making your money work harder

7/30/2019 Making Your Money Work Harder

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Retire Rich Retire Young-An effort to make your money work harder

Presented by:-

Vishal ThakkarM.Com, CA, MBA(fin)

Managing Director

Brianna Knowledge Resources Pvt. Ltd.


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Time & Money Lets begin with a story! There was a village with a drought. The Chief

of the village found the two smartest men he could find and gave

them each Rs.10,000. Their mission..bring water to the people.

The 1st man was a hard worker and started a business.

The 2nd man was an investor and built a pipeline.
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And the winner is

Not only did the second man win the contest, but he

found a way to have water (money) come in even

when he wasnt working.

Both men started from the same background, with

the same experience, and the same amount of

money. The only difference was that the 1st man

worked hard for his money and the second man hadhis money work hard for him.

The world is changing very fast. Big will not beat small

anymore. It will be the fast beating the slow. Rupert Murdoch


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Retire Rich & YoungWhat?

Different People have different meanings

Some say good lifestyle, no pressure to earn

money etc.

While others say pursuing hobby, not going to

work.

Retire Rich & Young, to us, means,

subscribing to an increasing standard of living,

without having increasing effort to maintain it.


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Retire Rich & YoungWhy?

To do what I like to do & not just work formoney.

To pursue my hobbies, interests which were

left behind in Rat Race. To spend more times with Loved ones, family

& friends

To help people, take up a social cause & tomake this world a better place.

Whatever be the objective, we all agree that

there is a need.


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Savers Are Losers

How many of you have a Savings Account?

What is the Rate of Interest that you get on your

Savings Account?

What about the average Inflation Rate?

Do You recommend Fixed Deposits?

If Savers are Losers, Borrowers would Win

Lets Look at borrowing


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Arbitrage Your Re.1 at work at the bank.

Rs.10 for every Re.1. By RBI Rules, banks can lend outRs.10 for every Re.1 that you give them. Meaning theyhave made up Rs.9 of borrow able money out of thin air.Where do I get some of that?

They say open an account with us and well give youanywhere from 1% to 5% interest. Well even give you

stuff! Then they then turn around and lend you the money right

back saying borrow money from us and well only chargeyou 10% to 27% interest.

And that is why banks have beautiful fountains, golden

chandeliers, and marble floors. Your money paid for it!
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Your Expense, Banks Income

INCOME

EXPENSE

ASSETS LIABILITIES

YOU

INCOME

EXPENSE

ASSETS LIABILITIES

THE BANK

Your Mortgage Your Mortgage


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Top Two Money Eaters

TAXES & Death are the two things which we

cannot avoid, so we defer them ALAP.

INFLATION is number two evil that eats away our

money like a rodent


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Why do we follow the crowd?

We are going to read your mind. Thats right read your mind! Ready..

1. Pick a # between 1 and 10.

2. Now multiply that # by 2.

3. Add eight to that #.

4. Divide that # by 2.

5. Now subtract the # you started with from that #.

6. Now what ever # you have in your mind, match it up with its correspondingletter in the alphabet. i.e. 1=a, 2=b, 3=c, d=4, etc.

7. O.K., Now think of a country that starts with that letter. Ill give you asecond.

Having a hard time.think Europe.how aboutDenmark? Youre thinking of D right, you did get 4? At least youshould have if you did the math right. How did we do that?


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We follow the crowd because its easy

and because we are just good at it!

No matter what number you were thinking of

the equation would have led you to the

number 4. When we invest, we are doing the

same. The numbers start out differently, FDs,

Post Office, PPF, KVP, IVP, NSC, Mutual Funds,

yet your results are the same...dismal.


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Time Is Your Friend

Time: a young persons biggest asset

Compound interest is awesome

For every decade that savings is delayed,the required investment triples

Example: Rs.500,000 at 65; 10% yield

Age 25: Rs. 79 per month



Age 55: Rs. 2,141 per month


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Power of Compounding

0

700

1400

2100

2800

3500

0 5 10 15 20 25

15%

10%

8%

Growth of Rs. 100/-

Difference is quiet significant in long run.

