You don’t have to get poorer!

‘The rich get richer and the poor get poorer’ – this is a catchphrase that people often use to criticize uneven economic development. It may be a fact though. I am not going to write a scholarly discussion on the economic theory here, but just to discuss from a common man perspective how does it happen!

How do rich get richer? If you have one million and deposit it in a bank fixed deposit at a rate of 5% per annum, it becomes 1.28 million in five years. When you have one million you will be able to invest in shares which will give you better return. When you have one million you will be able to invest in real estate or rental property which will give you regular rental income besides capital appreciation. You will be able to start a business or invest in a business which may again multiply your wealth. This is how rich becomes richer! It is only natural and there is no meaning in complaining about it.

So it is obvious that the rich get richer. Does it mean that you have to get poorer? How does it happen? You spend on what you can’t afford. When you try to imitate others, you fail to recognize that others do it because they can afford it after saving enough to build their wealth. You take loan to spend and pledge your future income for present luxuries, while others save from their present income to meet their future expenses. You pay interest while others earn interest. You misunderstood that living the life means spending on luxuries! You go behind ‘get rich quick’ schemes and lose everything. Yes, it is you who make you poorer.

So how to avoid becoming poorer? First thing that you need to do is live an affordable life. Keep yourself away from debt. Never pledge your future income by taking loan to meet present expenses. Keep a portion of income as savings – treat it as a necessary and unavoidable expense. Understand that there is no quick way or short cut to make money – It needs years of hard work. Realise your hidden potential, polish the skills that you already have and find some way to generate additional income.

Warren Buffet, the self-made billionaire

Rich made their first million by sweating, by doing their hard work, going that extra mile, deferring their gratification. Read about any rich people, there is a hard work behind them – at least by their parents or grandparents. Warrant Buffet, one of the top five world billionaires, has gone door to door selling chewing gum, soft drinks or magazines. He has worked in grocery shop. Every rich has a beginning from the low.

I know there are people who get rich by unscrupulous methods. I know there are poor people who are in trouble too deep to come out of it themselves. Forget about the former, they can’t enjoy their life too long peacefully. Help the later, it will help you to live peacefully rest of your life.

Published earlier at www.dropsdavings.com

What will you do first when you want to build a house?

Constructing or buying a house is one of the most important decisions in one's life. It is everybody's dream to have a house of their own. However it is a most dead investment one can make as it does not provide any direct return while it is the largest capital expenditure in one's life. You may use up all your savings and you may even commit your future income by way of a loan! An house can not provide you income for buying food or send your children to school. Many end up in debt traps and lose their peace of mind at the end.

That is why it is very important to have a good planning from the beginning. It will be difficult to change any part or design at a later stage and any change may be too expensive and can delay the completion. Here comes value management study to optimise our requirement and resources for the maximum benefit. Value management is not about building cheap, but finding value for the money spent.

There are four stages or steps for a value management study for any construction project - Concept, Space, Element and Component. You don't need a professional or you don't have to be an experienced person to do a value management study before you build a home - at least at Concept and Space stage. However you can get professional advice from your architect or civil engineer for a value engineering study at Element and Component stage. In western countries, value engineering studies are very common for civil engineering projects and it is gaining momentum in the Middle East too. There are qualified value management and value engineering professionals.

At concept stage, you question yourself your need for an house in the first place! Why you want, how you want, where you want and when you want? These are essential questions you better ask yourself. It is basically sitting quietly and jotting down your concept of a dream home. You will also sit with your spouse, children and any other family members who are expected to stay in the house and discuss with them. There is no meaning in constructing a home at your native place when you reside somewhere else and have no plan to settle back in foreseeable future! If you are not going to settle down in your new home in foreseeable future, it will become old and out-fashioned when you finally start living there. This is what happens when expatriates construct their home at their native place. So the question 'when you want' becomes relevant. Do you want an house now or can you delay it. Do you want to use up your savings or do you want to commit your future income by taking a loan? Do you have enough savings and investment that can be used for it. Do you want to get your house constructed yourself or do you want to buy one.

At Space level, you brainstorm for ideas for the spaces you required in your house. How many bedrooms do you need? Do you want a store room along side the kitchen? Or a spacious kitchen and a 'work area'? Do you want all the bedroom with attached bathroom or one or two common bathroom? Do you want a separate dining room or just a hall combining living and dining? Do you want a large veranda or a small one would be okay for you. There is no rule here, all depends on your requirements, your interests, your concept, your values! Yes it varies from person to person. You will have to see who are going to stay in the proposed house. If you have aged parents to stay with you, you need minimum two bedrooms ground floor. Requirements may be different if you are in early middle-age with young children and if you are late middle-age with your children working or settled out of town. It may be highly likely that the children will settle down there and you may not require a bigger house. Staying in a large house as an aged couple would be like staying in a ghost house!

Then comes Elements and Components. You may require advice from a professional or experienced persons at this level. Your architect, civil engineer or contractor can help you to take a better decision. Here is where you decide about the doors and windows, external and internal walls, floors, other elements and components of the building. You would weigh cost and benefits of various options. Eg. Floor - there are many materials used for flooring like stone flooring, wood flooring or tile flooring. In each of these categories there are further options - for eg. in stone flooring, you have options such as marble, granite and so on. Your selection will depends on your budget, your requirements, your interests and your values.