: My very good and dear friend Asokan Chakravathi's thought on financial wisdom

Hello Readers:
Salary income is linear in nature, the increases just keeping up with inflation. With slight jump on promotion.
Expense grow linearly plus non-linearly as we have kids and unexpected events and as we increase our standard of living by acquiring costlier car, house, furnishings, appliances, insurance for the increased assets etc.

Most salaried people think their earnings are to meet their expenses. Their accumulation of savings and borrowings are used to acquire assets to enhance their lifestyle. They feel whatever is advertised is a necessity. They tend to satisfy their growing perceived needs.

A business person or self employed entrepreneur thinks of his income or savings as working capital for investment to satisfy customer needs and gain thereby. He is reluctant to spend on himself to the detriment of eroding his capital. They expand their investments creating multiple source of revenue and their income grow exponentially.

Poor people work for money. The Rich have money work for them.

Poor think and work for linear growth (like simple interest). Rich think,plan and work for exponential growth (like compound interest).

Poor start their earning life with self-indulgence and squander their life earnings and end up in misery and become a burden to others. Rich start their earning life with self restraint and build a financial empire to retire in luxury and is be a benefactor to society.

Those with financial wisdom will become like Warren Buffet even with small amount of regular investment and start saving early in life. Those with no financial wisdom will end up in debts and bankruptcy even they are billionaires to start with. Even Gods cannot change the fortune of financially ignorant.

You may start out working for money. Soon you must save and invest to have your money work for you. Starting to invest early is very important.

I remember this Money Doubling formula that I learnt from my wise grand father. Divide 72 by the annual interest rate. The result is the number of years it takes money / investment / principle to double.

Say you can get 12% return per annum. Then your investment will double in 6 years. Your working life is 36 years. An investment of 10,000 dollars doubling every 6 years will become $640,000 at retirement. Now if you save and invest $10,000 every year you will get $640,000 every year after retirement. And at 42nd year your $640,000 at 36th year become $1,280,000 plus your regular $640,000. If you delay investment for 6 years till you are 30 years of age, then you will have only $320,000 at retirement, a loss of $320,000 every year. Hope you see the wisdom of investing early. All self-made millionaires have started investing early in their life.

Amount of savings and investment and starting early is in your hand. The amount of return depeds on external condition. But you can learn by studying various options to improve your returns. Here again starting early will give head start on the learning curve. People do not become expert investors overnight. You may even lose initially, but that is the cost of learning like college fees. Like without spending on college education your life earnings will be stunted, without risk taking and educating yourself in the art of investing you will not succeed financially. Start investing an amount that you can afford to lose as cost of learning. First talk to people who have already done it. Associate with winners of good character. Read "Rich Dad Poor Dad" by Robert T.Kiyosaki.

Take action after investigation to gain experience, learn from experience to gain wisdom. Post your thoughts here and start lively discussion. Please share your thoughts with everybody and make life beautiful, enjoyable, peaceful and prosperous not only for yourself but to every body on this wonderful planet.

Love,
Asokan Charavarthy

About the author: Mr. Chakravarthy is an Engineer by profession. He has a masters degree from University of California, Berkeley, USA. In the past he worked for many multinational companies in USA and Canada for more than thirty years. He is very well versed in financial investments and has degree in accountancy. Apart from this he has profound interest in all the religions and religious studies. He is an independent thinker, logician, man of letters and a wonerful compassionate human being. He has a wonderful family with highly educated children. He can be reached at ashokc5@hotmail.com