Personal Finance Masterclass : Learn How to Live a Financially Healthy Life | Tariq Hussain | Skillshare

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Personal Finance Masterclass : Learn How to Live a Financially Healthy Life

teacher avatar Tariq Hussain, Learn | Build | Teach

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

11 Lessons (1h 20m)
    • 1. Introduction

      3:04
    • 2. Tracking Income and Expenses

      10:14
    • 3. Creating a Personal Budget

      4:43
    • 4. Everything About Savings

      7:09
    • 5. Net Worth

      7:11
    • 6. Emergency Funds

      6:09
    • 7. Insurance

      8:38
    • 8. Credit Scores

      5:21
    • 9. Financial Pitfalls

      9:00
    • 10. Magic of Compounding

      8:11
    • 11. All About Investing

      9:51
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About This Class

This class is designed to teach you everything related to personal finance. Personal Finance is the most important of life skills and something overlooked by most schools and colleges around the world.

To live a financially healthy life, you need to know and learn these concepts. This class is aimed at absolute beginners and will help you learn everything from the most basic concepts to advanced ones.

I followed these concepts right out of college and was able to become financially independent at the age of 28. My mission now is to teach these concepts to everyone else and this class is a step in that direction.

Meet Your Teacher

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Tariq Hussain

Learn | Build | Teach

Teacher

Hello, I'm Tariq. I work as a Data Science and Analytics Manager with a large payments company. 
Here to share my skills and help others learn.

