A very happyÂ new year to everyone, and I hope 2011 brings you great wealth, happiness and prosperity. I thought I’d pen a few thoughts to start off this new year that touch upon thrift, investing, and behavior.
1. No credit card debt: This is one thing that I’ve said a few times earlier, and want to emphasize again – credit card debt is the worst kind of debt for anyone, and can spiral out of control very easily, so as far as possible bring your credit card balance to zero at the end of every month. If you must keep a credit card balance, then make it a high priority to get that to zero as soon as practically possible.
2. Brace yourself for stock market volatility: The stock markets are inherently volatile, and are prone to crashes, and violent downturns that can cause panic fairly quickly. If you’re disciplined in your buying, and have stuck to blue chips then you will be able to handle this volatility a lot better than if you’ve bought penny stocks that can lose a lot of value fairly quickly. If only a part of your portfolio is tied with stocks then you will sleep a lot better at night during these times. I don’t know if we will see a crash in 2011 or not, but I won’t be surprised if there is one because of the way the market has zipped up after the recession. So, I’d say you should prepare yourself mentally for volatility.
3. Ask a question, and avoid unforced errors: I’ve seen at least a couple of comments in the past few days that suggest that the person asking has bought an infrastructure mutual fund mistaking it for the tax saving infrastructure bonds, and is in a bit of a pickle now. If you’re not sure about anything then ask a pointed question before making a decision. I was guilty of not asking many questions till not too long ago, but have improved over the years. It’s amazing how many unforced errors you can eliminate by asking questions, and avoiding assumptions.
4. Don’t miss the forest for the trees: When you have spent time pursuing something, and things don’t go your way – it’s only natural to get upset and disappointed, but don’t sweat the small stuff too much. If you created a fixed deposit with 1 lakh at 7.5%, and then the interest rate goes up to 8.5% then I can understand that you will be a little disappointed, but don’t lose sight of the fact that the extra percent in your case just amounts to Rs. 1,000 a year (and I’m not even deducting taxes here).Â Rather than fretting too much about this – think forward, and get on to the next thing. Try to move on to the next thing as quickly as possible, and don’t miss the big picture because of some hiccups.
5. Additional sources of income: Roger Nusbaum offers a unique angle to planning for retirement income, and that is to find a hobby that pays you. That way you can add an extra source of income, and earn money enjoying what you do. One of my Maths tutors was a retired school teacher who used to love to teach, and sometimes he used to phone me up, and call me to his place just because he was getting bored. The work kept him fit and mentally alert, and he used to earn well also.
I like this common sense approach of looking for a hobby that pays you, and though I realize not everyone will be able to think of something immediately – I’m sure if you’re actively seeking out something you will eventually think of something.
I want to wish all of you once again, and hope that this year brings you peace and happiness.