I have one uncle. He invests like everyone else. However, he has a different approach to investing than most of us.
Can you guess what?
He considers his monthly investing as an expenditure. Let me explain how.
We all have monthly household budgets. We plan all our expenses in advance. We plan our purchases in advance. We plan our holidays in advance. We consider everything in the monthly household budget.
Do you know where we fail? We account for expenses only. Expenses which are sunk costs once incurred. We do not consider our investments.
My uncle has a monthly expenditure budget which includes his investments too. Once invested, he forgets that he has the money available at his perusal. Everything goes to Index funds and multi-cap funds.
I think its a great idea to take a different perspective to investing. This way, you focus on your earnings from your core business rather than focusing on earning from your investments. Just let your investments grow with you.
I consider the following in my monthly investing budget –
- Consider the earnings of the family in one pot.
- All investments must be equal to or more than monthly expenses of the family. (This could vary if you live in a rented apartment or have some medical expenses to take care of).
- Equal proportion of savings in equity and debt instruments.
- 90% of equity assets to be invested in index funds and multi-cap funds.
I am not advising anything here. I am showing another approach to saving money.
Please let me know if you like the approach in the comments. What tweaks would you make in your personal household budget?