3G Theory- A must read for all investors

We would like to share one of the recent interactions we had with one of our past clients. There is something important to learn from the interaction we had and so we thought of sharing the same with all of you.

Client: Hi Nandish, This is Sam (Name changed), Do you remember me, I joined your financial planning service 2 years ago.

Nandish: Yes, Sam I remember you, tell me how can I help you?

Client: You created my plan and suggested some actions to me but I did not listen to you at that time. You tried hard to push me but I did not take required actions. I am still at the same place where I was and also I feel I have lost two precious years of my financial journey. With god’s grace, my salary has now increased and I would like to once again start the planning journey with jagoinvestor. I have realized that to have a good financial life you need a have a mentor like you. I am sorry for not listening to you.

Nandish: That’s great Sam, I am happy to see you have regenerated your commitment, and you just had a wonderful realization and insight which can, in fact, change entire DIRECTION of your life.

The most important ingredient in living an awesome financial life (or life) lies in how coachable you are. Add this little ingredient ( of being coachable) to your financial life and see what happens to your financial world. Last time you paid fees to us, this time along with fees just be 100% coachable.

Sharing from my personal life I have a fitness coach, a music coach and a business coach to help me in different areas.

I owe my heart to them as they are my backbone. They coach me, stand for my success and they help me to move to the next level. I do not question my coach, I do what they ask me to do and the way they ask me to do. I surrender myself to them and allow them to mould me in their respective area of expertise.

It’s time to make a fresh start and fix your next 10 years; we are fully there to help you and to serve you in taking your financial life to the next level. The only request I want to make to you before starting the planning exercise is “Be Coachable”.

Start the planning exercise with an open heart and mind and take the required actions. People who are not coachable always remain stagnant in life. I and my team can help you if you are ready to be coachable. A lot of people think they are coachable but in reality, they are not. Our growth in life is directly proportional to how many teachers we have.

Client: I agree and this time I am ready to surrender and I promise I will take required actions.

Nandish: Great I will send the next actions to you.

Are you Coachable?

Let’s get out of Sam’s life and look into your own financial world. Are you coachable? Are you ready to take external help to plan your financial life? Are you ready to take external help to take your financial life to the next level?

If you are managing your own money are you qualified and experienced to take personal finance decisions on your own. A lot of people think if I can earn money I don’t need to learn how to manage money or they think paying for advice is foolish when everything is available online and you have bank relationship manager to provide free advice to you.

3G theory

I would like to share one theory with all of you; it is called 3G theory. Before leaving this world if I have to share one last theory then it will be “3G theory”

3G theory

3G stands for having 3 Gurus in Life

1. Health Guru

We all know health is wealth but most people do not take good care of their health. They have valid reasons why they do not exercise and live an unhealthy lifestyle.

Health is an area that takes back seat very easily and when something goes wrong with the body they start to realize their mistake.

Having a health guru is extremely important because that is how you will get accountable in the area of health. I get 10 minutes late and my coach will call me to keep my promise. I have a fitness coach and I feel it is one of the best investments I have. He is a no-nonsense guy, he just believes in action and he helps me to stretch my limits. If you do not have a health guru go and find someone at the earliest

2. Wealth Guru

Wealth creation is a game and you really can’t play this game alone. Before taking any important money-related decision even I do a short discussion with Manish so that I can have an external agreement. Personal finance takes a back seat very easily and it is extremely important to have a wealth guru.

I have coached hundreds of people and I can clearly see how their financial life has gone to the next level. I am not saying go to a wrong advisor and make him your guru, go to the best, pay the highest fee as that is how you will derive value from your association.

3. Professional Guru

You need someone who helps you to expand your body of work. Your work has to nurture you rather than pulling you down.

We at jagoinvestor have a business coach, we do regular sessions with him and he guides us on how we need to shape our blog and business. He has taught us many things and it has helped us to grow our business. We really love what we do, we are passionate and running a business is a skill that you can learn from someone.

