Are you following these 6 rules of great financial life ?

POSTED BY Jagoinvestor ON December 10, 2012 COMMENTS (86)

Everything in life has basic ground rules, which we should never forget. You can consider these ground rules as the pillars of your decision making activity. Even our financial lives have some ground rules to follow in order to have a great and enriching life. Over the last 5 years of writing this blog and having interacted with thousands of people, I can clearly conclude that more than making right decisions in financial life, you should focus on avoiding bad decisions. I have seen so many people who have been careful, not messed up things and their financial life quality is really awesome. They have not lost wealth due to foolish mistakes and live a clean financial life overall and while they feel lag behind others, I can say they are ahead of others in many ways. Yes – They have not taken awesome decisions, but the best part is they have not made terrible mistakes either. Lets explore more on this today

Pillars of a great financial life

6 pillers of great financial life

Now I am going to talk about 6 areas of financial life which are like pillers. If you are clear about these ground rules and start some serious work on all of them, your overall quality of financial life should go up. But having said that, its a long term activity !

1. Rule of Earning

“Do not depend on a single income. Invest and create a second/ third source of income”

So many people just never focus on this. A person in a job has just taken it as his fate, that his only source of income will be his Salary. For him alternate source of income other than his salary is like a distant dream which he can only see, but could not achieve. The same happens with a businessman at times. He depends solely on his business income. Why? Why not also have some other passive income from other non-core business area.

Atleast start thinking in that direction ? Lets Explore some extra income source. I dont say, it need to be some grand income, but lets make some start atleast, if not in action taking, atleast in thinking about it, I personally tasted some passive income from my first book royalty, while it was not a big one (opposite to what people think) , it atleast gave me some good feeling. Other than our business income, I had some source of income from other stream. Thats important ! . It can be a small income, not a grand one . Thats okay ! . Whatever is your specialization, you must be god gifted into some or the other thing in life, start sharing about it with world by writing about it, you never know when you start making fans for yourself and it might bring some opportunity to you in life. Nandish has written a nice piece of “Giving your Gifts to the world” on our Jagoinvestor Wealth Club, check it out . If you are damn good about something , why not offer consulting or accept freelance projects in your own capacity.

Forget all that, at minimum, If you are a person who comes home early, why not take some tutions to make few extra bucks. Its not about earning a little more, its about the habit of creating an extra income. You never know when, in the future when you might have to look at it seriously! . So the point is, go ahead and put a small seed in your head about “Creating Alternate income” .

2. Rule of Spending

“If you buy things that you do not need, you may soon have to sell things you need”

People are over spending. There is no doubt about this. Just look at your own expenses & write them down. Question each of your expenses, do you really need them? Is it out of necessity or just a desire which you can avoided altogether or atleast minimized? The answer will be in front of you. If you have not yet tracked where your money is going and if you are our special member at Wealth Club, you might want to download this Budget Template.

One of our Bangalore clients told us last year that he has seen a lot of his friends, who buy a car on the first day of getting the job! and mostly they dont need it. Its either to show off, or just that short term desire of own it, without thinking about long term aspects of it. Its just unplanned!. Then there are people buying 25 shirts, when they only need only 12. There are people, who don’t have the `haisiyat` of driving an Alto Car, but they have bought a Honda City just to show off !

It just violates the rule of spending!.

Slowly but surely, this will take them towards disaster. It will come as surprise (to them) one day. Spending is a core activity of your life. You earn so that you can spend it, nothing wrong with it, but there is a difference between spending and over-spending. Understand it today to make your future more robust.

3. Rule of Savings

“Do not invest what is left after spending, instead spend after you save/invest”

This is directly related to rule 2 above. If you do not control your spending, you can never be able to save much and then you will never be able to give your best for your wealth creation. Fix this clearly & prominently in your head. For most people the formula is

Saving = Income – Expenses

If you rely on the natural flow of life, you can never save. Life will give you all the reasons why you can only save amount X . At times Nandish tells me – “Manish , you know what, if you do not define the purpose for your money, money will find its own purpose” . This is very strong point , for a moment, just slow down and think about it. you will realise what it means. You need to control the flow of money and you have to create that flow yourself.

I just ask to most of the people to do this 1 min experiment. I tell them – “Imagine your employer says that from next month, you will get a salary cut of 10% and all you will get is just 90% in your income. For most of the people, will they not be able to live the same life as they lived till now ? If the answer is YES , then why are they waiting for ? Why not give that small salary cut to yourself as your gift to your financial life. You will enjoy this salary cut in coming years. trust me.

