TLDR;
This video explains how wealthy people manage their money differently from poor people, leading to a widening wealth gap. It provides practical money management rules, investment strategies, and the importance of balancing financial discipline with personal enjoyment to build wealth and live a fulfilling life.
- Money management is key to financial success.
- Investment should be prioritized from your income.
- Balancing financial discipline with personal enjoyment is crucial.
Intro [0:02]
The gap between the rich and the poor is widening due to differences in how they manage their money. The video aims to explain how wealthy people manage their finances to grow richer, while also addressing why many poor people struggle to improve their financial situation. The video aims to decode the patterns that rich people follow to become wealthy, contrasting them with the patterns of poor people.
Money Management Rules [2:43]
The video outlines practical money management rules based on income levels. If you earn ₹1 lakh or less, save a minimum of 10% for investment. If you earn between ₹1 lakh and ₹2 lakh, save at least 20%. For those earning between ₹2 lakh and ₹3 lakh, save 30%, and if you earn above ₹3 lakh, save a minimum of 40% for investment. These percentages should be calculated from your post-tax income.
Investment Strategies and Benefits [4:51]
The video explains the benefits of consistent monthly investments through Systematic Investment Plans (SIPs). Investing ₹10,000 per month with a 15% annual return can result in ₹1.5 crore in 20 years, turning a ₹24 lakh investment into a substantial sum. Instead of traditional mutual funds, the video recommends investing in Index Exchange Traded Funds (ETFs) like Nifty Bees (invests in top 50 Indian companies), Mid Cap ETF, HDFC SML (invests in small-cap stocks), and Meang (invests in top 10 US IT companies).
The Importance of Discipline [8:09]
Discipline is more important than motivation or willpower for achieving financial goals. Set a rule to invest within the second day of receiving your salary to avoid the money disappearing. Most people struggle with overspending after starting a strict saving plan, similar to how people break diets after a period of strict eating habits.
The Memory Fund [10:48]
Allocate 10% of your income to a "Memory Fund" for experiences and rewards. This fund should be used for activities like family movie nights, dinners, gifts, travel, and pursuing passions. These experiences create lasting memories and strengthen social networks, which are crucial for overall well-being. Donations to religious or charitable causes also fall under this category, providing a different kind of return.
Needs vs. Wants [16:43]
Allocate 50% of your income to needs, with housing costs not exceeding 25% of your total income. If your housing costs are too high, consider earning extra income through additional skills or ventures. Negotiate rent agreements to save money, even if it means asking for no increase. For car expenses, your car's value should not exceed six months of your income.
Emergency Fund and Wants [24:55]
Set aside 20% of your income for an emergency fund in a high-interest savings account. The remaining 10% can be used for wants, such as shoes or glasses. When spending on accessories, consider investing in gold items like chains or rings, which retain value and can be considered investments.
Summary and Additional Tips [27:14]
The video summarizes the money management strategy: 10% for investments, 10% for the memory fund, 50% for needs (25% for housing, 12.5% for car), 20% for the emergency fund, and 10% for wants. If possible, reduce spending on wants and invest the extra money. To invest in ETFs, open a Demat account through the link in the description and earn affiliate income by referring friends.