Conclusion

People who have these three gurus’ will always have an edge over others.  You need a guru in all three areas to get accountable in the area of money, health, and work. The 3G theory is extremely simple, it says to find 3 Gurus and surrender to them. I have given the highest weightage to health guru because if health is not in place the other two areas will lose its meaning.

If you need help we are ready to COACH you

If you want to bring a shift in your financial life feel free to share your concerns with us and we will help you to design a wonderful financial life. Get in touch with our team and allow us to make a difference in your financial life.

[su_button size=”8″ radius=”square” background=”#D8180A” url=”http://bit.ly/pro-article”]YES – Connect me to a Coach[/su_button]
Share your details only and only if you are ready to be coachable because we can only help those who are ready to be our partners in the process. We believe that only a partnership can lead to magic.

Is it right to submit fake rent receipts at my office to claim HRA?

If you are living in a rented house and using any fake documents for HRA claim then be careful.

Because from now on there will be a big trouble for those who are using fake rent receipts to claim HRA, as Income tax department have started asking for more document.

fake rent receipt to claim HRA

Many times it is seen that people claim for HRA by submitting fake rent receipts. This also helps to get them tax benefit. But now as there is increase in the number of fraud HRA claims, IT department has started to ask for some other legal proofs.

Documents which IT department can ask in case of verification

Before you know about the documents needed for verification purpose, lets understand what is HRA (for those who are new to this)

HRA i.e. House Rent Allowance is an amount or we can say a part of salary of an employee which an employer pays if the employee lives in a rented house. It is beneficial for the employee as it lowers the tax which he/she pays on accommodation per year.

What is HRA

If you claim for HRA exemption then you need to submit some legal documents like a receipt or an agreement and ID proof of landlord. You can also claim for HRA exemption on your income tax by filling 12BB Form

If the IT department suspects that a person is providing fake receipts for HRA then they can ask for some other related documents. The list of documents which IT department can ask is as follows –

5 documents which IT department can ask in case of verification

  • Copy of leave and license agreement
  • Electricity bills
  • Water supply bill
  • Agreement or a letter from housing society
  • PAN card of landlord if the amount is above Rs.,1,00,000.

Is there any risk in submitting fake rent receipts to claim HRA?

People are asking various question related to fake rent receipt. You can see the snapshot given below…

fake rent receipts related question

The verification process is going to be more strict day by day so there is a risk in claiming for HRA exemption by providing any kind of fake documents. If a person wants to apply for HRA with fake receipt by knowing all the risks he has to prepare all the fake documents and as we know submitting each and every document fake is not that much easy.

In many cases employees asks their parents or relatives to sign the documents for HRA claim or sometimes employees shows the higher amount on their rent receipt than they actually pay so that they can get the exemption. In case IT department suspects your case as fraud, in that case you will have to go through verification

Some example where enquiry can happen

  • If a person has a house loan and also applying for HRA.
  • If a person living with parents without paying any rent but still apply for HRA and says that he pay rent.
  • Adding higher amount in receipt than he actually pays.

To know about this in detail you can watch this video..

IT department has stared cross checking the address on ITR ( Income Tax Return) form and the receipt submitted. They are also checking the records so that they can know who is the legal owner of the house to verify the Leave license agreement.

What are your thoughts on this issue? Do you know anyone who is submitting fake rent receipts?

The myth of “Early Retirement” – A real life case study !

This article is a guest post by one of our readers Vikram Agarwal, who wanted to share his experience on the concept of “Early Retirement”. Vikram was generous enough to share his story and some of the real-life things which will make you think hard about this concept. Like Vikram, if you feel you can write on jagoinvestor, please click here

Over to Vikram.

Most of my friends in my friend circle in late 30’s ask me one question – “How much money I should have now, so that I don’t have to work anymore while maintaining a decent standard throughout of my life, with all the future expenses taken in to account?”