So your next task today is tell your family, yourself and your relatives that from now on you will be living on just 90% of your salary – PERIOD! . Start doing it and slowly you will see that magically – you will be able to manage things – Try it! It works! .Your assets , your net worth , and every bit of wealth comes from those tiny savings you consistently do for years. That’s the most important ingredient part of your wealth creation. If you do not focus on optimizing it, nothing else will work out!

4. Rule of taking Risk

“Never test the depth of the river with both your feet”

There is a very thin line between risk and calculated-risk. Calculated risk is the risk which is taken after due thought, and by accepting the future consequences and a thought full evaluation of how the odds are stacked.

If you invest a big sum of money in stocks, just because markets are going up and you do not want to miss the train, and just because that guy on CNBC said you should , then you are taking a risk. You will not be able to sleep at night for sure.

However if you look at the current market and tell yourself that – “Markets have not moved up from last 5 years, and this kind of situation in past have been proven to give great returns in next 5 years and you are economically ready to loose up to 30% of your money, and thats why you choose to invest in stocks, then its a calculated risk! . You have put some reasoning , thoughts and accepted the downside of that decision and hence you are taking that risk !

Taking risk is not a bad thing at all. It’s the only thing which can help you grow at exponential rate. Those who don’t take risks, just die a simple life most of the times. The best things in the life are on the other end of the Risk , its on the opposite side of it. So take risks, but always make sure they are calculated one ! . Over the long term, one an average, you will do great. Its proven already, I am just reminding you!.

5. Rule of Investing

“Do not put all your eggs in one basket”

Warren Buffet is not a very big fan of diversifying. All the money he has today, comes from stocks, but there is one simple rule he has followed – Put all your eggs in one basket, if you know you are an expert of that basket and closely keep an eye on it”.

Most of us are not like Warren Buffet! . So lets not copy him. What if you have put most of your money in one single asset class or a property or a particular branch of a bank? or just a single stock. Things can go wrong, and when it goes wrong, you will cry out loud, but no will will be able to help. You will be helpless and will regret like anything.

As a best practice make sure that your wealth is not in a single place. Remember that portfolio diversification is mainly a tool of minimizing risk, not for maximizing returns, so don’t ask a stupid question like – “Will diversifying my money to different places increase my returns?” – The answer is “It might… or it might not!/. But properly done, it will surely minimize the risk of losing your wealth in future.” .

6. Rule of Expectation

“Control your expectations, and control your happiness – they are same thing”

One very dedicated reader of this blog – Pattu, who teaches at IIT Chennai, told me once that he does not expect equity to give him more than 8% of returns in long term and he always invests his money in equity, assuming that he will get 8% or better in long run. Anything more than that would be a bonus for him. I am sure that he must be happy all his life and will never be disappointed with equity returns.

In financial life, we expect agents to work in our favor, we expect financial products to give us amazing returns, we expect financial planners to charge less, but give an awesome experience (Like we give to our paid clients) , we expect life insurance companies to pay our family, even if we make some mistake while disclosing some important information, we expect our credit card to  forget the penalty for in-case we don’t pay on time, we expect government to decrease the tax rates.

If you look, we are an “expecting” machine in our life. I can say from my tiny experience of life till date, happiness and expectations are just the two different words for the same thing. If you want to get in control of your happiness level, just control your expectations in life. Stop the expectations from others, better control yourself and your expectations, because thats all you can control. not others.

Practice these 6 rules in your financial life

If you can master these 6 rules in your financial life, your quality of life will improve. Each decision of yours should originate out of these 6 piller rules.

What do you say? Which rule did you like the most? Share it with us in comments section…

86 replies on this article “Are you following these 6 rules of great financial life ?”

  1. Rishi says:

    Very refreshing article! Indeed. 3-years ago I plunged into business (e-commerce) with a passion. I measured and I found.
    1. Rule of Earning: I have been doing it since 2006, while I was in job. I am done with it.
    2. Rule of Spending: Many times broken, have to work upon it.
    3. Rule of Savings: Lately, I started following it after discovering Jagoinvestor. Has to be aggressive.
    4. Rule of taking Risk: My personality trait, doesn’t match with it.
    5. Rule of Investing: Has to learn.
    6. Rule of Expectation: I am ok with it.

