on personal finance
In this article, I am going to discuss a plan of how you can finance the construction cost of a medium-size house, provided you already own the land on which you are going to construct it. This is a long-term undertaking and its success hinges on how skillfully you can leverage the power of equities (stocks or shares). Let’s, first of all, list down the pre-requisites, some basic assumptions, and then we can go on to the execution part.
Raising our children to become civilized adults and useful members of society is one of the most important responsibilities of parents. All of us want and try to give the best possible education to our children. A good education must ensure all-round grooming of children. The existing education system lays a lot of emphasis on some areas while leaving the others unaddressed. One such neglected area is personal finance. That is why some very brilliant professionals, who are a product of this education system, are found struggling when it comes to money matters.
In personal financial planning, one of the most important decisions to make is whether to rent or own a house. If you decide to own a house, the second question is when or at what stage of your life or financial journey? Since constructing or buying a house, in a majority of cases, is going to be the biggest expense to be incurred, it merits a lot of deliberation and forethought. This single decision holds the potential to substantially alter the course of your financial life, for better or for worse.
Investing is committing your money to a business operation now, with the expectation to take out more money later. It has three core principles. The first and the most important is to protect the investment capital (the principal). Secondly, no investment is possible without thorough research which has many dimensions and takes time. Lastly, you have to be content with an adequate return. There should be a way of determining how much is adequate. This succinct framework of investing was propounded by Benjamin Graham in his book: The Intelligent Investor.
Credit card is a very useful financial innovation. It enables you to carry out transactions without having to physically carry money or even without having that money for a limited period. It gives you convenience and safety. The use of credit cards originated in the United States during the 1920s, when individual firms, such as oil companies and hotel chains, began issuing them to customers for purchases made at company outlets. The first universal credit card, which could be used at a variety of establishments, was introduced by the Diners’ Club in 1950.
Some 400 years ago, the first stock market was created in Amsterdam, Netherlands. Dutch East India Company became the first publicly-traded company in 1611. The New York Stock Exchange was established in the late 1700s. The idea of the stock market has played a pivotal role in the evolution of the business to where it stands today. Especially, conducting big business was not possible without the existence of stock market.
By the way, just have a look at the featured image on top of this post and read on. I will talk about it at the end of this article.
When it comes to wealth creation, predominantly, there are two options available: equity (shares or stocks) and real estate (finished and raw).
Although there are many other avenues that people like to consider e.g. precious metals, forex, commodities, art, paintings, and some new ones as well, including cryptocurrencies and NFTs (non-fungible tokens). By and large, these are speculative products and you make money only when someone pays you more than what you bought them for, which may or may not happen. In between, you are left to fend for yourself.
Hopefully, you are healthy and working in a job or doing a business. You are earning satisfactorily and generally, have enough for the month. You have some savings for rainy days as well. You are married and have growing kids with growing needs.
You don’t worry much about your routine expenses, although it’s tight. But when it comes to achieving your long-term financial goals e.g. buying a house, if you don’t have one, kid’s education and their marriage, etc, you don’t have a clear vision. You don’t feel as energetic as you used to, in your 30s and 40s. However, your routine expenditures are increasing and your major financial goals are approaching fast.
Whenever you think of committing your surplus capital to a product with the expectation of a regular income or creating wealth, you will have a range of options to choose from. However, these options will fall in one of these three categories: debt, equity, or real estate.
Although there are other options available like gold, cryptocurrencies, commodities, forex, and some other fancy names, those do not fall in the purview of this article.