They want to ‘Retire Early’

early retirement

In fact, I also used to be an ardent follower of the concept of ‘Early Retirement’ but now have realized that the concept is more like a mirage, which does not exist in reality and once you reach there, it vanishes.

Moreover – in my view, it is quite dangerous for an individual to run after this concept. In my opinion, you achieve retirement either ‘NOW’ or ‘NEVER’ irrespective of your current level of income or financial state.

Early Retirement is a state of mind

It is a state of mind, rather than a stage achieved. The moment you achieve early retirement as per the physical criteria set by you five years ago taking inflation, life expectancy and all major and minor expenses in your monthly calculations, by the time you achieve retirement as per your old financial definition, all those things become sub-normal or default.

Your mind will have another definition that looks normal for you in today’s context for example for future kids’ education, your house quality, the type of car you own, facilities you desire and all other such expenses.

My personal example

For example, five years before, owing a 2 BHK house in the newly developed area with Marti Dzire hatchback car and with the kids going in a decent school used to be a life I wished for and I had done calculation for the amount required to maintain the same standard throughout rest of my life without working.

And that was ‘Early Retirement’ according to me and as per standard definition.

great future illusion

But, now it seems owing a 3BHK house (one extra room for parents or for guests) in a good location of a metro city, a nice Honda sedan and a ‘good’ school for kids throughout their education duration is ‘Normal’ for me. Now it’s the standard, I would like to maintain before retirement and after retirement.

My next target!

My new “target” might be owing to a villa or bungalow, and a nice SUV and kids in the ‘best’ school of the area. And once I achieve it, I think it will become a new normal with time.

The next level

And who knows, a car for wife will be a standard I will look for in the future, as I will not be able to manage all the household activities on my own and an extra car becomes a necessity. (I did all my retirement planning calculations with taking decent return on investment as 10% which is quite modest in the long term, so as not to fall in the trap of exuberant returns which might be temporary and actual return might spoil all your calculation.)

Even with a slight increase in any of the above ‘wish’ list (like the possibility of sending you kids abroad for his or her graduation) will push you back in time and you will not be able to achieve you ‘wished’ retirement any time and this carrot and stick game continues.

When your desires convert to your “needs”

You would not know when your ‘desires’ got converted into your ‘needs’. And now it looks like there is a meaning in the sayings of wise old man that “There is enough in this world for one’s needs and not for one’s desires”. I can sense the truthfulness in these lines with some financial literacy and practical experiences.

Greed Desires

If at all early retirement could mean anything for a ‘disciplined’ guy is thru’ a windfall gain from lottery or legacy, otherwise if one tries to achieve early retirement from normal gradual process where mind and hard work is involved, his thinking mind will quickly adapt to current situation and will turn the old desired standards in to ‘Normal’ or ‘Below Standard’ life in today’s’ terms.

The word ‘discipline’ need stress here because there is an old saying that irrespective of the size of the pot, if kept isolated all the water will drain out eventually if not refilled on time and only a disciplined life can control this drainage process and can prolong it (Read, why we are overspending these days by Manish)

Or you can become a hermit in deep forest, secluded from this physical world and concepts of ‘Future Expenses’, ‘Inflation’ become meaningless for you, one can think of early retirement stage.

early retirement myth

But, I guess this is practically impossible and this article is not intended for those who might be thinking of this stage as one of their future possibilities.

Story of my seniors – Real-life case

I personally know two of my seniors who after working at very senior positions in the company left their jobs as they thought they had enough money to sustain the rest of their lives and tried to follow new pastures in future life.

But, eventually, they had to join back in their respective jobs in order to meet their monthly bills and continue with their other passions in life.

It is human psychology to get adapted to the current situation and at present it looks like achievable calculations on paper and unreal confidence of being satisfied in case you achieve current target, but in reality it does not happen and by your own nature and human being’s reason of existence, you will always be pushed to work.

