1. Make your child understand the difference between needs and luxuries
Children need to understand that they can still go on without cool gadgets, designer accessories but not without essentials in life like food, home, clothing and education. Hence they have to prioritize accordingly. Sit with your child and help him prioritize according to needs and luxury. Once this concept is clear your child will transform into a better decision maker.

2. Set a goal for your child and help him achieve this through a budget
Goal setting is easy enough in today’s materialistic word. Sports equipment, a gadget or an item of clothing, motivate your child by setting a goal and encourage him to earn this through household and other chores. Make him draw up a budget from what he earns every week and show him how to save from this. Definitely reward him with something extra (besides his goal) the first couple of times, so that he is geared up and excited about the next goal and starts planning – the secret mantra to financial happiness. This will also help your child become competitive in life and be focused on goals.

3. Understand your child’s money personality
He could be a spender by nature. If so, you can guide him early on to curb this by encouraging him to not keep too much cash and ensuring that it is not easily accessible. If he keeps borrowing money from his friends then this could be a warning signal. Later on he could get into a debt trap. You can counsel him and also understand the source of his needs.

4. Involve your child in day to day financial activities
Entrust him with the responsibilities of paying bills i.e. going to the collection centers and paying the bills through cash or dropping a cheque. If he is not old enough than at least take him along when you are doing this exercise. It is a good way for him to learn that life is not just an ATM machine, you got to pay as well!

5. Open a bank account for your child and make him operate it
Buy your kid a piggy bank when he/she is very small and encourage saving for achieving his little goals. Open a bank account when he grows up. This the best way for him to understand how money grows, what interest is and how financial institution like banks work. You should opt for a joint account as it will give you the ability to oversee what your kid is doing. Step in whenever you think that he/she is going off track and try to rectify the situation by helping him with basic financial concepts mentioned above.

Financial literacy is one of the best gifts you can give your kids. It will stay with them forever.

Source: www.investmentyogi.com

Usha Asks:

Hello Dr. Rosie,It feels nice to read these articles as I feel I’m not alone in pursuing dreams that are different from what I earlier set out for. Here’s my question: How can handling money be shifted from a distressing situation to a de-stressing one?

Regards,

Usha

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From Dr. Rosie:

Dear Usha,

Thanks for your presence and your questions. You bring so much to this column with your sharing of what’s unfolding for you.

The easiest way to shift handling money from distressing to de-stressing is to shift how you think about money and then create new actions in alignment with these new thoughts. Here are some examples of what many of us think in regard to money:Money is hard to come by; You have to work really hard for money; Money is the root of all evil; I can’t have money if I’m spiritual; People who have money are unkind – I don’t want to be like them; If I make more money than my dad it will make him look bad; As a woman, having money will make me independent and men don’t like independent women, so I don’t want to make money. These are just a small sample of what goes through our minds when we think about money. All of these statements are distressing, and none of them are true – we just made them up!

Now, with these thoughts come particular actions that support these thoughts. Actions are not just a doing, but can also be a thinking or a feeling or a body response. If I believe that money is hard to come by, I’m going to feel defeated, stressed and worry that I’ll never be able to work hard enough to make enough. If I judge all rich people to be selfish and unkind and I don’t want to be like them, I’m going to do things to sabotage having money. So, for each of the thoughts, beliefs and judgments we have about money we have a set of actions, feelings and thoughts that we use to support them. Change what you think and your actions will change effortlessly. That is De-stessing!

One more thing: If you are used to looking for and finding how your beliefs are true in the world, you have to change what you are looking for. A lot of people are making a lot of money. Some people make money effortlessly. Rich people are often philanthropists and aren’t selfish at all, and there are millions of women who are self-sufficient, independent and enjoy a wonderful relationship with their partners. Notice where you put your attention and focus on what you want to see as true. It’s a wonderful experience to make true what you believe!

