The Richest Engineer

 

The Richest Engineer

-          - Abhishek Kumar

Even if all the wealth in this world is distributed equally amongst all the people in the world, soon the poor will again become poor and the wealthy people will regain the same wealth. That’s because of the financial mindset.

It is not necessary to be rich, especially at the cost of health and happiness. Money can’t buy happiness after a certain value. This book is using ‘to be rich’ phrase in terms of better or improved financial status. No attempts to become Mukesh Ambani.

Three types of learnings we get in our life

-          One that we get from the formal education system.

-          We learn from the mistakes of others

-          Through experiences and opportunities that life throws at us.

All that needs to be done is to develop some rules from the experiences and apply them and again observe and apply.

 If money is the problem, money can’t be the solution. The solution would be ‘Financial Literacy’. Intelligence solves problems and produces money. Money without financial intelligence is money soon gone. Earning money is an art, and retaining and increasing the earned money is a tougher art.

 

Wants:

First level of ‘Want’:

A two – year – old kid who is in need of milk to satisfy the hunger simply sits there and cry. Parents come and feed him/her. Most of the poor and lower middle class people are like this two year old kid. Most of them are dependent on Luck, government help, Gods blessings.

 

Second level of ‘Want’:  A teen ager who wants milk to satisfy her hunger will go to the refrigerator and get it. If not there, she will go to the nearby shop and buy it using the money given by her parents.

 

Third level of ‘Want’: This is the Warriors’ way. It is similar to the adult who needs milk. With no milk in refrigerator she does not ask for the parents, rather goes out, works hard, earns money and then buy’s milk. She is free.

 

To be financially baptized:

Imagine a jar of one liter capacity. You can’t fill more than one liter water in it. Our mind is like the jar and the water is ‘money’. To improve we don’t just need extra water but also a bigger capacity Jar.

So what’s the way to get a big jar? It is by improving the money mind, by having Rich money mind. For us to have rich money mindset we need to get ‘Financially baptized”

 

How to have this mindset?  - By understanding the differences. 

Difference #1 :

Rich people believe “ I create my own destiny”, whereas poor people believe, “ I can’t change much”. 

Difference # 2:

Rich people focus on opportunities. Poor people focus on obstacles. 

Difference # 3:

Rich people are students throughout their life. Poor people’s learnings stops after formal education. 

By having Rich mindset does not mean “Big Hat, No cattle”, which means spending heavily to show off but have very little in actual.

 

Pay yourself first:

 Parkinson Law tells that work expands so as to fill the time available for its completion. It means if you give yourself a week’s time to finish a task that can be wrapped in couple of hours, then it actually ends up consuming unnecessary two weeks with additions in work. The same principle applies when it comes to money; Expenses always rise to match the income.

With the increase in our income we end up buying bigger car, better furniture, and frequent shopping’s.

·         Keep aside at least one tenth of the Gross income as a safe investment tool and let it grow with time.

·         For every extra income, i.e. the non-routine income save at least 50% for long term.

·         Always count your expenses in absolute value and savings in % of income.

 

Building a Great offence:

 ·   Find a work that you love.

·         You will spend more time doing it and you will turn better at doing that. Becoming better than competitors will attract higher success.

·         Adapt : Become a continuous learner

·         Learn to play Big: With something you love, if you play big chances of success are much higher.

 

Create a strong defense:

 Say no to the nudge that comes for the extra expense. Eg. With a Jeans purchased, we often think of a T-shirt. Not that the life is to be lived miserly, but to be cautious of not getting carried away.

 

A rupee saved is not a rupee earned.

 How?  - Because of taxes.

Assume you earn `150. For simplicity sake assume `50 going in taxes and other deductions and you are left with `100 in your hand. Now when you’ve spent the entire `100 you’ve actually spent `150. That’s why a rupee saved is one and a half times a rupee earned. Always remember, to spend `100 you need to earn `150. It’s much easier to save `100 than to put effort to earn extra `150. There is no deduction while saving.

 

Don’t fall a prey to Diderot effect:

 Dennis Diderot a French philosopher of the 18th century wrote an essay entitled “Regrets on partying with my old dressing Gown”. It talks about possession of new thing which does not confirm with your existing possessions, forces you in a series of new purchases to upgrade your old stuff, resulting into over consumption and ultimately into debt trap.

The new expensive gown was breath-taking. He needed some extra purchases to accommodate that gown. He purchased better handkerchief costlier pens to match the gown. Although small purchases, he went adding things to it and kept discarding shabby things that spoiled the looks of the gown just to become slave of the gown. 

We renovate our house or buy a new car and often follow it up with the Diderot effect. That sucks in the long run.

 

The Good, the Bad and the Ugly:

 Good Assets: Stocks/MF’s, Property with rentals, Land, Gold

Bad Assets: Own home for living, F.D’s, Bonds

Ugly Assets: Jewelry, Car, Club membership.

 Jewelry is a bad asset because its price is more than its value. Eg. When we pay `120 for a jewelry its actual value is `100. When you sell the same jewelry after an hour it will give you 100 and not 120. Gold is good to buy but not in the form of jewelry.

 

Disclaimer:

The objective of writing the review is to preserve the good points mentioned by the author. In the process of doing so, I have used my opinion, experience and discretion to land on a point.

Vinay Wagh

Bulls Eye, Nasik.

 

 

 

 


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