Thursday, July 20, 2006

You Can Change The World

Its been quite a while since I posted last time. I heard a few of my friends saying that this blog is becoming more like a business blog. So I thought of divulging from the routine process, giving you some insight about the art of charity. Moreover I need to target people who are already in the “Living Rich” state and moving towards “Die Poor” state. So a next few posts of mine would be on altruistic movements.

There are various methods in which you can show your affection towards mankind. You can feed the poor, target the various health issues, provide drugs in war places, help recovery activities in places of earthquakes, bomb blasts etc. Or you can fund children for their education, work towards elimination of child labor. I can go on adding to the never ending list.

You can choose one or more of these depending on your financial status and the network of friends and relations you have. You also need to be aware of the negative implications due to charity. For example if you feed the poor regularly, they become lazy or dependent on you; or if u fund for the recovery activities there are possibilities that the money gets into the wrong hands and the purpose would not be solved.

In order to be successful in your efforts first you will have to form a group of like minded and effective people around you. You should have a longer reach in the society, able to convince people that you wouldn’t go wrong. Charity is a delicate issue. If people didn’t get a good impression on you, no matter how far you go, you will have a lot of setbacks and your time to achieve your goal will be enormous. So drive your intentions right from the beginning.

Another thing you can do is, instead of concentrating on a particular problem, try targeting the actual cause of that problem.

"Philanthropy is commendable, but it must not cause the philanthropist to overlook the circumstances of economic injustice which make philanthropy necessary." - Martin Luther King, Jr.

To be clearer lets take an example: Instead of spending billions and billions in developing a vaccine/cure for AIDS (which seems to take several more years) one can educate people about various methods of preventing it. Next one would be a more appropriate example; instead of serving the poor with food and shelter, you can target the unemployment. Or you can have good, wider roads with medians and proper sign boards rather than helping accident victims. These might seem foolish or a bit rude, but on the long run these will be much more effective. Besides there are lot of others who are actually doing their bit on the aftermath issues.

Rich people start their own foundations to involve themselves in philanthropic activities. By doing so they have control on what others do and watch if others move in the same direction as his/her vision. Bill Gates by imposing a few conditions controls the research on medication for AIDS. Since the research is delayed by far from the expected, Gates told the different organizations that all of them should share their results – no matter what the outcome of the analysis is. If not the grant towards the research would be stopped.

People who are less fortunate can also donate. Instead of money they can donate stuff, which are no longer useful to them, to the Goodwill centers, Orphanages, Old Age Homes etc. or they can start their own Good Samaritan houses.

All depends on how much time, money and effort you can spend towards achieving your goal.

Friday, July 07, 2006

Doing Away With Your Debts

Most of us have some form of debts or the other. It may be bank loans, credit card debts or the money borrowed from friends and neighbors. If you want to be safe and secure all you want is a self-sustained life. You have debts and you don't take steps to reduce them - then you are doing no good. Your debts will grow more than you expected and you might end up filing bankruptcy too.

"LET US NOT BANKRUPT OUR TODAYS BY PAYING INTEREST ON THE REGRETS OF YETERDAY AND BY BORROWING IN ADVANCE THE TROUBLES OF TOMORROW" - Ralph W. Sockman

Yes, you can't lead a life without loans. You need to have education loans, home loans, auto loans etc. But these are all part of investments. Other than these, i don't see any need to borrow money. Even for these loans you should be calculative enough to know how much a month you can pay back, how long you are going to take to get out of it and most of all - if this kind of investment really necessary at this point of life.

For other small amounts, borrowed here and there, you need to be really careful. First off these small amounts can accumulate into a big one quite easily. Or you might strain your relationship with you kith and kin. To avoid this I would like you to lead a controlled life. Do not spend unnecessarily. You can limit your food expenses to say $50 or $60 a week for a family of four if you prepare them at home. If you go to a restaurant you might spend the same amount for just one meal. You can restrict yourself to 4 movies a month instead of 10. Or you can share DVD rentals with your friends. Gas prices are soaring. You can save a lot if you used public transit systems or try to match your schedule with that of your family to share your car and some gas. There are a lot of other ways to save money without sacrificing the standard of living. Ofcourse it depends on the individuals' and family's interests and conveniences. You can be a little bit more creative in achieving this. (Note that I never said you should be a miser to save money). You can still have the same level of comfort and save quite a bit just by giving it a thought before you do something.

Initially this might seem hard to achieve. But once you start doing it, you will get into it and will be comfortable as well. When you continue this for a while you will know how easy it is and of course you will see how big a difference this will make in your budget.

