All posts by tejaswini

The Happy Life

Happiness is the number one goal for most of the people. Everyone lives to be happy and no one wants to live a sad life. Every action that we undertakes seems to have one objective, which is to increase the level of our happiness. But is happiness so crucial to life? Is the seeking happiness actually making us happy? One needs to be closely observant of life if one wants to understand this.

In the first place there is no standard definition of happiness and the scientific study of the same is based on verbalization of subjective feelings that people have. Most often used method is for people to report their level of happiness at randomly selected times of the day. But is this method an appropriate way to find out if a person is really happy the way some other person is? Some people may describe sensual pleasure as happiness, some other intellectual challenge and yet some other love for family members. Are all these types of happiness the same? Anyways, we would accept that method since we do not have anything better to suggest.

Once we accept that happiness is self described and subjectively felt, we need to wonder if just thinking about it as a goal would get us a bit of it. Oftentimes we have seen in other goals that the pursuit of a goal is not guaranteed to give you the desired object unless there are favorable circumstances. Just as an example, if you want to acquire an expensive sports car, it is not necessary that you would get it unless you have the ability to earn the money for the same which depends on the skills you have and what you would get paid for those skills. The point I am trying to make is that you enter a complex maze of skills, abilities and circumstances when you want to get something. Is happiness any different? Does achieving happiness require us to achieve some other things? And what are those things?

We will explore that soon, keep thinking about the same.

How to use frugality to generate wealth

In the dream of living off your investment income, there are two parts. 

  1. Generate enough investment corpus to get your recurring income without taking too much risk.
  2. Invest that corpus in cash generating investments that potentially grow in the capital value in order to beat inflation

It is the first part that we are going to talk about today. The second part is equally important and I would write another article about the same but for most people, they never get off to a start because they do not know how they would get the investment corpus in the first place. The key to get there is to be frugal and not spend unnecessary money and also to keep on increasing your earning power so that the monthly income increases. This is very obvious in the hindsight because if you want the balance to increase you have to increase the income and decrease the expenses. 

The key expenses for people are home, car, electronic equipments, food, clothes and entertainment. Each of these offer a potential opportunity for one to save money. Oftentimes I hear about people saying that this is not a great way to lead life since you are wasting the prime years of your life in saving money while you could spend that in experiencing things. While it is true that you should experience things at an appropriate age, there is always a middle path between extreme frugality and reckless spending. Everyone has their own limits and you would hear things like “save twenty percent of your post tax salary every month” but you should decide your own limit based on how important is that spending and what you expect from spending it rather than saving it. There are certain rules that I use in achieving a judicious balance between spending and saving:

  1.  You should save a certain percentage of your earning and increase that percentage as years pass.
  2. You should stay away from debt as much as possible and analyse every use of debt with the utmost scrutiny. Credit card debt are especially something that you should avoid at any cost.
  3. You should track every expense and analyse at the end of month how your top ten expenses worked out in terms of your expectation of what they would give you. Do a similar excercise at the end of year about the top twenty expenses and analyse how they worked out.
  4. Look for a trial step between your desire to build an asset and actually buying it. 

The whole purpose behind this excercise is to become more aware of how you spend your money and what it gives you. Best of luck!

10 practical tips from year of spending nothing

Michelle Mcgagh decided that she would not spend a single penny on things that are not necessary. This means no movies, no cab(no bus even!) and no meals in fancy hotels! She documents her experience in a Moneywise article which is of interest to all the people interested in frugality and financial freedom.

Some important tips she shares are
1. Check your spending :- Unless you know how much you are spending, you can not control it.
2. Needs vs wants :- Make sure you need the stuff you are spending your money on!
3. Set a goal :- This could be overpaying your mortagage or building the retirement account.
4. Pay yourself first :- Keep the long term money aside and then spend.
The other tips she shares are Pay cash, Get organized, Get others on board, Do not get suckered into deals, Look to the past and finally Get out of your comfort zone.

It is important that you need to be convinced of the necessity of being frugal and equally important is the organization you put around your efforts to get there.