    1. Great to know that Rishi 🙂

  2. kaushik says:

    I am researching about the first point of passive income for first time. actually a group of like minded friends are thinking on this line. there are various options for these. what we thought is building a business in internet is one of the best way for people in IT industry at the least, since they are familiar with WWW (internet) very much, and capital requirement is not that much (so risk of too much loss is ruled out)

    I found this great new place name IIA online that teaches you how to build a long term income online. If you ever wished to build and own an internet business, have a look at the site IIA: INTERNET INCOME ACADEMY (search on google with this). i do not know if sharing link is allowed or not but still putting the link, in case anyone here is interested.

    good luck with your passive income

    1. Thanks for that link, let us look at it !

  3. If one masters these things, things can be a whole lot different financially…!

    Although, sometimes we know the rules and we love breaking them 🙂

    1. Thanks for appreciaiton Amandeep !

    2. Dinesh Jain says:

      Well said Amandeep,

      Irony is “People know what needs to be done to succeed financially, but then also they don’t do it and they don’t know why?

  4. Unknown says:

    Bhai Manish, you have just copied the thoughts of warren buffet. what’s new about this article?

    1. Did you get any value out of it or not ?

  5. lpt says:

    One more – Understand the effect of fees and costs on your investments. We tend to ignore the 2% or more expense ratios that MFs/ULIPs charge. Over a 20-30 year period these can reduce the final amount by 30-40%.

    BTW, you should call this article the ‘6 pillars of financial wisdom’ 🙂 . See

    1. Thanks for your appreciation !

  6. Dinesh Jain says:

    Very nice article Manish,

    I came to know about rule no.1 from one of the books of “Bob Proctor”. thereafter i read a book from “Robert allen” on multiple source of income. Everyone should have MSI (multiple source of income) other than their PSI (primary source of income).

    This is one of the reason of being wealthy or middle class bcz middle class people are busy in their PSI where as wealthy people have MSI other than PSI.

    1. Great.. thanks for mentioning that !

  7. Gopi Krishna says:

    Always invest on appreciating assets not on depreciating assets. this is my philosophy

    While my colleagues invested on buying on herohonda CBZ on loan, i bought gold 🙂

    While my colleagues bought cars to showoff,i travlled in citi buses and bought a independed house.

    while people around myself bought hifi cellphones, i used the cheapest cellphones.\

    I first invested in mutual funds only on my own guidance. may be i did not make any good money in returns but i did not loose principal.

    So if a person thinks while buying a thing is it a appreciating asset or depreciating asset, they will make a right decision always.

    1. Suhas Patil says:

      You are just talking about the “choices” here.I think it is upto to an individual how he wants to live his life…..roam on bike or travel in bus(again Volvo or local). Eat in 5 star or road side.The best I guess is once you begin end in mind (set goal) and have your compass set aligning it (plan all ur investments for the goal) rest all you can do with the choices and not think all the time to save by cutting on your dreams.
      Off course the compass will keep you guiding on preferences and priorities.I know some of my friends talk and do too much for saving they sound greedy to me.
      Why don’t you think you should make attempt to increase your wealth horizon to earn a house and bike too.Spend some money on self and family.go for planned vacation,do some charity,Pay tax infact a little extra……
      I think keeping low aim will not untap the potential in you…..If you follow the rule of the game thats more then enough I guess.
      Just a thought..No heart feeling please……

      1. Gopi krishna says:

        Yes you are correct.when you have more money you can have flexibility to think more and expensive choices.what i meant in my reply was a conservative way how any one can accumulate wealth when they have no peroperties or monies given by elders 🙂

    2. Thanks for sharing that experience with all of us !

    3. Anjan says:

      It seems you are the one bragging and showing off now. You have to strike a fine balance between saving and spending. Once you go on the extreme end of the saving scale, you just become a miser and can never enjoy the luxuries of life. Going by your logic, you must think even vacations are a waste of money.

      Mind you, you are earning to live a comfortable life, not to ensure your next generation doesn’t have to work. Buying a car and high end cellphone are some of the basic aspirations most middle class people have and there’s nothing wrong about it as you seem to be indicating. One can start putting aside money for retirement right from the beginning and still save enough for these luxury goals.

  8. kulbhushan says:

    Beautiful!!! Beautiful!!! Beautiful!!!

