Week 7 — Quick Revision

Start here All of the week’s personal-finance lessons on one page.

• Life has three parts: health (most important), wealth, relationships. Use time, energy, resources and money well.
• Wealth mantra: cash inflows → cash outflows → investment options → return on investment.
• Inflows: you work for money (human capital, salary); money works for you (assets); gifts and inheritance (don’t count on these).
• Outflows: hold, spend, donate, invest.
• Investing: lending or ownership; you control it, or someone else does.
• Wealth = assets − liabilities.

• Compounding is the “eighth wonder” (quote credited to Einstein).
• Warren Buffett: $6,000 at 15 → about $85 billion by 88; most of it after 56. Regret: started late.
• Oseola McCarty: a washerwoman who gave $150,000 to a university.
• Boris Becker, Michael Jackson, Ranbaxy: earning a lot ≠ managing well.
• Good liabilities: a small education loan, a startup, a joint home. Bad: personal loan (24% a year), credit card (36%), car loan, gadgets on EMI.

1. Save before you spend (20%+). 2. Emergency fund (3–6 months). 3. Term insurance (100 × monthly income). 4. Own health insurance. 5. Diversify (max 20–30% in your business; 5–10% cash). 6. Start retirement investing early. 7. SIPs for goals. 8. Tax planning in April (ELSS, 80C). 9. Check nominations, addresses and documents, and write a will.

• 92% of returns come from asset allocation.
• SMART goals: Specific, Measurable, Attainable, Relevant, Time-bound.
• Nobody gives a loan for retirement.
• Keep EMIs under 40% of take-home pay. Don’t buy stocks on tips or follow the herd.

• Three earning curves: early (sports, YouTubers), middle (IT, peaks at 45–50), late (doctors, peaks at 55–65).
• Under 30: about 65% of a typical portfolio is locked in one apartment. Common regret at 50: started equity too late.
• Every month: budget vs actuals. India’s financial year runs April–March.

• Inflation = rising prices = falling purchasing power. “Too much money chasing too few goods.” It is measured by the CPI.
• India: about 6–7% overall; education about 10%; health up to 15%.
• ROI = net profit ÷ cost × 100.
• CAGR example: ₹1 crore → ₹1.48 crore in 5 years. Simple 9.6% a year, but CAGR 8.16%.
• Use XIRR for SIPs. ETF = passive (benchmark return); an active fund must beat the benchmark.

• 5 heads: salaries, house property, capital gains, business or profession, other sources.
• Old regime: 5% / 20% / 30% above ₹10 lakh, with deductions (80C, 80D, NPS).
• New regime: 5% steps up to 30% above ₹15 lakh, without deductions.
• Lecture’s rule: save about ₹2.5 lakh a year → old regime; otherwise → new regime.
• Today: the new regime is the default, and income up to ₹12 lakh is effectively tax-free under it.
• Tax planning is ethical; evasion is not.

• About 15 of 100 startups survive 3 years. High risk, high reward.
• Time, money, energy: young = time and energy, no money; 26–50 = money and energy, no time; 50+ = energy falls.
• Sleep 6–8 hours. Remember the 10,000-hour rule and learning → earning → returning.
• 7 business functions: marketing, sales, suppliers, operations, innovation, support, leadership.
• Risk only about 20% of your money. Work 5–6 years first. Don’t start at 60.

• Personal balance sheet every year: net worth = assets − liabilities. Beat inflation with a positive real return.
• RBI bonds: safe but taxable. FDs: use laddering, and keep deposits within ₹5 lakh insurance per bank. Corporate deposits: capital risk. Gold: max 10%. Real estate: illiquid.
• Equity sizes: giant, large, mid, small, micro. Ways in: mutual fund (₹100), PMS (₹50 lakh), AIF (₹1 crore).
• Four risks: liquidity, credit, volatility, concentration. Make a will (or your assets are intestate).
• Financial freedom = income from assets is greater than expenses.