Now that you have more money than you used to have, it will be easy to pay back you debts one by one. It might take a few weeks to several months depending on the debts you have and the amount you save due to these cost cutting measures. Eventually you will become debt free. If possible try to repay your bank loans as well. Some banks charge an early termination fee if you prepay the loans, so double check with the banks before you do this.

You will never know how peaceful and happy you will feel once you are out of all the debts. You paid back you debts, your loans are dealt with and now its time for savings. Let's deal with it in the next post.

Wednesday, July 05, 2006

Investing / Donating - Part II

In the previous post I was talking about various stages of investing your money. Investing your money with proper thought and hardwork would yield you more money. This is what we dealt in the last article. Now we shall think in a different perspective. The first part of it is going to be the same - spending your money with proper thought and care but the returns are different. By doing so, you can get fame and most importantly peace as a result. You just can't do this unless you have the generosity and self-lessness. But I guess everyone would have these qualities within them.

"GENTLENESS, SELF-SACRIFICE AND GENEROSITY ARE THE EXCLUSIVE POSSESSION OF NO ONE RACE OR RELIGION." - Mohandas Gandhi

I am sure every one of us possesses these inherent qualities. But we have other pressures and we expect much more comfort out of life, hence we tend to push these aside for a while. We think of charity only when we are bedridden or when we know that we no longer need that money. Yet we decide to give away our wealth only after our life through will. Why do you want to have all your money till you die? Have whatever is really necessary for you and give away everything else. Infact you can start giving even when you are younger say when you are in 20's or 30's. This is called as 'Giving while Living'.

There are a lot of advantages in giving while living. As I always say - you will have the satisfaction. Even otherwise you have some more benefits. You can keep track on the gifts you make and watch whether the money you give is being used effectively. Almost every country I know has a lot of tax benefits for any kind of donation. Of course these are all at the cost of your comfort. That's how the world rotates. You give away something to get something else in return.

Now that we understand philanthropy is an integrated part of our life, we get further into the ways of spending money in a useful manner. First thing that comes to my mind is helping people who suffer of hunger and diseases without medications. You can try helping them directly by giving them food/drugs or you can fund a research organization that tries to develop vaccines, cures for various functional disorders and diseases. When providing people with food be sure that you don't make them dependent on you in the future.

Next comes the education. You can fund children and educate them. Investing/Donating in the way of education is the best means to provide a bright future for the recipient. Giving the primary education to the children or funding deserving students for higher education are both appreciated. This will by itself be a motivation for them to study and learn more.

One can also think in the line of raising the people who are below the poverty line. Or increasing the standard of living of lower middle class people. You can't just keep giving the money to raise their standards of living. You need to target the root which causes their living to be less than the average population. By this way you can reduce the burden of the government and uplift the mass.

You can also help people to get their own house. This might seem difficult. Whatever I say is just the ways of donating and might not suite each and everyone. Not all of us are equally blessed. But helping people to get their own house is not that big an issue as it seems. Many people around have enough money to pay the EMI (equated monthly installments) still unable to get a home loan because the down payment is quite a big amount. So you can just give away the down payments and the rest is upto them to manage. Believe me there are people who would welcome these kind of offers.

If you don't want to help anyone in person but you want to do something for the community you are in, there are ways too. There are a lot of places where you can adopt a street/community or a highway and maintain it. You can grow grass, plant trees, keep it clean and green. This is infact a great step in having a close relationship with the nature which we are lacking right now.

I will explain different ways of proceeding in each and every one of the afore mentioned plans in the future posts.

Monday, July 03, 2006

Investing / Donating - Part I

Investing is the biggest part of becoming rich. Unless you start investing, small or big, you will never start growing rich. Investments can be of any type and in any means. It can be as little as you wish or as much as you can. But all I insist is do not go beyond your limits. I preach everyone to invest the maximum they can. But before that, there are a few things I would like to suggest.

"SOMETIMES YOUR BEST INVESTMENTS ARE THE ONES YOU DON'T MAKE." - Donald Trump

First off, get rid of your debts. Investing in something which yields 5-10% returns is not a good idea if you are going to pay 10-15% in interests for the loans and credit cards. Make sure you paid back all the debts. I bet its still not the time for investments. You need to have atleast 3 - 6 months of your living expenses in savings. This can be used for emergencies like sudden sickness, accidents, natural calamities or in case you lose a job/took a great setback in your business etc. Once you have this done, you are all set to go.