  9. NDK says:

    Hi Manish,

    I have been a regular reader of jagoinvestor and have been pretty impressed with the sincere and genuine advice provided on this website. And today there was this funny incident, when an agent was trying to sell me HDFC SL Crest and as usual talked about very good returns. Suddenly I googled for the product and jagoinvestor and showed him what a customer says about the various charges and why he wants to stop the policy. You should have seen his face.. and he had to quickly admit that all these charges are indeed deducted from the premium, which he cleverly did not mention earlier. Hats off to you.
    Your site has helped me set my financial goals.. and I am now a much more disciplined investor. Thanks and keep up the excellent work.

    1. Great to hear that 🙂 . Thanks for sharing that incident !

  10. Paresh says:


    It seems Warren Buffett also tells same thing. Please check this URL:


    1. yes Paresh.. But these are repharesed in my style of writing and all what matters is what you learn out of these rules , nothign else matters !

      1. Paresh says:

        Yes Manish. I am also following all rules except #1. My wife has a Job. Does it mean I have second source of Income?

        1. No paresh

          Its not a passive income , its a active income , it will stop once your wife starts working . We call somethign as passive income ,which comes without any activity !

  11. santosh says:

    These Rules are so crutial for new rising BUSINESSMEN.
    Also called as new steps of success
    in todays business environment.

    1. Yes Santosh

      Thanks for acknowledging that .. but these are also true for any kind of investor also ! . dont you think so ?

  12. Siva Mohan says:

    Hi Manish,

    Great article! This article along with ‘Difference between Needs and Wants’ is a must read for every earning youngster.

    I am a dedicated reader of this blog from last 2 years. You & Nandish taught me how to manage (spend & invest) money. I have implemented rules 2 to 6 smoothly so far. Investing in PPF & SIP (in MF) for long run, FD & Liquid Funds for short run along with taking a Term Plan and Personal Health Cover & most importantly saying ‘NO’ to traditional & ULIP plans sold by relatives/neighbors.

    Need to work on rule 1.

    I share this knowledge with friends and colleagues and they started considering my advice.

    Thanks a lot.

    Siva Mohan

    1. Thanks Siva

      Great to hear that we were able to make some difference in your financial life . just make sure you replicate it and send this to more and more people !

  13. Srinivas says:

    Good article. Nice points to introspect and improve.

    The basic(should i say mathematical) definition of increasing one’s wealth consist of reducing one’s expenses, increasing one’s income and investing one’s savings wisely to maximise returns. This set can be achieved through various means. One such strategy was indicated by Manish.

    One can see it this way. Achieving financial freedom is conquering Mt Everest.(I say even more difficult). There can be more than one ways of doing it. Every one can choose different strategy based on his/her temperment and philosophy of life.

    However, to choose a strategy meeting one’s temperment, one should know about personal finance. True, it is not easy for a person to become reasonably expert in finance matters. But it is not difficult either. Internet resources help in easing part of the difficulty. Good thing is, as one starts improving his knowledge and skills in PF, the way forward becomes clearer and clearer and lead one to much better position.

    This is a personal experience. For about 15 years, i was not interested in (afraid of) finance. Then one fine day, i started learning and gradually it became a routine activity for me. Though over the years, i did not work on improving my income streams, i worked on reducing expenses drastically, maintaining reasonable standard of living. This worked for me and hope in another 10 years time, i will be in a position that i will not have to work for money. I can say that other points mentioned by Manish, can improve this strategy further.

    Though as per definition, it is purely mathematics, introduction of human elements makes the equation erratic, awkward, in effective etc. This is where understanding oneself(“Know thyself”) is badly required.

    In summary, i would like to highlight that, in addition to following a prescribed strategy, one can start applying his mind to one’s finances and continuously see if one is on course. If there is any deviation, timely intervention to correct the course, will help one achieve one’s goals in the long run.

    1. Nice and a long comment . thanks for sharing your thoughts on this and also sharing your experience . I liked the thing that even though you were afraid of personal finance in life, still one day you took charge of it and changed the way things are ! 🙂 . Out of these 6 things we discussed on article, which one is of the biggest focus right now in your life, can you share a bit more on that ?

      1. Srinivas says:

        Passive income : Currently my passive income is sufficient for one month expenses. Planning to increase it to a years expenses.

