One who spends a lot of money ?People who spend less than what they
earn are likely to become wealthy Wealth of a person is determined
by something called ----------------- ?
Ex. 1: make B/S of Mr.Amitabh given his financial details
Michael Gerard Tyson is a former American world heavyweight
boxing champion. He is the youngest man to have won a boxing world
heavyweight title belt.
Despite making over $300 million in his career, he declared
bankruptcy in 2003.
Why?
He spent indiscriminately and did not plan
Another famous personality.
MONEY AND YOU
List 5 things you would want to own or goals you have in life:
1. ________________
2. ________________
3. ________________
4. ________________
5. ________________
What prevents you ?
Are these goals clearly defined ? The goals seem to be vagueThey
need to be clearly definedConvert them in to SMART goals
*
Specific I want to go somewhere with my friends during the summer
vacation.I want to go to Goa with my friends during the summer
vacation.Measurable I need to save some money for the trip to Goa.I
need to save Rs.10000 for my trip to Goa
Attainable I will arrange all the money myself.I will request
my parents to give me Rs.5000 and I will save up rest of
it.Realistic I will save Rs. 100 and buy lottery tickets.I will
save Rs. 1000 per Month for the next five months.Time-bound I want
to save the money sometime soon.I want to save the money by first
week of March.
Session (2)
Now that we have learnt to make Smart Goals
Lets learn how to plan and work towards achieving them.
Meet Raj
Age: 15 years
Loves: Creating Computer Games
Hates:His current computer which is slow
Goal:Buy a new Computer of specific Configuration
Friends love him for: other than being a nice guy Repairs their
computers
Raj has a Goal !
We have learnt to have
smart
goals !
To buy a new computer of his required configuration costing Rs.
35,000 by March 2009Can he achieve his goal ?What more information
you need to answer this question ?
Where does the money come from and where does it go?
Rajs parents give him RS 250 per week as his pocket money. Last
month Raj spent his money on the following items:
His mother gave him RS 500 without telling his father and told
him this cannot happen every time. The mobile bill was paid by
father directly. Raj analyzed that his parents had spent RS 6,000
on clothes for him during the last year.
What is this information called ?
Rajs Need Want Analysis / Plan
Need / WantN/WN/WWWWN/WTypical ExpensesAmount Last
MonthCanteen400.0Auto600.0Movie150.0Restaurant150.0Computer
Game150.0Stationery
50.0Total1500.0Mobile750.0W500.0Clothes500.0N/W400.0Planned350.0450.0000
25.0825.0
How much Can Raj Save?
Raj Needs35,000GoalSavings4725From Pocket Money1751575Mobile
Bill2502250Clothes100900Total4725Still to go30,275
What More ?
Raj knew that he could save no moreWhat do you suggest .some Idea
?
Raj needs more savings
Raj thought hard and realized that his parents and grand parents
spent Rs. 5,000 on his last bday. This year he had board exam and
he could let the bday and the gifts go. He knew he could convince
his parents to give that in cash and not spend a penny more.Raj
also realized that once he had bought the new computer, he would
not need the old one. He could sell/trade it. He would have to
convince his dad though. Raj found that while the shop guy was
giving him Rs. 4,000 but one of his friends agreed to give Rs.
5,275.0 for it. After all the computer was hardly a year old.
Is Raj close?
Raj Needs35,000Savings4725From Pocket Money1751575Mobile
Bill2502250Clothes100900Gifts in Cash5000Sale of
Computer5275Total15,000Still to go20,000
What skills does he have?Raj realized that his neighbors, all
his friends used to call him for all their computer problems. Raj
offered to solve computer issues for a charge of flat Rs.50 per
month. He figured nobody will mind paying that small an amount each
month for all the calls that they gave him. And he was right, 15
people agreed to pay him and he had setup his first business with
an income of Rs. 750 per month.
Story so far Raj still has a gap.
Raj Needs35,000Savings4725From Pocket Money1751575Mobile
Bill2502250Clothes100900Gifts in Cash5000Sale of
Computer5275Earnings fm Computer Support7506750Total21750Still to
go13,250
Should Raj Borrow?
PROS:He can get the computer when he needsBUT??Who will be willing
to lend and Why?How much will he be willing to lend?How will Raj
repay?
Activity: What questions come to your mind when you think of
borrowing?
Who and Why?
Someone who has extra & want to park it for safetyAlso can get
back more in returnRaj can borrow and pay back something extra as
interestBut what are the rules & regulations for banks to lend
?
