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.