See full profile

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Transcripts

1. Introduction: In June of 2014, news channels in the United States for reporting and revenues, a janitor had died that MAN. But what was remarkable that upon his death, he had left $8 million to various charities, including ours and a library. His name was Ronald James, read it on and never graduated beyond high school and had only two jobs ever in his life. Gas station attendant for 25 years and a part-time janitor job. For under 17 years. Ronald didn't have any fancy degrees, wasn't Ivy League educated, and didn't inherit as well upon his death at the age of 92, non-header monster well, what, $8 million all on a janitor salary. Ronald is on one end of the spectrum. On the other hand, we have a case of Mike Tyson. Mike Tyson is one of the most famous professional boxers of his generation and hold several world records throughout his career. He amassed a wealth of $320 million. But sadly, you almost lost all of it and went through bankruptcy. So what happened here? Why is Ronald able to achieve such a weld on janitors salary while Mike earn millions worldwide stardom and lost almost all of us. Well, the answer to both these cases lies and learning this key skill. The skill is known as personal finance. Ronald knew the basics of personal finance while Mike did, personal finance isn't taught to us either in school or college. Get it is the most important life skill to learn. Good personal finance can help you build a healthy financial life free from financial anxiety and let you achieve all your dreams. This course is aimed to help you learn those basic skills. I have followed these principles personally in my life and was able to attain financial independence before my 28th birthday. I am on a mission to teach these skills to everyone. This course is a step in that direction. Here's a quick overview of what we will learn through this entire course. I'll first introduce you to the ways in which you can track your income and expenses. Then we will learn the ways in which you can create a personal budget. Explore everything there is to learn about savings, learn what is net worth and how to calculate it. Learn about emergency funds, learn everything about insurance, find out what credit scores are and why they're important. Learn about common financial pitfalls and how to avoid them. Get to know the details of this magical thing called compounding. And finally, end this class by doing a deep dive into investing. Lot of thought has been put into design and structure of this class to ensure that everyone from a fifth grader college graduate and learn these concerns. The class covers everything from basic. So even if you don't have any prior knowledge of finance, you can still take it. At the end of each chapter, you will find class exercises that will help you learn the topic we discuss. So go ahead, start this course and begin your journey towards living a financially healthy life. I'll see you on the other side. 2. Tracking Income and Expenses: Thank you for choosing this course. Let's get started with your first chapter. In this chapter, we learned about the basic building blocks of personal finance, which is tracking of income and expenses. Through this class, we will learn about the importance of tracking income and expense. I'll show you the methods to track your income and expenses. And finally, I'll teach you ways to automate this entire process so there is no friction with this. Let's get started. What if I ask you, do you know how much you spend this entire you take your time? Do you have an estimate number in my no. Okay. How about last month? Still too difficult. How about last week? No. Maybe yesterday. If you know the answer to these questions, then congrats, you're already on a good start. If you do not know, then don't be disheartened. According to one survey, 65 percent of all people do not know how much they spend when they take a moment and track how much they spent last month, 31 percent of them Admit and wish that they had spent less. And this ability to inhabit, to track expenses is reducing by each generation. Even though the technology available for us to track our expenses is as easy as downloading an app. Not tracking expenses is the number one reason why people do not have a good financial help and find money stressful. Knowing how much we earn and how much we spend is of utmost importance. Specially if we want to improve something. There's a quote by a famous physicist to measure is to know if you cannot measure it, you cannot improve it. And he's right. Unless you know how much of your income you're spending and for what purpose. How will you ever know where to make an effort to improve tracking income and expenses has a wide variety of benefits. First, they let you be aware of how much you're spending and what percentage of your income are you spending? Maybe you're spending too little of your income on groceries and essentials, and too much of your income on entertainment. Or maybe it's the other way around. We're spending too little of your income on entertainment. The point is, unless you track it, you will never know. Second, tracking expenses help you build intelligence over time. You can learn about your spending habits. You would have heard by now that data is the most important commodity in the world in 21st century. Well, your spending habits are your data that can help you derive information and insight into yourself. By tracking your expenses over time, you will be able to derive insight into how you spend. Maybe the amount you spend on Essentials have increased over the last two years. Or maybe your income has increased faster than your expenses. These kinds of insights are only possible when you are tracking the data. The third advantage is savings. Savings are the fuel for your investments. Savings I'll only possible when you can track your income and expense. If you do not track your expenses, you will never be aware of the areas where you can say and boost your savings rate. Ideally, your expenses should not increase in proportion to your income. Tracking both your expenses as well as their income will help you achieve a higher savings rate. Now that you know how important tracking both income and expense can be, Let's now discuss ways in which you can track them. We will first start