        Spending : Capped expenses at 1/2 of salary. Balance half goes in investment/repayment of loans(Loans will be paid back by year end)

        Savings : Part of the above. Continually learning/researching ways to improve returns.

        Risk : Long term goal(after 8-10 years) is to be on my own. Currently in low risk zone. Have to improve gradually.

        Investing : Currently conservative. Gradually plan to improve for better returns.

        The abouve 3 Savings, Risk and Investing form a continuum. If this is understood and executed well, one is sure to be on his way to wealthy future.

        Current biggest focus is managing spending goal(for the next 3 months). Then it will be investing for better returns.

        Just one more point. Great financial life can also include leaving a legacy. This can be in two ways. Leaving a great fortune to the progeny/dependents. Or making dependents truely independent. I feel this aspect also need to be considered for making/feeling great financially.

        1. Good to read your current situation and what you are doing about it , best of luck i would say !

  14. George Joseph says:

    Hi Manish

    Great article this one. I have just one more quote which i read from Warren Buffet recently. It says

    “A Crisis is a terrible thing to waste”.

    Which means make full use of every buying opportunity and also selling at the correct time :-).

    1. Yea .. thats great one .. also I think a situation of crisis the one where you can get out of your comfort zone and do something extra ordinary !

  15. Rajesh Kumar says:

    I checked my situation after going through the article and found wanting in rule one and to some extant rule two as well. Correct me if I am wrong as far as rule one is concerned. 2nd or 3rd source of income could be the return coming from past investment or not. I have started investing in such a way that the return from it is one way or other fulfilling my part of monthly requiremnt and gradually this list is increasing. I hope after 3-4 years I should be able to fulfill all my monthly expenditure from my returns. The earning which I have should go straight to saving. Please comment whether this idea is worth continuing or not?

    1. Yes definately .. passive income out of the returns from your investments is 100% valid passive income . its one the simplest things one can complete and everyone can do it !

  16. Sirish Pujari says:

    This article is a must for every youngster, who just know to spend money and know to do partying.

    1. Thanks Sirish for appreciation ! .. What is your action plan after reading this article ?

      1. Sirish Pujari says:

        To be very frank and honest, I am following all the listed rules except for “Rule of Expectation”.

        Rule of Earning -> For this, I have rental source of income.
        Rule of Spending -> I avoid most of the times, impulse shopping.
        Rule of Savings -> Following the principle of Expenses = Monthly Income – Monthly Investment

        Rule of taking Risk -> Believe in taking calculated risk.

        Rule of Investing -> Have spread my investment portfolio across various asset class such as real estate, SIP in equity based mutual fund, fixed deposit and PPF.

  17. Venki says:

    As usual another nice article, Manish. Perhaps one among your best.

    It would be good idea to post a prioritization poll on these six pillars. Interested to see how your readers rate these points.

    May be ironic, but I would rate spending should be more wiser than earning. I know one of my friend who is using an old classic Nokia 1100 phone even today (1500/- that time). Don’t get him wrong, the same guy using latest server class computer (PC) for personal needs which costs about 1.5 lac. He is one of the few who knows where to spend and when to spend.

    1. Venki

      Yes, spending is something you have immediate control on , all of the people would agree that spending wisely is the first thing to concentrate on . Just that spending control is LIMITED . if you spend 30k right now, then how far can you go .. at some point you have to limit, but earning potential is not bound by any limit , you can always take it to 1x, 1.5x , 2x – 10x …

      What do you think on this point ?


      1. Venki says:

        Yes, right. But, do you think it is possible in the attractive world like this? We are seeing a new phone model once in every quarter, new car models, new LED TV, LCD TV, … the list is end less. We see multiple models in same company.

        We should clearly know what value addition the gadget brings in. Even contentment is wealth in my opinion, but not at the expense of financial life.

        For example, one student I know, bought 5-inch smart phone. Cost is high for his budget. But, he is smartly using it. He is watching few learning videos and lecture notes in his travel time, makes rough notes on the phone. Once I observed, he was making notes on sheet of paper and saving them by camera picture. Many other ways. He is one among the smart users of phone.

        Also, not all people convert their ‘controlled spending’ into investments. Many end up with savings, and inflation hunts them. Early age investment is more important than savings.