Y YEAR END SENSEX l l 1 3 5 7 10 12 15


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Years YEAR END SENSEX level 1 year 3 years 5 years 7 years 10 years 12 years 15 years

1 31-Mar-80 128.57 28.57% 31-Mar-79

2 31-Mar-81 173.44 34.90% 100.00

3 31-Mar-82 217.71 25.52% 29.61%

4 31-Mar-83 211.51 -2.85% 18.05%

5 31-Mar-84 245.33 15.99% 12.25% 19.66%

6 31-Mar-85 353.86 44.24% 17.58% 22.44%

7 31-Mar-86 574.11 62.24% 39.49% 27.05% 28.36%

8 31-Mar-87 510.36 -11.10% 27.66% 18.58% 21.77%

9 31-Mar-88 398.37 -21.94% 4.03% 13.50% 12.61%

10 31-Mar-89 713.60 79.13% 7.52% 23.81% 18.48% 21.72%

11 31-Mar-90 781.05 9.45% 15.24% 17.16% 20.52% 19.77%

12 31-Mar-91 1167.97 49.54% 43.12% 15.26% 24.97% 21.01% 22.73%

13 31-Mar-92 4285.00 266.88% 81.76% 53.04% 42.80% 34.71% 33.94%

14 31-Mar-93 2280.52 -46.78% 42.93% 41.76% 21.78% 26.84% 23.95%15 31-Mar-94 3778.99 65.71% 47.90% 39.57% 33.11% 31.45% 26.85% 27.40%

16 31-Mar-95 3260.96 -13.71% -8.70% 33.09% 35.03% 24.87% 25.60% 24.05%

17 31-Mar-96 3366.61 3.24% 13.86% 23.58% 24.81% 19.35% 24.39% 21.86%

18 31-Mar-97 3360.89 -0.17% -3.83% -4.74% 23.18% 20.74% 20.63% 20.02%

19 31-Mar-98 3892.75 15.82% 6.08% 11.29% 18.77% 25.60% 17.29% 21.43%

20 31-Mar-99 3739.96 -3.92% 3.57% -0.21% -1.92% 18.02% 18.05% 19.92%

21 31-Mar-00 5001.28 33.73% 14.17% 8.93% 11.87% 20.40% 23.47% 19.31%

22 31-Mar-01 3604.38 -27.93% -2.53% 1.37% -0.67% 11.93% 14.45% 13.03%22 31-Mar-02 3469.35 -3.75% -2.47% 0.64% 0.89% -2.09% 13.23% 13.63%

22 31-Mar-03 3048.72 -12.12% -15.21% -4.77% -1.41% 2.95% 8.32% 14.53%

23 31-Mar-04 5590.60 83.38% 15.76% 8.37% 7.54% 3.99% 2.24% 14.71%

24 31-Mar-05 6492.82 16.14% 23.23% 5.36% 7.58% 7.13% 9.11% 15.16%

25 31-Mar-06 11279.96 73.73% 54.67% 25.63% 17.08% 12.85% 9.54% 16.32%

26 31-Mar-07 13,072.10 15.89% 32.73% 30.38% 14.71% 14.55% 12.27% 7.72%

10/28 5/26 3/24 3/22 1/19 0/17 0/14

27.85% 19.94% 17.95% 17.36% 17.67% 18.00% 17.79%

35.71% 19.23% 12.50% 13.64% 5.26% 0.00% 0.00%

Average Returns

Probability of Loss (%)

Probability of Loss

As Time Increases

Volatility & Range

Decreases

Performance of BSE Sensex -

Equities not risky in long run

4,285Harshad Mehta

5,001Tech Boom


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Sensex Growth from 1979 - 2007

After all, in the last 25 years, weve seen .

Two wars

At least three major financial scandals

Assassination of 2 prime ministers At least 3 recessionary periods

10 different governments and

An unfair share of natural disasters, yet

However had one invested in the Sensex Rs 1 lacs in 1979

it has grown to 1.30 crs earning a return of 19%

compounded annualized return.


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More About Time

Time diversification reduces investmentvolatility

The Rule of 72

72/interest rate = doubling period

72/doubling period = interest rate


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Rule of 72

If you Put yourMoney at X % then

your Money is

double in (72/X)

years.