with tracking income. There are two types of income, fixed income and variable income. Let's understand treats of both of them. Fixed income is something where you have a lot of certainty. You're a 100 percent sure of being able to earn this income. This can be in the form of a monthly paycheck if you're a working professional or it can be in the form of a minimum income from a business. If you're a small business owner. The idea is, any income that is very certain should fall into this category. Variable income, on the other hand, is where there is no certainty. This income changes in varies every month and we have no control over it. Any income from a part-time job or a side hustle should fall under this category. Let's talk about expenses now. Similar to income. Expenses can also be divided into two types, fixed and variable. Fixed expenses. Here refer to those expenses where we do not have any control over. These are mandatory nature. The necessities of life, if you will. Example of fixed expense. Includes rent, basically realities, groceries, and all the other essentials. This is the minimum expense required to sustain your day-to-day life. Variable expense, on the other hand, are those where we have some discretion of. These are up to us to decide how much we should be spending on these items. They are not required to sustain daily life and can include categories like entertainment, travel, and shopping. After you have listed down all your expenses, you should be adding three detail points. So then these are category which refers to the kind of expense it was, whether it was entertainment, shopping, grocery, etc. Frequency. Determine how often you incur that expense. Is it weakly buying up groceries or daily bus fare? Or maybe it is the monthly utilities bill or an early insurance premium. Adding frequency will help you determine how often in expense occurs. Finally, calculate the percentage of your total income you spend for a specific category. This will help you determine if you're spending too much or too little of your income on a particular expense. Remember, data is the most important commodity. Tracking expense and adding details help you analyze your spending habits. The most important data to. By analyzing this data, I can guarantee that you will discover details about yourself that you're not aware of before. This is one of the most rewarding exercise you can do for yourself spatially in your financial independence journey. You have learned how to track income and expense. Let's talk about automating them. Why do we need to automate? Simple answer is to remove friction. Racking daily spending, a very tedious task. And when you're trying to just get through your day, remembering to track each expense can be tough. This is where we take technologies help. There are three simple ways in which you can automate tracking of your expenses. First is to replace your cash spending with a car wherever possible. Caches hard to track and carried. It's even harder to remember an expense, meaning dashed much later. The easiest way to track every expense is to use a car. Your credit or debit card bill. At the end of the month, we'll show you exactly where and how you spend. You can simplify this even further by installing an expense tracking app. These are available free on the App Store and do the tough work of reading your bills and expense information and categorizing it. There or even simple ones available where you can just login expense information as and when you make them. Finally, limit the use of cash where possible. The more you spend on a card and the more you track cash should become non-existent from your life. I have personally not use cash since the last three years, and I do not plan to ever returning back to cash anytime soon. The idea of all these three habits is to reduce friction from the process. The less friction, the more chance of succeeding. With this, you have come to an end of this chapter. Let's quickly recap what we have learned so far. Tracking income and expense is very important, has the first step to your financial independence journey. Income and expenses are of two types, fixed and variable. Both of these types have their own unique characteristics. Categorizing and tagging your expenses help you build analytics, which can further help you understand your own spending habits. Finally, automation of tracking removes friction from the process and helps increase the chances of your success. Before we leave, here's a class exercise for you. There's a template under the resources section, download it and follow it to track down all your expenses. I want you to then categorize your expenses and analyze them. Find out interesting insights about your own spending habits. And maybe post them in the comments to share with the rest of the class. In the next chapter, we'll learn about how to build a personal budget for yourself. I'll see you in the next chapter. 3. Creating a Personal Budget: Welcome to your next chapter. In this chapter, we'll learn how to create a person budget for yourself. This class will teach you about the importance of creating a budget. Ways in which you can create a budget for yourself. And we'll also try to clear some misconceptions around budgeting. Let's get started coming to the first topic. Why is a budget important? In the previous chapter, we learned about the importance of tracking expenses, but that's only half the job. Second half of the job is to keep those expenses under control. This is where budgeting comes in. But you think helps build discipline around expensive and keep them under control. A 10-person allocation of income on entertainment means you now have a limited mind whenever you spend on entertainment. Without a budget, this limit wouldn't exist. And as such, you will end up spending a lot more. Budgeting also helps in generating savings. Because you're spending within your limit and controlling yourself. You can ensure that you are able to save a good portion of your monthly income. Finally, budgeting helps to build consistency in spending. By a budgeting, you can ensure that you're spending equal amount of money every month. And there aren't huge variations in your spending habits. Budgeting is highly essential to help build a discipline towards your spending habits. Now that you are aware about the importance of budgeting, let's learn a