        My close friend in the above comment was against stocks earlier. But after lots of discussion with him, he did careful study of market for some time. He started short term trading on quality stocks with strict stop loss. This is apart from MF SIPs. Surprise, he is now earning as good as his pay scale via the market. But he never bets more some fixed amount. Most of his time he spends on coding, open source projects, OS and teaching. Only 1/2 hour per day he spends on market. He also takes freelance projects and some hardware projects as second source of income.

        Good article. Hope it ignite thoughts in your readers.

        1. I am only talking about useless spending , not quality spending . So what you are saying , I am myself aligned to that

  18. sanjeev says:

    amazing article

  19. Krish says:

    Gem of an article. If you are looking for a case study, I would perfectly fit into your described Rule # 1. Mine is an example of creating passive income through conventional investments. Today, my monthly passive income matches with monthly salary. I am talking of figures in ‘6’ digits.

    I diligently set a side SIP in FD (Recurring Deposit), SIP in MF and maxed out tax savings. I have done this without missing a single month for the last 10 years and never withdrawn any money from the investments. I had not taken any loans (home, car, personal). I paid self EMI for 3 years and bought a car on cash. Even today I do not own a home and happy to pay the rent instead of EMI on home.

    I stayed in moderate apartment for many years and just moved to a luxirious flat last year only, again on rent. Enroute some factors helped me. Got a good break in job, decent increment and bonus every year, no risky investments, no interest on loans and more importantly not subjected to any frauds.

    On the negative side, I was hit with some emergencies (parents health), sudden travels, jewellary purchases and forced vacations. As a result, I could not channel higher savings into investments in last 3 years. While investment EMI remained same albeit pay rise, savings ratio had come down not to my like.

    However the strong discipline and ‘will’ to create an alternate income and engaging the family to understand what I was doing finally paid off. For first few years, it was bit of sacrifice and hardship. Today, I realise the magic of compounding and started to taste the fruits.

    1. Thanks for sharing that Krish .. I am sure everyone can atleast do this kind of passive income with their own investments !

    2. Raju says:

      Hi Krish,
      Thanks for your experience shared with us. But I was under the impression that investments are for attaining the goals like child marriage, retirement. But how your investments in MF, RD you are considering as your passive income?

      I thought income as royalty from your book sales considered as passive income. Just curious to know your thought process, that’s all 🙂

      Thanks and Regards,

      1. Krish says:

        Interesting Question. As I spend lot of time into strategy of investing, I consider investment income as my business income. At the end of each year, I calculate howmuch income is generated other than salary. I would like to treat my investment income similar to that of passive income from part-time jobs, commissions, royalties and freelancing.

        Any type of income (salary, business, investment), it is supposed to be used for ultimate goals of kids education, marriages and retirement if other interests are not persued. In mycase the investment income is theoritical as long as I don’t use it.

        1. Raju says:

          Thanks for your thoughts.

  20. ashok says:

    As usual, wonderful..

  21. Siddhant says:

    Simplicity of your articles never ceases to amaze.


    1. Thanks Siddhant ! .. just help in sharing these articles to other people .

  22. RD says:

    Hi Manish,
    Simple Awesome. I liked all rules and definately will try to follow them specially rule #1, #3. Thanks manish.

    1. Welcome 🙂 . I would like to hear more from you on your action plan .. what are your doing and are going to do in these areas ?

      1. RD says:

        For Rule #1 : I am going to take some small assignments(projects) which i can complete in my free time. Till this time i was vary Lazy in doing some extra work other than office work.

        Rule #3 : I did some analysis and finally come out with items or services that i dont need like i am having two internet connection but one is enough for me.

  23. Vishnumoorthy Adiga P says:

    Simply superb article Manish 🙂

    I liked 1st rule of generating extra money.
    When we have different reasons(destinations) to spend, we should have at-least few sources of income na…!!! 😉

    1. Yes. .totally true ! .. passive income is such a great thing that everyone should aim for it !

  24. Raju says:

    Hi Manish,
    I like the secondary passive income step, spending and saving ground rules. Thought it is universally accepted but we miss to implement it.

    I am getting rent as passive income, does this count ??
    You mentioned about risk and calculated risk. If possible, you can also mention about many people thinking lending to friends,relatives and putting gurantor signature as non-risk. In this case, total risk liability is 100+% of losing principal (and also additional interest,if any).

    Nice reminder, thanks alot.

    1. yes Raju

      Rent is a perfect passive income. the thing is you are getting money by NOT DOING ANYTHING . Thats great !

