Some advice to kids (and anyone else willing to listen)

My daughter, Shivangi, goes into her college as a freshman later this year. As most parents, I worry about the expenses. As a responsible Dad, I’d like her to be able to stay on the right track from all perspectives – character, health, finance and you name it. So, I thought it would be appropriate if I could jot down a few of my experiences and guidelines for her financial safety.

People make stupid decisions all the time. Some mess up in their retirement accounts, while some take out mortgages they think they can afford, without understanding the full implications. I would like to try and prevent my kids from having a knee jerk response to any issues that come. It is always about planning, planning and more planning for me.
Today’s blog is more about making money – big or small -- and hanging onto it. I learned that doing this comes from combined effects of several factors: education, talent, upbringing, luck, and avoiding scrupulous advisors. It also gives some generic advice based on experience in my life. Few things to remember:

1. We can’t control everything
2. We can only set goals based on what we value most
3. Make plans and take concrete steps to achieve the goals
4. Live within our means
5. Try to manage risk
6. Avoid the bad guys

Of course there are always unknowns that get thrown in the mix. Government policies can change, there could be an environment disaster, stupid and greedy CEOs in Wall Street may wreak havoc on the economy. It is like staying sober, but still getting hit by a crazy drunk driver on an empty freeway.
So, here is sharing some advice and experiences with my darling daughters, Shivangi and Niharika – and many other kids all over the world --- as they prepare to step into adulthood and get ready to face the world. Here are some of the habits (some inborn and some forced) and practices that have helped me in my past two decades.

• 1. Whatever you do, give it your best

It was 1980 and my friends and I were playing cricket on the terrace of Adit’s (a friend) house in Indore (my home town in India). The game was adapted to suit the small perimeter – so things like if the ball hits the side, the batsman scored 2 runs; if it went past the bowler and hit the wall, he got 4 runs; and if the fielder caught it directly or after one bounce, the batsman was out. So, one of my friends hit the ball and I threw myself on the cemented surface to catch the ball. In the process, I ended up getting a little bruised. Someone said that I didn’t need to do play so seriously – but I disagreed. I have always believed in giving my best to the thing on my hand. I have made it a habit to try one more time before I say I can’t. This helped me win difficult matches when I played cricket, and when I designed circuits or applications for my clients. If you really try your best, you won’t have the regrets that you didn’t succeed because of lack of efforts.

• Keep evolving – pick your own skills

After I graduated my high school from Daly College, Indore – I was at cross roads. My high school coaches wanted me to go to Bombay and play cricket there. They felt I had the potential to make it big. My dad wasn’t keen that I leave Indore – so make a long story short, I joined Holkar Science College as a Second year student with Botany, chemistry and Zoology as my subjects. It was a drastic change from Daly College. I did my bachelors (B.Sc) from Holkar Science College in 2 years. Next I did my masters in Organic Chemistry for 2 years - -and then realizing that it was not really what I wanted to do, I decided to switch to Engineering. I joined and completed my Bachelors in Electronics Engineering in 1989 from Pune University. That was a course I really enjoyed and made some very good friends.
My first job was with a small Instrumentation company. I had interviewed at 5 companies and was selected to join all of them. I decided to join Nivo Controls – A Toshniwal Brothers Company, thinking that this will help me learn all aspects of a company. And it did – I enjoyed my 3 years in that company. I managed the development of a Magnetic Flow meter and worked on various circuits. I realized that I had a flair for circuits and reverse engineering. And I had a great memory for circuits that I saw. I also realized that if I had to move up in my career, I had to do a Masters in Business Administration. So I appeared in the entrance exam and was selected to join the IMS in Indore. This was in 1991 and I completed my course in 1994.

In 1992, I decided to start my own business. I took up maintenance contracts of machines and controls for various industries. My first contract was at a friend’s company, which offered me Rs1500/- per month. I eventually added development of customized machines and controllers for them. The company grew from Rs.18000/- per annum in 1989 to about Rs.38, 00,000 in 1999. We were doing job work, manufacturing equipment and machines and a lot more. I consulted for several major lamp filament manufacturers in India, and the Crompton Greaves Phones and IFB microwaves had their electronics PCBs assembled in my shop floor! I was also exporting some controllers. I made things like temperature controllers, Stepper motor drives, power supplies, CFL ballasts, Power conditioners, and a lot more!
And then, in late 1998, I decided to switch lanes and get into software too. So I took courses in Java and other languages. I built websites for companies and also developed software for a community bank. In 1999, I decided to move to the US and joined a company in California. It was a big move, but I decided to go for it, in order to give my daughters a better shot at life. I had to start from scratch, at the bottom of the rug, and reprove myself – and I’d like to think that I have done a fairly good job at it; good enough to now direct and own a team of my own. In 2005, I did my Project Management Professional Certificate from UC Berkeley and learned that I love analyzing human behavior and team dynamics. But, I am still evolving and quite sure that I will soon join another class to learn something new.
Trust me – it will help you stay ahead of the curve. Learn a new language, a new hobby, perfect your current knowledge – whatever … keep doing something every two years or so. Work exceedingly hard, and enjoy harder. Be aware of your competition and realize that your competition is global and you are entirely dispensable. So invest your time and money in developing your distinct abilities and a network that goes with you from job to job.