All of this is not new! It’s very easy to enter into this as a practice and it can be very challenging to continue because of our thinking that it should all change instantly! You see? My thinking that it should change instantly is going to set up some expectations and I’m going to start anticipating the money rolling in. And, if it doesn’t, then what am I going to think? I’ll probably begin thinking: I’m not good enough; I’m not doing it right; There’s something wrong with me, etc. With this thinking, then, I start feeling frustrated, depressed, sad, hopeless, anxious, angry, etc. Then, I’m right back where I started.

About three month ago I started a 30 Days to Prosperity program. In the very first day I got the biggest lesson of the whole process. As I was setting up my little workbook I started getting excited about having such incredible abundance raining down upon me. It was fun to think about it and to feel the relief of having all the money I could possible want and all the freedom money could buy me. Then, this little voice came in and said “What if that money doesn’t come raining down? What if not one darn thing changes; then what? This thought became distressing and I found myself wanting to stop the program right there and then. But, I realized that it was really important for me to answer that question: What if the money doesn’t come? What do I have it mean about me if it doesn’t happen? Sitting with my fear and sadness the answer came. The belief underlying so much of my way of being in this world is this: If the money doesn’t come, that means God really doesn’t love me. And, if that’s really true, what am I going to do with that?

Here I am a spiritual teacher and coach, someone who has been on a spiritual path for at least 30 years. I never knew that this little thought was way down inside of me. It has kept me in a constant state of fear and from allowing myself an abundance of prosperity. If I never try to making a lot of money I never have to find out what’s true. So, as good as I am at the work I do, and as much money as I do make, I came to find out that I’m still holding back so I don’t have to find out if God really loves me. How distressing is that?

As grown up as I am, I know that I am loved by God and the Universe. That’s what’s true for me! So, I can now become mindful and start noticing all the ways I hold back or sabotage myself from having financial abundance rain down on me, and, I can let go of my worry about whether I’m loved by God – this is a something I made up when I was just a kid. It doesn’t make sense to keep following this belief as a grown-up.

So, Usha, begin by listing all the things you believe about money, all the thoughts, expectations, assumptions and judgments you have. All of them!!! Then write down all of the actions to take based on your thoughts. Notice which ones work in your favor and are actually de-stressing and which ones are distressing. Decide for yourself which ones you will practice more often and which ones you will let go of – just as a practice. Just notice what shows up – just like I did. Be with yourself – with your feeling and thoughts in a compassionate way. Notice when you want to judge yourself or others, than ask if this supports being de-stressed or distressed? You have the power to choose!

I have written a whole chapter about this in Self-Empowerment 101, with an exercise that will take you through this process, thoroughly. With or without the book, though you have to be willing to practice creating positive thoughts about money and then create actions and strategies to support them.

Have fun!

Book: Self-Empowerment-101

Email: rosie@dr-rosie.com

Websites: www.dr-rosie.com www.theparadigmshifts.com

Blogs: http://www.blog.invincibelle.com/category/ask-dr-rosie

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1. Lack of goals

“Most people don’t plan to fail; they just fail to plan”. A good percentage of people are still not aware of what is financial planning and how to go about it. In simple words, financial planning is taking a disciplined approach to achieving your pre-determined financial goals. A good financial plan is based on strong goals.

Well-articulated goals with a detailed break-up into long term, midterm and short term, specific steps on how to achieve them and checking the progress periodically are basic ingredients of financial planning. As you can see it all starts with a GOAL.

2. Lack of life cover

Living without life insurance is just like “flying without a net”. A financial plan is incomplete without adequate life cover. One major goal of a financial plan is to maintain the life style of your family whether you are with them or not.

A common mistake we make is buying life insurance policies such as endowment plans or money back to save tax, also hoping to reap returns. Remember, returns from such policies are much less compared to traditional investment products such as stocks, mutual funds, gold or real estate. So why not separate investment and insurance completely? Most salesmen will not give you this advice because the commission in plain vanilla term policies is the lowest.