  25. Narendra says:

    A Eye-Opener, many of us knows this, many of our parents and grand parents teach this many times, but we neglect this.
    Good, you reminded me once again.

    1. Thanks Narendra

      Which part of this article was the best for you ? Can you share a bit from your life ?

  26. Mona says:

    I like the very first rule and it has become very pertinent in today’s time given the jobs in private sector are volatile.

    1. Thanks Mona . Are you looking at creating some kind of passive income in your life ? Have you thought in that direction ? Can you share a bit ?

      1. Mona says:

        Yes. Thinking of devoting more time to my hobbies and hopefully making money out of it. Possibly a food business!

        1. Thats great .. I think you should give it a shape , did you check my article on some points I noted down which i learned by leaving my full time job ?

  27. Abhijit says:

    Wonderful Manish! I am a great fan of your articles & started implementing it.

    Step 1) – Health Insurance is in place for parents & you know I have avoided lots of pain & troubles only because I had the Health Insurance in place which took care of my bills.
    Step 2) – PPF account is started in SBI & I am investing a lot in it every month so as to cover up my past mistakes by not having it even if I was earning decent money.

    I am surely looking forward to avail the PAID services in coming days to further update my financial life.

    Thnx a ton!!

    1. Good to hear that Abhijit ..

      Can you share more what you got out of this article, which point gave you biggest push and what you action plan out of that ?

    2. Rachana says:

      The biggest push for me is don’t expect awesome returns from equities, expect reasonable returns and start investing early in equities so that you can get higher returns than other available options like FD, PPF, LIC etc.

      1. Thats great to know . I think its a major point every one should think about . !

  28. Swarup Saha says:

    Simple yet enriching discussion…..every rule discussed should be followed to maximize one’s healthy financial life.

    1. Thanks for appreciation Swarup ! .. Glad you liked it, what was the biggest learning for you out of this article, can you share what is your action plan ?

      1. Swarup Saha says:

        Rule 1 : Had been engaged in giving tuition for the last few years for that xtra mile apart from my regular service.

        Rule 2 :Was a spendthrift at one point of time and used to “shop till u drop” during those stupid season sales……but yes a late realization has made me more cautious.

        Rule 3 : Glad that this realization had made me more stable financially..

        Rule 4 & 5 : Yes invested in both equity and debt in a calculative risk and in a decent diversified path with the guidance of Jagoinvestor ( after rectifying those huge mistakes in ‘INVESTING’ in so called Endownment plans of LIC :-p )

        Rule 6 : This is a new point which I do want to keep in mind for future references.If we keep our goals realistic , achievement or even over achievement is possible.

        So overall, this is really a learning article for me Manish.

        1. Thanks for sharing your achievements in all these area’s .. I really like the way you have listed it , I wanted this kind of reply from almost all the people 🙂

  29. Anup says:

    Great article.. Rule 3 is written as –
    “Do not spend what is left after spending, instead spend after you save/invest”

    It should be
    “Do not invest what is left after spending, instead spend after you save/invest”

    1. Thanks Anup . I fixed it 🙂

      Can you share what you learnt out of this article ?

      1. Anup says:

        Most of these rules, I am already following. But the most important rule which I need to work on is Rule #1. I think it is most important rule to make your life achieve freedom and also make your retirement less painful.


        1. Yes, Even I would say that if you work on Rule #1 , you can be much ahead of others .. So what will be your action plan on that? any pointers you have thought ?

          1. Anup says:

            I have tried thinking in this direction a lot of times. I could think of below options
            1. Rental income – Difficult to purchase apartments due to price and also rental yield is not much
            2. Investments – Have a PMS to manage the money. Need to think in this direction further with concrete plan and expectations.
            3. Franchise – Some franchise. Risk of capital loss.
            4. Business – Some software company. Risk of capital loss.

            Main hurdle I am facing is – risk taking ability and laziness. 🙂

            1. Kranthi says:

              Hi Anup/Manish,

              Good options discussed. Can you help me know what is PMS?
              I will add two more options (internet related, little creativity needed) here.

              5. youtube moneitzation of videos.

              6. Monetization from blogging.

            2. Venki says:

              PMS – Portfolio Management Service.

              Thanks for the links, these are new to me, though I knew about monetary aspects blogging.


              It would be useful to highlight the article on main page. May be the headline hyper links can be modified to drop down lists.

            3. PMS we will write very soon .

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