For Eg: 1 Lac Invested

for 36 Yrs

Rate of

Interest

Yrs to

Double

After 36

Yrs

6 12 Yrs 8 Lacs

8 9 Yrs 16 Lacs

24 3 Yrs 40 Crs


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Financial Status of Rich Person

INCOME

EXPENSE

ASSET

LIABILITY


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So what do we recommend

Take the Steering Wheel in your hand

Invest In Yourself First

Learn the Language of Money

Climb the Seven Steps of Retiring Rich & Young

Make an Action Plan to religiously follow them

Review your progress at reasonable intervals


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4.90

Crores*

27Crores*

40 years25 years 60 years

Ram Shyam

Savings Starting Age 25 40

Savings - Monthly SIP Rs.5,000/- Rs.15,000/-

Saving Years till age 60 35 years 20 years

Total Amount Saved (appx.) Rs.57 lacs Rs.62 lacs

Starting Early

Give time to your investments

rather than timing

Assumptions: (a) Savings grows at 5% annually (b) Returns assumed at 20% CAGR


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Investment Avenues

I know all of you have been waiting for this one

But not too soon

Let us first understand the difference between

good Loan & Bad Loan


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Here are 5 great reasons to carry a big, long mortgage and never pay it off.

- Ric Edelman, Author of The Truth About Money (1997 Book of the Year).

1. Mortgages Dont Affect Home Value

The value of your property is going to rise or fall regardless of

whether or not you have a mortgage. You wouldnt keep Rs.100,000between the mattresses, why would you keep it in your house?

2. Your Mortgage Is The Cheapest Money Youll Every Buy

People have a ton of debt, i.e. credit cards, auto loans, student

loans, etc. By far, the cheapest loan you can get is a mortgage loan.Why wouldnt you borrow against your house at 6% acquiring moreassets to increase your R.O.I., instead of borrowing with a 18%credit card.
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3. You Might Need The Cash

Financial Troubles? i.e. retirement, job loss, medical, family, marital,

college, etc. Banks only like to lend money when they know it canbe paid back.

4. Tax Law Encourages You To Have A Mortgage.

Mortgage insurance and interest is tax deductible whereas interest

on other loans are not. In essence the government rewards youwith cash back for paying interest on your mortgage.

5. Mortgages Become Cheaper Over Time

Depending on the loan you choose, your mortgage payment stays

the same over time. However your income increases making thepayments easier to make.
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Investment Avenues

Real Assets Real Estate

Commodities

Oil, Gold and Silver

Paper Assets Stocks and Shares

Certificate of Deposits

Government and RBI Bonds Foreign Exchange

Mutual Funds

Public Provident Fund


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The Beauty of Real Estate!1. Phantom Cash Flow (Depreciation) Make money

and count it as a loss

2. Banks Lend You Money Try that with stocks

3. Leverage Get more for your money4. Sec - 54 Tax Deferred Exchange No capital gains tax

5. The Bigger the Better

6. Negotiations Something is worth only what

someone else will pay for it

7. Appreciation


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Dolf De Rooss Four Questions1. Q: How many Rupees worth of stock/property can you buy with

Rs.10,00,000? A: Rs.10,00,000 with stocks, but with real estate awhole lot more!

2. Q: The moment you buy your Rs.10,00,000 worth of stock/property,how much is it worth? A: Rs.10,00,000 with stocks, but with real

estate it could be a whole lot more!

3. Q: When you buy your Rs.10,00,000 worth of stock/property whatcan you personally do to increase the value? A: With stocks pray orwrite the C.E.O. of the company and ask him to ease up on theprivate jet trips. But with real estate you can paint, put in new

flooring, landscape, or even add a room.

4. Q: Once you have bought Rs.10,00,000 worth of stock/property andit has doubled in value what must you do to enjoy the gain? A:With stocks sell them and pay capital gains, but with real estate youcan sell, trade, refinance and enjoy limited and even sometimes no

tax.


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Seven Steps To Retire Rich &

Young Step 1:

Decide your Age of Financial Retirement Now.


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Step 2:

Buy Liabilities to the Extent of Need and NotDesire.


Young


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Step 3:

Link Liability Targets to Asset Targets.


Young


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Step 4:

Plan Liability Acquisitions at least a Year inAdvance.


Young


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Step 5:

Increase CASH by Increasing K.A.S.H.K = Knowledge

A = Attitude

S = SkillsH = Habits


Young


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Step 6:

Work Smarter, Make your Money Work

Harder.


Young


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Step 7:

Have Targets for Job Earnings and Freedom

Ratio.

Freedom Ratio = Other Income

Monthly Expense


Young


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Action Plan


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Only a fool does the same thing over and over again andexpect a different result. Albert Einstein

Conclusion

So the question is.

What are you going to do with your time and your money?
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Questions


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FAQs


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Wish you good luck.

Thank You

making your money work harder

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