My advice is not to indulge in a business or to buy shares straightaway. What I would do is start investing in a house. But I guess that is a huge investment at the starting stage. So I would go for gold. The world runs on gold. Most of the currencies in the world are based on the gold reserves of their countries. Gold is one item which will never depreciate. The value of the houses may go down if there is a natural calamity in your area. The stocks may tumble. But gold will never let you down. I would prefer to buy gold coins and bars, but if you want to buy ornamental gold go ahead. Gold is gold. Though ornaments wouldn't have that much of an appreciation as the others, it is still a good investment.

Buying a house is no mean thing. You need to think twice before making a decision. You check with as many people as you can before making any concrete plans for a house. Estimate your monthly savings based on your income/expense chart. Check how much you need for your business/stocks if you are going to start one in the future. Let us do a small math here. Say your income is $1000 per annum. Your regular spending for food, rent, apparels, entertainment, vacations, emergency expenses, tax, miscellaneous expenses sum upto $650. You have $350 on hand of which you would like to invest atleast $150 every year on shares (Though you are not going to invest in them for 1 or 2 years - you might need in the future. I add them in this chart because normally the home loans are for a longer period). So you are left with $200 per year for housing. Considering this in mind you will have to get a loan. And based on the loan amount you can get you need to decide upon the kind of house you can purchase. These calculations are approximate and can vary from individual to individual, city to city etc.

Now that you have cleared your debts, have a savings for any mishap, some gold reserve and a house of your own, you are ready to dive into the business pool. Now you have an option of starting your own business or invest in some public companies. Or you can do both depending on your ability to spend and your inclination towards risks. Both can be done in which ever order you prefer. Based on your risk taking mentality you can go in for value stocks or growth stocks. You can start a small business or a home office. You have more options. There are mutual funds as well. Whatever you do, you will have to research what you are doing, take sometime to decide. Don't make a hasty decision just because your friend has invested in something or your neighbor has achieved a huge profit in some stocks. You are different individual than they are; you are investing at a different time period with a different capital. So, the one which worked out well for them need not necessarily be fruitful for you.

I'll deal with each one of the above given processes in becoming rich in detail in the future posts.

Tuesday, June 27, 2006

Richest Philanthropists - Gates, Buffett

I thought of blogging about this after a while. But as this topic is highly talked in recent times, I think its more appropriate to write a few words about these humanitarians now. First of all, why do we want to help others both physically and monetarily? Why do these people donate billions of dollars to charity? Did you ever think about that? Possible reasons could be for immortality, or for self satisfaction. There could be more, atleast for Mr. Warren Buffett. He wants his children to be as motivated as he is.

Mr. Buffett, months before his generous gift to the Gates Foundation, reportedly said

"CHILDREN OF WEALTHY PARENTS CAN BE SAPPED OF MOTIVATION AND SPOILED IF THEY INHERIT ALL OF THEIR FAMILY RICHES."

It doesnt stop here. You might have heard about a lot of other people donating huge amounts to some noble cause or the other. Carnegie, Rockfeller, Mellon, Ford, Gates have all started their own foundations and put in lot of money and effort to help the human society. Buffet started his fondation decades ago. But due to his busy schedule he could not concentrate on this. One might think why didn't he retire from his business and indulge fulltime in his foundation like Gates proposed. Thats not going to be an effective way. He thinks that he will bring in more money if he manage his wealth himself rather than someone else, which is true. And after his wife's death, he feels that he will not get a proper support to continue his vision for the Buffet Foundation.

You might think Buffet is no different from the others I have mentioned. But he dint stop just with his foundation. Nor did he gave away his money to other foundations just for the sake of giving it. He has stipulated some conditions for each of the five foundations he donates his money. Especially for the Bill and Melinda Gates (BMG) Foundation, which he thinks is the most effective among the five, has mentioned that either one of them must be alive and active in the policy-setting and administration of BMG. By this he makes sure that his money doesnt get into the wrong hands. He also didn't want his foundation to end up like Ford Foundation. Buffett's Pledges to the foundations are drawn to make use of his money properly and effectively. Truly Buffet is a legend not only by his wealth, but also by his altrustic thoughts.

Gates is another legend in his own style. Though he has not gifted huge share of his wealth like Buffet, he has done something more. At the age of 50 and when he is in the peak of his business world, he has committed himself to spend more time on the welfare of the people (which Buffet couldn't do even when he is 75). This is not as easy as it seems. He makes sure that he has enough funds for the BMG by having the largest portion of the Microsoft's shares. This is really necessary because he didn't want to endup like other small organizations looking for funds rather than involving in other social activities.

The series of benevolent commitments from these richest people would trigger a sense of selflessness in other affluent people all over the world. But all this is not just to get fame (they already have that) nor that they have money. Its human nature to help others.