Bank
Frieda Pinto: I have decided to take an education loan of Rs.5
Lakhs how do I decide the amount of the installment (EMI-Equated
Monthly Installment) to be paid every month.Answer : depends on two
factors.
Dad Earns from the bank10%Bank lending rate15%Raj Offered to give
his dad 12%.
How much EMI ?
Principal Amount
Rs.13,250
Interest @ 12 %
Rs. 1590
Repay 13250 + 1590 . 14840
EMI = 1237
EMI ?
This is wrong way of calculation.
The interest has to be paid on reducing balance method while here
interest is being paid on full amount even though part of principal
is being paid every month.On the reducing balance method EMI works
out 1177Raj is happy as his EMI is reduced.
Raj shows Dad the plan
Raj Needs35,000Savings4725From Pocket Money1751575Mobile
Bill2502250Clothes100900Gifts in Cash5000Sale of
Computer5275Earnings fm Computer Support7506750Loan from Dad @
12%13250Total35000Repayment Amount14124Planned Savings + Earnings
in one year16475
Dad is impressed and agrees.
Raj the entrepreneur(3)
Raj has passed out of college and wants to start a gaming company
(his Dream) called Neo GamesHe cannot invest the required money all
by himself.His friend Simran suggests him to get in touch with her
uncle in the neighborhoodHow can he be of help ?
When Should I start ?
Sachin Tendulkar asks :I m quiet young , when do you think I
should start Investing ?
Immediately !
Who will have more Money ?
Sunny Deol Starts investing Rs. 1 lakh /year from the age of 15 At
the age of 30, he stops investingHe does NOT withdraw a single
penny from this moneyBobby DeolStarts investing Rs. 4 lakhs/year
from the time he is 30 years and continues to invest the same
amount till the age of 60He does NOT withdraw a single penny from
this money.Given: Both earn 12% return on their investment Who do
you think will have more money at 60 ?
Investment mantra 1
At age of 60 years Sunny will have
11.16 crores !
While bobby will have
9.65 crores only
So.
Earlier the better !
Sole bread earner
Q :Zaheer Khan : I am able to make only small contribution because
of my other responsibilities. Also I do not save regularly A :
Small is ok but you need to invest regularly . Lets check out why
?
The Tale of Twins !
Abe & Jabe, twins, decide to invest Rs. 3000 every year when
they are 25 years old. Jabe just gave up at the age of 30 whereas
Abe continued to invest regularly. A few years later, Jabe decided
to make up for all those years so he invested a lump sum of
Rs.20,000 when he turned 35 and again invested Rs.25,000 at the age
of 42. Thus by the age of 45, both Abe & Jabe had invested Rs.
60000 each.Assuming a growth rate of 15%,How much would both have
at 45 ?
Investment Mantra 2
Abe will have 4 lakhsJabe .3.8 lakhsSo..second rule is
Invest continuously !
3 rd Mantra : Check Mate !
Once upon a time there lived a wealthy king. One day a man
brought to him a new board game that the man, had invented. He
called the game chess.
The king played the game with the man and he was so impressed that
he asked him to choose a reward for himself.
The man asked for one ashrafi for the first square of the
chess
board, 2 ashrafis for the second, 4 for the third & so
on
Chek - mate
The king found it a very easy reward. And ordered to give the
award to the man ..
But till the 64th square .the man had managed to gather
18,446,744,073,709,551,615 ashrafis!!!!
The king had given the man his word so he had to stick to it. So
even after having emptied his entire treasury, he could not pay the
mans full reward.
. Third mantra of investment is reap the benefits of
compounding.
Einstein called Compounding ?
Long Term
Q : Vinod Kambli asks.. We always hear one should invest for
long term dont you think in the Long term every one dies ?
A : On the contrary I would say if you dont invest for Long term
then you would surely have to face difficult times .Lets see how
100 rupees grows in the Long run.
Lamba : And if something happens unfortunately to a person in the
short termthen what about his family and long term goals?A : well
Planning is the solution
Needing insurance is like needing a parachute. If it isn't there
the first time, chances are you won't need it again!
Insurance is protection for the person and his family
Why Insurance Planning ?
Doubling money
I want to keep my money safe & till it doubles ?Invest in
--------Any one can purchase denominations of 100 to 50000.No
ceilingIt doubles money in 8 years 7 monthsEffective rate works out
to be ------ ?
Salsa with 72 !
Divide 72 by given rate of return to arrive at the number of
years in which one can double the money
Conversely divide 72 by number of years to get the return you
got to double your money.