• Plan A, plan B, plan C

Always plan your moves – have a plan A and a Plan B and sometimes a plan C. Remember that Murphy’s law often kicks in – when you think something is all set, things will start hitting the roof. It never hurts to be prepared for the worst and hope for the best. I am a firm believer in under-committing and delivering more.

• Define rich

I highly recommend that you list a few things that are of utmost importance to you. This list should include quantifiable and non-quantifiable items. I would include items like strong and true friendships, health, freedom, or a home or a Mercedes. Set your priorities and put a dollar figure on them. Build a plan that will give you a view of your tomorrow – immediate, 5-year view and a 10-year view. This will help you plan your next moves.

I have always felt that my priorities are getting my kids a good education, staying healthy and ensuring that my kids stay focused on their goals. I bought my first car in US in 3 months and my first house in 3 years. For me the car is just a means of going from point A to point B. Though I have admired expensive cars -and if I could afford to, I’d buy them - I don’t believe in blocking my money in these items. Remember that the car loses its money as soon as it leaves the Dealer’s shop. A house on the other hand, often appreciates. When you decide to buy a house, I’d suggest buying even a small house in an area with good schools and zero crime rates. Its price will almost always go up in the longer run.

• Mind your credit

Pay credit cards on time and in full every month. If you already carry a revolving balance, get rid of it as quickly as possible, even if it requires living at home (or sharing a dorm) for a period of time.
Don’t borrow more than what you can repay. Understand how the banks operate. They make money off you and you need to figure out how to use their money. They will love to entrap you into their credit schemes. You will get a momentary high, and then you will get so dependent that you will need a cold turkey treatment to get out of the debt trap. Learn to say No – keep minimum numbers of credit cards and you will find that you have a good credit score.
Once you understand the mechanics of the credit system and ratings, and are able to get a good credit rating, maintain it ------ and it will speed you in style to your destination. If you let your guard down, it will damage your ability to get a job, rent an apartment, or borrow money to buy a car or a home or for your kids’ education.

• Take good care of your health

Exercise regularly, eat a balanced diet, and don’t smoke. Avoid alcohol, if you can and definitely avoid it, if you are drinking more than once or twice a week. Get yourself into simple things like Yoga or just walking 30-45 minutes per day.
I took yoga as a subject in my school days and practiced all the asanas and poses that I had learned. Then life got busy and I rarely got a chance to do it. During my 2005 trip to India, I had a slightly high blood pressure so my family doctor suggested that I start some yoga exercises. I did and loved getting back into it. It is very relaxing and helps me immensely. I try to go for a daily walk of at least 45 -60 minutes. If you have a family history (like I do) of diabetes and blood pressure, exercise is best bet.

After you turn 30, get regular check ups. Build a relationship with your physician and nurses. Get to know them and help them get to know you.

• Manage your own money

Learn about options, bonds and stocks. There is a lot to read about these on the web. Understand simple mathematics of interest and Principal. Remember that banks compound interest on your savings. Understand how to minimize tax impacts on your earnings.
My simple rule of thumb is – save at least 10% of whatever you make for your rainy day. Always have at least 6 months of savings, based on your current expenses, as your buffer. Anything more than that can be used for whatever you want to splurge on.

Go for 401k investments in your company, even if the company does not contribute. Try and save 15 percent of your income, from the time you start working, in your 401K and you should be fine when you retire. Spread the allocations and update your allocations frequently based on how the market is doing. Diversify your risk by buying very low-cost index funds or exchange-traded funds. Look carefully at the charges and fees for investing. If you don’t have the 401K options, look towards Roth IRA, where you pay the taxes now, when you are in a lower income bracket, and take the money out tax-free later.

Have at least one account with a good Credit Union, for your day-to-day finances. They pay a higher interest and cheaper loans. Also, consider saving with online banks – like ING. And always check for FDIC insurance of your banks.

• Build a Network

My dad always said – the only real wealth one accumulates in the world is friendship. I have come to realize that is very true. The good thing about friends is that you choose them, unlike with relatives. In my humble opinion, a friend is one who can tell you that you are doing something wrong. And still be around when things are not working well for you. With good friends, you don’t have to pretend – you just be who you are. It doesn’t matter if you haven’t been in touch in years – you always pick up where you last left off. That has been the case with my friends and me.
Even at work, talk to your colleagues. Establish a relationship with your boss and your boss’s boss. Meet your boss for a one on one meting at least once a month to go over what you are doing right or wrong. Meet your Boss’s boss (with your boss’ knowledge) at least once or twice a year. Meet people outside of your work too and build a relationship with them. Meet people at your religious gatherings and get to know them. You never know when you might need a referral and knowing someone may come in handy.

• Be grateful

Finally, always be grateful for what ever you have received. Remember, it could be worst than what it is. Contribute to the community and be involved. Get involved with a cause that is worthwhile. The way to do it is by looking at the expense ratio. If the organization consumes more than 10% of the funds it collects for itself, I think it is wasting money. There are several small groups that are doing very good work but lack the means or don’t feel the need to advertise.

I normally avoid religion-based groups, as I personally don’t believe in converting people’s religion and faith. If someone wants to do social service, they should just focus on that and preserve the local culture.

I think I will stop here. More until next time!