Basic foundation of human existence is WORKING

This wish of ‘ Not working’ one day will take you away from ‘Karma Yoga’ which is the basic foundation of human being’s existence. Even in GITA, it is mentioned that all of us have to work one way or other and this is the law of life.

I remember a recent discussion with a prominent businessman in my home town. He told me that he used to ‘struggle’ a lot to book rooms in his locality for any private family functions for his guests they had to ‘adjust’ sometimes as per hotel terms and conditions.

Now, he has built his own guest house and no need to be ‘dependent’ on the hotels any more for bookings, etc. and I was thinking that if this rich man thinks booking rooms in 5 star hotels as per their terms and conditions is a compromise in life, what independence could mean for him ?

Don’t buy anything less than a BMW

A few years ago I was having a discussion with one of my friends and in his views, having something below Mercedes or BMW is a compromise as all other brands do not give importance to safety standards and life is precious more than anything else.

At that time owing a Honda city and maintaining it was the kind of life I wanted to live for all early retirement calculations and now since I can afford Honda City easily, I have a choice, either to keep working to be able to buy Mercedes or BMW one day or put my life always at risk while driving mass-produced cars!

We can retire the day we are BORN

On second thought, I achieved financial freedom years back, the moment I had enough money to be able to afford public transport all through my life. In fact, to take it to one extreme side, we have the potential to retire the day we born and it is only afterward that we enter into the working force in this world, fall into the financial trap and again want to get rid of it.

This wish of ‘Not working one day’ can make you lazy, averse to work and afraid of accepting challenges as in your thought process you are always after something else and it is quite natural that you will not focus on the very basic aspect of life you want to get rid of one day.

Here is a great answer which deals with this issue on quora thread

don’t want to work

These days a lot of people think of retirement at an early stage, some talk about retirement in the late ’30s or early ’40s and there are various articles circulating around to tell how to achieve it.

But, this kind of thinking pattern in today’s youth is preventing them from acquiring skills which can help them in their current job profile and make it interesting.

Story of my father

My father achieved his financial freedom just after his retirement and both of his sons are well settled and living a decent life and he does not have any liability in his life, yet he is always focused on ‘working life’ and whenever he gets any chance of making money with guest lectures etc., he always looks forward to it and that’s what he says is the secret of his healthy life.

Had he focused on early retirement, this ‘fire’ or ‘energy’ inside him would have subsided quite early and he could have attracted many lifestyles related diseases like blood pressure and diabetes etc, which is happening these days even to the young generation.

So, one should not focus on achieving early retirement any time but should think of living a simple, satisfied, and an exemplary life and realize that the ‘Work’ is the only thing that matters in life and for this you need continuous practice for sound physical and mental health to keep your body fit and energetic and let other things come on its own without worrying about it.

Watch this TED video which talks about an experiment of living a simple life in a tiny home.

It is a good idea and in fact a necessity to have the habit of saving and investing, but the idea should come from the need to meet future expenses and not to achieve early retirement.

So what should be your plan in life?

The financial goal in one’s life should be to have sufficient inflation-adjusted funds for all major expenses in the future like owing a house, Kids education funds, children’s marriage funds, emergency funds, and retirement funds in present terms and all funds invested properly.

At large, one can think of a ‘stage’ where he or she will not be worried about ‘Net savings’ from the income and can live a life one desires with his current income from job or business and even If he/she spends all of the earnings he should not be worried financially.

The more one earns, the more facilities one can desire and his current lifestyle will remain in accordance with his income levels and this is what I call real ‘Financial Freedom’.

That is an inherent assumption here that the rise in expenses (with inflation) will be taken care of by salary increments/ job changes or business expansions and for there is no other alternative but to ‘Work’.

What do you think about Early Retirement?

So let us know what you feel about this concept and my points regarding it? Do you agree with them? Is there any point where you can add?

Would you like to share your own story in the comments section and how you have dealt with the concept of early retirement? We would like to thank Vikram for his contribution on this subject on this blog.

Also, if you feel you can write on jagoinvestor and contribute, please click here