According to the article "Altruistic Helping In Human Infants And Young Chimpanzees" in www.sciencemag.org, altruistic behaviour is one of the rarest evolutions and some even propose that its unique to the human beings.

Sunday, June 25, 2006

Step1: Start a small business

Welcome Back!!!

I am assuming that you've read my previous post and that you are a person in the working class and not a businessman already. I am sure many of you would be in an impression that if you want to start a business, one can get some bank loans. To get the loan you should have enough money or asset to prove them that you are trustworthy.

"IN ORDER TO GET A LOAN, YOU MUST FIRST PROVE YOU DON'T NEED IT" - Murphy's Law

So dont get lost if you didn't get a loan from a bank or any institution. Try to borrow money from your friends and relatives ( if your business really needs a considerable sum). Or better try to manage your business within your limits by borrowing from yourself. Once you start your business, never mix your personal and business funds. It is dangerous.

There are a lot people who have started their businesses swiping their credit cards. You must have heard about YouTube.com. Its the most popular video site. It had 20 million visitors in May '06, which is almost twice the number of visitors to its nearest competitor MSN video in the same period (MSN video had 11.1 million visitors). The founders of YouTube Mr. Chad Hurley and Mr. Steve Chen started their website from a small garage in 1999 by using Mr. Chen's credit card. His credit card was maxed out soon. But before that they got their website publicized (by word of mouth), got recognized in the industry and funds started flowing in. They are now planning to offer an IPO.

You might not be a computer savvy like Mr. Hurley or Mr. Chen. In that case you would want to try investing small amounts in shares of companies which would give you a big margin in a small time. You will have to research on which companies to invest in and how many shares to buy in each of them. Try to diversify as much as possible so that the loss in one would be compensated by the others. I would talk more about investing in stocks in a separate post.

If you are not willing to take these risks, there are a lot of other options. But you might want to spend a lot of time and the returns will be slow too. For example one can start making and selling hand-made knit-wears or crafts. Here your investments are meagre and have a very low risk. On the other hand if you have some sufficient amount but would not like to take risk, you can try for some franchisee.

I'll keep posting about the various ways of investing with different capitals and risk factors.

Friday, June 23, 2006

Live Rich Die Poor - Walter Annenberg

I've read a lot of blogs and always wanted to start one on my own. For months i've been thinking about it and dint find anything that i could write about. Now i thought once i start something i might get some idea and people like you would feed in more inputs to get my blog going.

To start with i would like to share one of the best quotes i've ever heard.


"LIVE RICH, DIE POOR; NEVER MAKE THE MISTAKE OF DOING IT THE OTHER WAY ROUND" - Walter Annenberg


Yes, everyone wants to live rich; wish to have all they want and do all they can. But not many would like to die poor. First lets see how to start living rich before going for the latter part of the quote, because, as far as i've seen, living rich is much more easier than to die poor.

If you think earning money is hard when compared to spending them, I am sure you will have to give it a thought. I can quote several examples who were born poor and at some point of their life became one of the richest people in the whole world. On the other hand there are few people who were rich and enjoying all the luxury, had died poor.

Becoming rich is easy, but its a long process. None can become the richest person overnight (unless there is sweepstake for $50bn and you have the luck to win it). It all starts with your attitude towards life. One needs to spend a lot to become rich. This seems to be absurd, but thats how it is. I dont say that you shouldnt save money for the future. Save money so that when you need it you can spend it for yourself. But never save for your children or for your future generations. If you can become self-made richest person, your child can too. He/She neednt inherit the wealth from you.

First of all to become rich, one needs to be self employed. If you are a salaried employee working under someone, you are not going to get what you want. You cant spend time for yourself. You will not be able to match your ideal schedule. You will always be under some pressure which is nothing to do for your growth. In short you are living someone else's life. On the other hand, if you start business, investments, stocks etc., you can manage your time, you dont have the risk of being fired or laid off, you need not worry about someone else's problems and most of all you can earn big money in much shorter duration.

You must be thinking that to start a business or to invest in stocks one needs a lot of money which you dont have right now. Its a misconception. One can start a business even with a few hundred dollars, sometimes even without a single penny. All you need to do is, research on what you are going to do, which are the areas where you can invest with the little money you have and what is the risk in investing in them. If you can figure out these and if the risk in them is quite manageable, go ahead and invest in them. Initially you might take a few days or months to achieve the break-even. But once you know how to manage a business and started earning a little profit then there is no stopping.

You are all set to be the richest person.