Protect yourself with an inexpensive term policy providing sufficient life cover. The thumb rule for your life cover is your annual income multiplied by 10. You can add family floater mediclaim or health insurance policies for self and family members. It’s a way of making sure that your family will continue to enjoy the current life standard.

3. Lack of investments
Start saving as early as possible. Generally, a person should start saving and investing money from the day of getting first salary. By starting your financial plan at the earliest, you are allowing your money to grow by the sheer power of compounding.

Don’t be over-enthusiastic about it either. Develop a regular and disciplined investment approach. Select a few good equity funds and do a SIP (Systematic Investment Plan). Increase the investment amount as your income increases. Don’t wait for a lump sum amount to be accumulated to invest and don’t try to time the market.

4. Too much of loans and debt
“Don’t stretch yourself too much with a mortgage. Buy within your means. It’s not worth the sleepless nights”. It’s always advisable to resist the temptation and control unnecessary expenses. It includes loans, mortgages and credit card expenditure.

House loan and car loan may be necessary but do some analysis about how much you really need and what can you comfortably be able to pay back. Keep a tight leash on personal loans and credit card debt. They can be a drain on your finances as the interest rates are much higher. You must have a plan to reduce the loan and pay off the debt gradually.

5. Only debt/fixed income instruments
Putting your entire investment amount into the debt instrument is like settling for a bonsai instead of a huge teak wood tree which you could have. It’s good to be safe but too much of safety will not make your money grow. There are many among us who keep their money in Term Deposits, Pension Plans, insurance policies, National saving certificates etc. It’s good to have them but they should not have all your money. You must have a healthy mix of equity and debt in your portfolio. Equity gives you growth and debt gives safety with peace of mind.

6. Over-indulgence in stocks
By watching too much of business news channel and reading business journals we start believing that we know all about stocks and the way companies work. Listening to equity analysts gives us more encouragement. We think we can beat the market. But the truth is most people fail to make money at the stock market and end up wasting their precious time and wealth. Sit with a certified Financial Planner and chalk out a long term plan for yourself. Remember “slow and steady wins the race”.

7. Owning too many products
“Wide diversification is only required when investors do not understand what they are doing”. The unavoidable risk from over diversification clearly articulated in this powerful quote by Warren Buffett.

The right portfolio should be built by optimum allocation into different asset classes. A good financial planner should be able to tell you the right proportion as per your profile. Within a particular asset class it’s better to do thorough research and put your money in a few select products. For example if you are investing in Mutual funds then buying too many of them is not advisable. Similarly if you are an investor in stock market it’s advisable to pick the right stocks and stick with them.

We keep adding more products to the portfolio because we fall for what the salesmen and advertisements tell us. Do your own research or consult a certified financial planner for such decisions. It’s important to own the right ones and not too many.

Source: www.investmentyogi.com

Money is just one measurement of wealth. High net worth is only one currency of success. In my mind, there are multiple forms of wealth that you need to look at to decide whether you are truly successful. And playing at world-class.

Here are a few of them:

1. Full Creative Expression.

If you go to work every day and express your absolute best, you have equity that makes you pretty rich. Celebrate that. And take it into account when evaluating the true strength of your success.

2. High-Trust Relationships.

Surrounded by an impressive Circle of Genius? Get to associate with people working at wow? Have friends who would go to the wall for you-and champion the highest version of your greatest vision. If so, than you’re a very wealthy person. I’d encourage you to recognize – and appreciate – that.

3. Personal Leadership.

To me, personal leadership has a lot to do with being congruent. And ensuring that your daily deeds are consistent with your deepest values. Personal leadership also has a lot to do with standing for excellence in a world filled with mediocrity. Being passionate, positive and polite. And standing for fearlessness when others are scared. If you rate high in this category, you have some riches to take account of.