few ways in which we can create a budget. The first step in creating a budget is to begin tracking your expenses. We have learned about the ways in which you can track your expenses in the previous chapter. The second is to analyze your expenses. Assigning and grouping expenses into categories will help you analyze them in advocate and a volume understanding about your spending habits in detail. Over time, you will learn to control your spending. Built-in discipline required for a financially healthy lifestyle. Final step is to assign a budget for your expenses. An example of this would be to spend only 20 percent of income and groceries and 10 percent on shopping. As soon as you sit limit, you can make yourself aware of spending within those limits. Keep practicing. This is a life-skill to don't get overwhelmed and start with one category at a time. Eventually, you will get better. Before we complete this chapter. Let me also give you some misconceptions around budgeting. Budgeting does not mean that you should be making compromises. Budgeting just means that you have chosen to spin within a limit and you are aware of how much you're spending and various spinning, you can continue to live your life the way you will without making any adjustments. You're simply tracking and making yourself aware of your expenses. Budgeting does not mean that you shouldn't be aluminum list. You do not have to give up all your possessions and alter your lifestyle drastically. You're just choosing to live a certain lifestyle within your means. Budgeting also does not mean that you should be in constant stress when you first start tracking your expenses and logging everything in detail and planning a budget, you may feel overwhelmed. So approach it in small steps and leverage technology to make it easier for yourself. You do not have to become a master at personal finance immediately. You can do it in small sidesteps and gradually become better as you practice. With this, we have come to an end of this chapter. Before you leave, let's quickly summarize what we learned so far. We learned about the importance of budgeting and what it accomplishes in a personal finance plan. We learned about the ways in which you can create a budget for yourself. Finally, we've cleared some misconceptions about budgeting. Just like the previous class. This one too has a class exercise. Based on the exercise from the previous class, I want you to add budgets for each category and divide your budget into two gases, essentials and discretionary. Remember to include something under your entity within budget. Finally, calculate the difference between your income and expenses. This is your savings. With this, we come to the end of this chapter. The next chapter teaches you about savings. I'll see you in the next chapter. 4. Everything About Savings: Welcome to your next chapter. In this chapter, we will learn about savings. This class will teach you about the importance of savings. I will then show you the various metrics that you can use to track your savings progress. And finally, we'll learn ways in which you can automate savings to remove friction from the entire process. I call savings as the fuel for your investments. Just like your car needs fuel to go from point a to point B, savings act as a fuel for your investment. Without adequate savings, your investment will not amount to much, even if they give you a 100 percent return. Without savings, you cannot invest a lot. And getting big returns on small investment does not move the needle by a lot. Savings also help you to plan for emergencies and create an emergency phone. There's a whole chapter dedicated to emergency funds later in this course. For now, I will just tell you that emergency funds are a great asset to elevate all sorts of financial anxiety. Knowing that you are prepared to face any emergency that comes your way, goes a long way to remove any sort of financial anxiety from your life and improve your mental health. Finally, savings are an important step towards financial well-being. Regular savings help build discipline and train our minds to accept delayed gratification. This discipline and training goes a long way towards achieving financial independence. Now that you know about the importance of savings, let's learn a few ways in which we can measure it. Remember, we cannot improve, we cannot measure. So measuring the progress on our savings goes a long way. Here are three ways in which you can measure your savings progress. First one is a very basic one. Percentage of your income. You should be saving a sit percentage of your income every month. At a minimum, this should be 10%. Do not be discarded if you cannot achieve this at first. Through the lessons you learn on tracking the income and expense in budgeting, you can achieve this target over time. Second is lifetime earnings. Once you have advance yourself by saving for a few years, you may want to track how much of your total lifetime earnings you have been able to save. This will give you a perspective into your progress throughout your life. I personally track this metric and it has served me well. Anything over 35 percent is a great. Finally, this is the metric that I loved, the moles, hours saved. What this means is that you should look at your savings in terms of hours of work you're saving. All of us have limited time in this word. And we're exchanging this time for compensation by doing a job or running a business. High-income should be viewed as number of hours exchange for that income. So essentially, you can calculate your income on a per hour basis since time is limited and essentially more valuable to us, this metric helps you understand money from the perspective of time. If you start to think of savings as a means to earn back your time, you can begin to appreciate its importance on bit more. Let's now learn how to automate savings. As you would have heard me repeat so many times by now, automation is the key to removing friction from the entire process, which helps to increase our chances of success. Here are a few ways where you can automate your savings. Pay yourself first. Every time you earn a receive your income. Make sure to set aside the percentage you have decided to save before paying for any bills and expenses. This will force you to work with whatever is left. Sometimes it may be hard, but the more often