Personal Finance Manifesto - As You Invest, So Shall You Reap

Aug. 13, 2013 1:24 AM ET
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Contributor Since 2013

1/3rd Dividend stocks for acting as a  bellweather 

1/3rd index funds in retirement accounts for acting as a bellweather

1/3rd small cap/midcap/large growth stocks for share price appreciation.

No bonds. no cash. All in.

As this is my first post, this will primarily be an introduction to my personal financial habits and investing influences. The intention of this blog is to document my investing experiences, thoughts and share them with the community, learn from them and engage in profitable discussions.

You understand the value of something when you don't have it. I understood the value of money when I got my first job eight years ago - I got paid a princely sum of zero bucks (0, zero, ZERO).

I felt lucky. I had just graduated and spent around eight months trying to get a job in a competitive industry while living in the country of my origin to no avail. I finally decided that I will offer my skills and services for free and leave it to the employer to decide if they find me of any value. In the process, I was hoping to get a break into the industry, gain some real world experience and see if I could take my carreer from there.

That was the best investment I made in my life with infinitive returns in monthly "dividends" considering that I started with no pay. It humbles me and reminds me where and how I came from when I see where Wall St Journal's income percentile calculator places me today.

As Warren Buffet once said, the best investment you can make is in yourself. So anything in this direction will reap you rich dividends.

When I started getting a pay check, I slowly saved up some cash and started putting away small amounts into mutual funds every month. I wasn't comfortable investing in individual stocks back then in 2005 and mutual funds seemed to a safer bet. Those investments have grown around 150% so far inspite of the 2008/09 recession.

Now that I'm older and married with lots of responsibilities and milestones to look forward to in the future, I've decided on some personal financial principles to follow in our home to the best of my ability. This will be my Personal Financial Manifesto.

I believe every head of the household should be responsible for the financial affairs of their sovereign home.


The Finance Minister's Manifesto For Responsible Fiscal Policy

1. Be frugal, not cheap: Get good value at a low price. Don't fall for marketing or be part of the herd. As Charlie Munger once said, no matter how wonderful something is, it's not worth an infinite price so you need to have a price you're willing to pay for value.

2. Household budget: 30% savings, 20% to 30% expenses, 10% to 20% charity, 30% taxes

  • 30% savings: It's amazing how big that bank balance looks after a few years of saving. Savings should go towards either cash or investment wherever appropriate. Current plan is to have 20% savings in cash as an emergency fund for one year's worth of expenses, 10% in cash for regular savings and the rest 70% in stock investments.
  • 20% to 30% on expenses: Even if household income rises, it is imperative that life style expenses need not and should not increase proportionally. Which explains why some millionaires go broke and do stupid things while some folks, inspite of ever increasing salaries, are always living pay check to pay check.
  • 10% to 20% to charity: Don't be too greedy. God has blessed you to extend a hand to those who are less fortunate. Be liberal
  • 30% taxes: The only thing certain are death and taxes. And in this day and age, even if you can make yourself live longer, you will consequently pay taxes longer.

3. Don't expect anyone to bail you out: I'm saving and investing as if there won't be any social security or Medicare by the time I retire. And by the looks of it, I don't think they'll be around by the time my time comes.

4. No debt ceiling - Avoid debt: Pay all bills on time. Credit card debt is a definite no-no but credit cards are the best financial tools if you know how to use them wisely. For eg, I had various credit cards where I've piled up airline miles for free flights which would otherwise have cost me anywhere from $400 to $1800. Hence, airline miles are as good as cash for someone like me. Any sort of debt where you loose money on interest is more or less a no-no. Exceptions may apply under rare situations (eg, buying a house). As a wise person once said, the borrower is slave to the lender. This is a fundamental principle.

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