trading in current times and those who are in the positional trading membership the next episode that is episode 10 will be coming out tomorrow so please keep your notifications on and please be active in the community section and for those of you who are not channel members you can just join channel membership for one month and watch all the 55 videos in price and volume analysis series so these videos are spread out across five main playlists the first series is about price volume analysis the second series is about application of price and volume analysis third series is about detailed rule on pullback trading fourth series is about pivot range and poc analysis within this anchor vap is also covered and the fifth series is an ongoing series on gap trading so when it comes to compounding skill is actually a huge factor and this is the main reason i tell you that you need to be consistent in the amount of effort you put and you have to multiply this by number of years trading and investing is just like any other profession the more number of years you put in the more your skill set will improve and that is where you will be able to quickly double up your money this is a secret if i can tell you or a holy grail if you like to hear those words this is the thing that you need to focus upon not all the fancy stuff that is shown on various other mediums those are all selling points but focus on the formula of consistency into the number of years this is where the true impact of compounding will kick in so in this section let me give out some psychological key points and some personal tips i have gathered over the years whether you want to believe it or not it is actually savings that will determine how rich you get in life or rather how wealthy you get over a period of time what i would suggest is that write down all expenditures every day and at end of each month analyze your expenditures and try and cut out any unnecessary expenditure you do the next thing i'll tell you especially if you are in the millennial generation don't just buy things to impress anybody if there are people in your life who are getting impressed by the kind of car you drive or the kind of mobiles you have then those are the kind of people that you need to get rid of and you need to surround yourself with people who genuinely care about you this is one of the biggest learnings that i can give you in life don't ignore this there is no shortcut that will give you tremendous amount of wealth and don't fall for this trap just follow the guidelines that i have given out and a lot of people genuine people who share knowledge in terms of personal finance just follow those important points and over a period of time you will do well and when it comes to saving the more you save the more you will have money to invest that money will compound and in general then you will grow over a period of time every single cent that you spend in your life every single rupee that you're spending in your life is the money that will never compound for you that is why develop this habit of saving more money be judicious in how you spend this is the single biggest tip that i can give you in terms of becoming wealthy as the years progress ahead now there is one more important point that i want to tell you is that if you're doing a job if you're doing a side business of course your savings should grow over a period of time you should be investing this money and your capital will grow over few years but there is one more thing you can do and that is in terms of building some side income that will contribute towards your savings that will remove some pressure over your head in terms of expenditures in terms of investing more money see have you noticed one thing i'll just talk with respect to our field there are many successful traders both in india both across the world europe us who diversify their trading income into businesses so first they will be trading their own account investing their own money and then they also get into the field of education you'll see a lot of traders in the us they host a lot of events seminars webinars and they try and make some side income which will contribute towards more savings and more investments so if you're a good coder let's say you're into coding you're exceptionally good at coding get into education stream open up your channel teach people how to code if you're someone who paints well again apart from your main job open up a channel where you'll teach people how to paint develop this side income and then contribute towards your saving and investment and if you look at all the successful business people everybody moves towards generating multiple streams of revenue so even if traders are trading their own account and they get into education they teach people how to trade they have their channels they host seminar webinars that is completely fine the only thing here is that they should do it ethically this is what i always vouch for this is what i always try to follow you have to do it ethically don't cheat people that is something only negative people do but focus on what i'm writing here multiple streams of revenue is always important and it helps in savings and investments and eventually this will again contribute towards compounding your money now let me give out two psychological points which your mind will tell you as you begin the journey of systematic investments of compounding the first excuse your mind will give you is that your salary is very less and expenditures responsibilities are way more let me tell you for this point that every trader investor has gone through this stage and in today's time people are more than inclined to spend something like 299 a month 499 a month on something like netflix amazon prime those kind of things but they don't want to put this money aside into systematic investments into the power of compounding this is what i'll tell you in terms of excuse you gotta be more determined you have to do proper budgeting keep money aside as soon as you get your salary calculate the post tax figure and directly put it into savings this is nothing but long-term discipline i can tell you one thing that a person who is on a regular job let's say there are two people a and b if a does proper budgeting saves money invests compounds his money he will be in a much better position in the next 10 years when compared to b who does not do all this and lives from one paycheck to another paycheck so there is a remarkable difference between how you will treat your money because that is what is going to help you towards financial freedom in the years to come the second common excuse that you get from your mind is in terms of satisfaction instant gratification when you're spending a lot especially this applies to the newer generations who are doing well in life these days there's a tendency to spend a lot avoid this if you really want to become financially independent in the next 10 years you have to follow the guidelines i have given out or create your own custom plans you can even consult a financial advisor i'm not a financial advisor or a consultant you might get some better inputs into how you need to grow your money how you need to save how to do proper budgeting those kind of things are really helpful and this if i tell you is the untold sort of secret of becoming a successful trader investor what i've given you and these are some things you only learn with experience in most of the books you won't find these points that i mentioned is because very few people go through this stage of starting small and then growing big as time progresses so make use of my experience my learnings this is something that will shorten up your learning curve incredibly and you would be able to grow much faster so when it comes to personal finance and its role in you becoming extremely successful over the years do not underestimate this process because this is what most of the experienced traders and investors will tell you and this has personally helped me do really well in life so keep the notifications on for the second part where i will be explaining a lot of technical details about investing and trading and meanwhile do click on the playlist in front of you because this is where i've gone in depth in trading psychology in trading mindset and what you need to follow in order to become a successful trader and investor so thanks a lot for watching this video guys kindly consider hitting the like button if you find the content useful have a great weekend ahead take care and be safe
2021-05-30 10:52