you do it, you will learn better and create the discipline necessary to make this a habit. Ultimately, this habit, we will go a long way in helping you get a better control over your personal finance. Second is to have a separate bank account. Having a dedicated BankAccount meant only for savings goes a long way to building that discipline. We talked about. This bank account should be only used for savings. Do not withdraw from it and do not touch it for any other purpose other than savings. Eventually, this will grow and the only time you're allowed to withdraw from this account is when you have to invest that amount. We will learn in detail about how extraordinary compound interest works. There's a whole chapter dedicated to it. Having a separate bank account will help you in that compounding journey. Finally, set up automated transfers from your salary account to your savings account. The percentage of income we talked about, set up a recurring transfer of that amount to your dedicated savings account so that you don't have to think about making the transfer every month. The bank will do it automatically for you. And this little step means that all the friction from this process is now removed. Do it for one year. And you will be surprised to see how much you're able to save through the simple process. With this, we have come to an end of this chapter. Before we move on to the next chapter, let's recap what we have learned so far. We started the chapter talking about the importance of savings. We learn the ways in which you can track the savings. Remember, you can track savings, even the form of ours on backorder. Finally, we listed down some ways to automate your any tire savings process. Having a separate bank account for savings and scheduling automated transverse goes a long way. Just like the previous chapter, this tube has a class exercise. I want you to apply the three metrics we learned about earlier. Calculate the monthly savings rate as a percentage of your income, compare it to your lifetime earnings, and finally, translate this into number of hours saved. I hope you discover some great insight about yourself through this exercise. In the next chapter, we'll learn about ways in which you can calculate your network. It'll be an interesting one. I'll see you in the next chapter. 5. Net Worth: Welcome to your next chapter. In this chapter, we will learn about network. We will first explore what is meant by network. Then move on to understand what are assets and liabilities. And finally, learn ways in which you can calculate your own network. Let's get started. Let's first learn about what is network. Network refers to the total amount of wealth you have. Your wealth is divided into two parts, assets and liabilities will explore what is meant by both assets and liabilities in a minute. Net worth is the sum of your assets minus all your liabilities. It is important to know your network as it will help you to make important decisions in life. Like how much your insurance covers should be, and how you should be investing in various assets. Without knowing your network, you cannot define your risk profile. And without knowing your risk profile, any investment you make is like throwing darts in the dark room. Chances are you will not hit where you're aiming for. Before we learned how to calculate network, we need to first understand what are assets and liabilities. Let's start with asset first. An asset is anything that you own. It can be a car, a house, a watch, or a phone, anything that is owned by you. There are two types of assets. And appreciating asset and a depreciating worth. Appreciating asset refers to the asset whose value increases over time. These are the good kind of assets and you want to own as many of these as possible. A really good example of appreciating asset is your house. You know the value of your house will increase over time and investment in the house is worth the cost. Another good example of an appreciating asset stocks of good companies. These two will increase and give you many fold returns provided they are of good quality and sound companies. Another type of acid is called a depreciating assets. These are assets that reduce in value over time. Unfortunately, many people in the world are fascinated by owning more of these assets. Then the appreciating one's try to own as lists of bees as possible. These include cars, electronics, and any other machinery. In the chapter of compounding, you will learn more about why the price of such assets depreciate over time. If you own more of appreciating assets, let's stop depreciating ones. You will automatically be on a path towards living a financially healthy layer. Let's now learn more about liabilities. Just like acid refers to anything that you own. Liabilities refer to anything that is owed by you to someone else. These are all your borrowings and obligation that you need to meet. A common example of a liability is a loan either to a bank or even to a friend. If you have taken a home loan to buy a house, the loan is a liability, while the house is an asset. Similar to assets, liabilities can be of two types, a good kind and a bad kind. Bad kind is known as short-term debt, while good kind is known as long-term debt. Short-term debt is usually bad as it carries a high rate of interest. Taking a short-term loan via a credit card or a personal loan means you're paying a very high rate of interest on your borrowing, and thus it is bad use of money borrowed. All cases, trying not to take any form of short-term borrowings. Long-term debt, on the other hand, usually has a low rate of interests and it's spread over a longer timeframe. Now long-term debt can be bad too, if you take it for buying a depreciating asset like a car for an example. However, if you get a home loan at very low interest rates and buy a house that appreciates in value over time. And that's a good use of the long-term debt. In all cases though, we should try and avoid debt as much as possible and should not be boring money unless absolutely required. When you borrow money, you will always be ending up paying more what you borrow. And the whole reason for this course and good personal finance is to make sure such a situation you never arrives. So always try and strive to become debt-free enlightenment and stay debt-free. It will save you a lot of headache and we'll