4. Impact and Influence.

Leadership isn’t about your title. It’s about your impact. And whether you run a company or serve hamburgers, the choice you’re faced with every day is to influence other by your example of excellence or play victim to the conditions around you. If your influence is high and you help people become better by all that you model, celebrate that win. And count yourself rich.

Please visit : www.robinsharma.com

How is managing money in your household similar to managing your finances in a company? Are there personal finance lessons you can learn and strategies you can apply from the business world?

Investmentyogi tells you how to think like a CFO (Chief Financial Officer) and manage your money professionally.

A company exists to earn revenues by selling product or services, managing expenses and earning profits. The goal of any company is to have more revenue, and lesser expenses thereby maximizing the profits. Most companies of the world have this objective at the very core. Every other strategy revolves around this. A CFO’s role is the following:

• Responsible for company’s financial situation
• Make investments for the company taking into consideration risk and liquidity
• Borrow money at the best possible rate
• Maintain a healthy debt/equity ratio
• Monitoring and controlling cost, expenses
• Forecasting and preparing the company for financial contingencies

What if you look at yourself as a company and try to assign a CFO’s role to yourself? Do you see the similarities here? You will be doing pretty much the same things with your personal finances.

Revenue:

A company earns revenue by doing its business which can be selling a product or some kind of service. You also earn revenue by offering your services to someone else. You are being paid for that every month. This is your top line. Just like a business your aim is also to increase your revenue either by switching jobs or getting a promotion.

Other Income

Companies sometimes make money from secondary sources for example their investments into Government bonds, other companies etc. Same is true with an individual. You also have other sources of income like giving out your home on rent, investments into Mutual Funds, Stocks or sale of property.

Fixed Cost

A business has certain fixed cost like machinery, office rental, debt repayment etc. You also have monthly fixed costs like home rent, EMIs, school fees for your children. You always need money to make these payments.

Variable Cost

Businesses have variable costs which vary from one month to another. For example salaries paid, raw material used, electricity consumption etc. Same is true for you. You have monthly variable costs like groceries, transportation, entertainment, dining out. The figure will vary from one month to another.

Taxes

You have to pay taxes on your revenue (Income Tax) just as companies pay taxes on their profits. You try hard to minimize your tax liability and so does a CFO.

Interest

If a company has taken loan from a bank of other financial institution for factory, machinery or any other operations then a part of its revenue goes into paying back this debt just as you have to pay EMIs for taking home loan, car loan.

Your Capital structure (Debt/equity ratio)

Every company needs money for its operations and for that it takes equity capital from investors (either private investors or stock market) and takes debt (in the form of loans from banks and other institutions). The CFO decides how to borrow and how much. The debt to equity ratio is crucial as it impacts the future of the business. Moreover the right structure is different for different kind of businesses.

If you look at your personal money as portfolio, a lot of similarities can be seen. You have a strike a balance between how you invest in debt instruments (like bonds, pension fund etc) and equity like stocks and Mutual Funds. It will depend upon your income, savings, age, risk profile and future goals. If you think like a CFO it will be so much easier to accomplish this task. You will have to ascertain the right capital structure for yourself. The difference is that companies borrow money using a combination of debt and equity whereas individuals need to invest.

Your Profit and Loss Statement

Prepare your own P&L statement just as the CFO of an organization does. Here is how:

Total Income = Revenue + Income from other sources

Total Expenditure = Fixed cost + Variable cost + Taxes + Interest

Savings (Profit) = Total Income – Total Expenditure

See if you are a profit making company or loss making. Calculate your profit margin like this:

(Savings/Total Income)*100

Ask yourself this question: Are my savings enough to achieve my financial goals? Am I on track? If the answer is yes then good for you otherwise you will have to improve profit margin or savings which can be done either by increasing the Net income or decreasing the total expenditure. Secondly you will have to think of making investments which will have a balance of risk vs return, depending on your particular situation

A financial plan helps you look at your finances from a strategic perspective and transforms you into your own CFO. Take control of your finances today!

Source: www.investmentyogi.com