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www.thomasjstanley.com


wealthymatters.comEver since I first read ‘The Millionaire Mind’ I’ve always been interested in the insights of its authors.Today I was lucky enough to stumble onto the thomasjstanley blog.I found the few posts I read at random pretty useful.I thought I’d record the find here and refer to it on and off and that my decisions are not wealth destroying.(http://www.thomasjstanley.com/)

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Some Financial Thumb – Rules


wealthymatters.com

Financial thumb-rules are rough guides for making sensible financial decisions .However they have their  infirmities and so need to be used in the right context.Following are a few basic financial thumb-rules:

  1. Pay yourself first rule: From any money you make, put away atleast 10% first before you pay any bills or debts or do anything else with the money i.e. make your investments the first obligation on your money.The general idea is that this money will start working for you by earning interest , gaining in capital value or giving you rents etc. and in time you will need to work less and less as your money starts working for you.
  2. The emergency fund rule: Build a corpus equal to 3-6 months worth of expenses of your household.Life is uncertain and you never know when somebody might meet with an accident , fall sick , suffer losses in business , lose a job or suffer loses due to fires or natural calamities ,war, civil strife etc.The money is to take care of immediate expenses,provide a cushion to fall back on till you find your feet again and if necessary provide a small stake to start over again.The money needs to be kept in a safe place where there is no chance of loss of capital and where it can be withdrawn immediately and without hassles.
  3. 100 minus your age rule:This is a thumb-rule to determine how much of your paper assets should be in equities.The general idea is that as you grow older and wealthier you want less volatility and less risk of capital loss.Volatility might complicate withdrawls from the corpus in retirement and lost capital might not be so easily made up for later in life, after retirement.
  4. The 10,5,3 rule : This rule states that you can on an average expect returns of 10% on equities,5% on bonds and 3% on liquid cash and cash-equivalent accounts in the long run.It’s important to remember this rule before reaching for that extra half percent that might lead to capital loss. Read more of this post

Am I Wealthy ? Calculator


wealthymattersIn the book ” The Millionaire Mind” the authors Thomas J. Stanley and William D. Danko explain the concept of Prodigous Accumulators of Wealth (PAWs) and Under-Accumulators of Wealth (UAWs). For their age and income levels,the PAWs are people who have accumulated an exceptionally good amount of wealth and the UAWs are those who fail to impress on the wealth front.This is because many people with huge incomes have equally large expenses because of their lifestyle choices.To check if you are a PAW or UAW use the calculator here Link  .

Congrats if you are a PAW!

And if you are wondering just how wealthy you are in global terms? Check here: Link

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