help you get rid of the financial anxiety from your life. Now that we have an idea about assets and liabilities, Let's try to learn about ways in which we can calculate your network. I have divided the whole process into three simple steps. You begin with step 1, calculating your assets, like we learned earlier, and asset is anything that you own. So make a list of everything you own and try to estimate its value occurring price. Next step is to calculate your liabilities. We know from the previous slide when liabilities are anything that you owe to someone else. So make a list of everything you owe. All the loons you have, all the EMI's, you pay. Anything that you are bound to return to someone else is a liability. Final step in calculating net worth is the easiest. Simply subtract the liabilities from your assets. Whatever remains is your total net worth. This number can tell you a lot about yourself. Pay attention to it. We will learn later in this course how to use this number to determine your risk profile. Those are the three ways in which you can calculate your network. With this, we have come to the end of this class before we. Here's a quick summary of what we have learned so far. We started this class with an understanding of what is network and why is it important? We then learn about two key concepts, assets and liabilities. We also explored various types of assets and liabilities. And finally, we learned in ways in which you can calculate your net worth. Before we end this class, Here's an exercise for you. I want you to list down all your assets and liabilities and classify them into appreciating and depreciating assets along with all the liabilities into short and long-term. Finally, calculate your net worth and compare it with your lifetime earnings. It will teach you a lot about yourself. There's a template in the resources section if you want to take hell. The next chapter is an interesting one on emergency funds. I'll see you in the next chapter. 6. Emergency Funds: Welcome to your next chapter. In this class. We'll talk about bottoms of emergency funds. I'll first explain to you what emergency funds are, how to use them, and then tell you how you should calculate your emergency fund requirements for yourself. And finally, also teach you some ways in which you can invest your emergency funds. Let's get started. So what are emergency funds? Well, as the name suggests, these are funds that help you plan for contingencies. Our life is filled with unseen just search. We cannot plan for everything in advance. Whenever you an emergency occurs, you do not want to dip into your savings and investment to pay for those emergencies. And this is where emergency phone comes in and helps you. The idea behind emergency fund is to pack some money aside that can help you deal with all sorts of emergencies and life. From pain to fix a broken pipe, to any hospital bills for emergency accidents. This way, you will not disturb your investments and let the compounding do its magic. Emergency funds can also help to ease financial anxiety from real life. Knowing that you are prepared to deal with any challenge with life throws at you, goes a long way in easing anxiety and help you live a peaceful life. Emergency funds help you to achieve a piece of mine. Personally, when I first built my emergency fund, I took a sigh of relief and felt like a weight was lifted off my shoulders. The piece you get from having enough money set aside for emergencies is as reward in itself. Now that you know what emergency funds are, let's discuss ways in which you can calculate your emergency fund requirement. I've broken this process down into three stages. The first one is a basic one, save enough to have one month of expenses. This is the bare minimum requirement and a good goal for you to achieve when you first start building out your emergency fund. The second one is a bit harder and may seem very challenging at first. But believe me, with discipline and time, you will get there. Six months of expenses? Yes. 6. The idea is for you to live in peace, even if you lose your job the next day. You know you have enough money set aside to live a peaceful life and still hunt for the next job. This will take you some time to accumulate, but once you do, you have unlocked and achieved a new level Personal finance journey. The final goal is to have 12 months of expenses saved. Yes. One year worth of expenses saved up. Sounds difficult, but it is not. You just have to repeat stage 1 and 2. Achieving 12 months of expenses is an emergency fund means that you are now prepared to face a challenge in life. Anything that life throws at you, you can knock at rewrite are the buck. I have full faith that if you follow whatever we have learned so far, you will be able to achieve these emergency phone goals with little effort. Remember to not get o of n. Start small and take one step at a time. Start with one month, increase it to two, and then 26. And soon you will have 12 months of expenses saved up. Small steps every day will help you walk miles in a year. Now let's talk about the last topic in this class. What to do with emergency fund? When you have it? You want to keep this money safe and hopefully earn some return for you. So where and how do you invest? Where you decide to invest should have three characteristics. First, it should be liquid, which means that you should be able to sell and withdraw your investment within the same day. This will eliminate tough to sell investments like fixed in your deposits with the back. The second characteristic is that it should carry a low risk. This means that you do not expect the investment to reduce in value or invest in areas of high risk like equities. Finally, the investment should give you just enough return to beat inflation. In not looking to grow your capital, your merely looking to protect your capital. Low risk and high certainty is what you're aiming at. Protecting capital is the utmost importance with emergency fund. Then growing capital. With this, we have come to the end of this chapter. Let's summarize what we have learned so far. We started this chapter with the importance of emergency fund. What they are, how they help us in our journey of a good financial life. We then learned about ways in which we can calculate the requirement for our emergency fund and how we should draw our emergency fund goals at one step at a time to not overwhelm ourselves. Finally, we learned about the areas where we can invest in emergency fund. The characteristic of these investments and how we are looking to protect our capital rather than grow our capital. Before we move on to the next chapter, there is a class exercise. In this exercise, I want you to calculate your emergency fund requirement and estimate how long it'll take for you to accumulate the desired phone based on your current savings. It. If you find that will take too long and revisit your expenses and budget and see where you can adjust further to achieve your code. The next chapter, we'll teach you everything you need to learn about insurance. I'll see you in the next chapter. 7. Insurance: Welcome to your next chapter. In this chapter, we learn about a very misunderstood concept in personal finance. Insurance. Main objectives for this class are to inform you about the importance of insurance. Gives you insight into race types of insurance that exist. And finally, teach you about some key points to remember why selecting a life or a health insurance policy for yourself. So why is insurance important? In my view, insurance is the most misunderstood financial product. Most insurance as an investment, which it is not at the very core of it. Insurance is a product designed to transfer risk from one party to another. And because someone is taking responsibility of owning that risk, you pay a compensation to them in the form of premium. It is this ability of insurance to remove the risk from any financial instrument is what makes them remarkable. Insurance in your own life can help prevent from any large, unforeseen risk. Life is unpredictable. And even though you can be prepared for some risk by building an emergency fund, there are some risk in life that are too big and cannot be dealt with. Insurance will help you tackle these risk. It will help you tie out loosens and a is in your financial life, which an emergency fund cannot go. By transferring risk to someone else. You're also reducing the risk of owning the asset. Everything you own hasn't risk. For example, the house you own has a risk of a damage may be due to a file. A home insurance helps you cover for that. In the unfortunate case, your house burns down. The home insurance ensures that you get paid for the value of your house and do not have to bear the financial burden of rebuilding the home on your own. The second most common misconception about insurances are that they are viewed as investment products. No insurance product can be an investment. If someone is selling you and insurance as an investment, ten, either it's a really bad investment product, disguising as an insurance scheme. What's a really bad insurance product? Disguising as an investment scheme. And in some cases, it's both. You should view and understand insurance as an expense to reduce risk in your life and nothing more. The pure insurance product that helps you reduce risks are really cheap compared to the ones that are disguising as investment scheme. Now that you know, where are the basics of insurance, let's try to earn three main types of insurance products out there. First of these is correct term insurance plan. These are insurance plan that offer prediction against the specific risk for a set period of time. As soon as the time period ends the ICS file and you are no longer protected against the specific risk. This form of insurance are the cheapest among everything out there. Common example of such insurances are lifetime insurance plan. Peace plan act as life insurance plan up to a certain age after which they expire. In the unfortunate event of your death. Within this time period, a fixed pre agreed sum of money is transferred to your family upon your debt. And the premium on these are really cheap and they cover you from the risk of your family fending for themselves after your device. The second form of insurance plans are quite productive insurance plan. These are insurances for a very specific requirement. Since these are specialized and designed for a specific purpose, there are a variety of options available to choose from. Some example of these products include a fire insurance and property insurance and health insurance. Health insurance today comes in a variety of shapes and sizes and you can pick and choose what suits you the best. Finally, the last type of insurance is called an umbrella insurance. These are typically insurance policies that cover a wide variety of risk across many different aspects in one's life. Think of them as several product insurances clumped together into one. Example of these include a life, health and home insurance plan, all combined into one plan. Let's now talk about what to look for by selecting a life and health insurance plan for yourself. Life and health insurance are two basic insurance policies everyone needs to own. Let's first understand what to look for and selecting a life insurance policy. The first thing that you should be looking for is cheap premium. As we learned earlier, that term life insurance policies are the cheapest kind of policies to select. A good life insurance policy will only cover you until a certain age and the premium on these will be very low. Second thing to look for is adequate coverage. Having a life insurance that provides only two months of your current earnings is like having no insurance at all. You need to calculate and understand how much your family would need to get back on their feet and stabilize themselves after your loss. Anything more than five years of actual earnings is a good life cover. Finally, while selecting a life insurance, you're only looking for a standalone product. Do not buy life insurance at CMS clubbed with investment policies other than any type of insurance products, like we have learned earlier in this chapter, and insurance is not an investment. Now let's understand, what do you need to pay attention to by selecting a health insurance for yourself and your family. The first most important point is high some ensuring your health insurance cover should be really high as health care costs keep increasing every year. And some illnesses cost a lot to cure. Just like with the life insurance. Having too little of a health insurance is also equal, not having any insurance at all. The second to look out for is local hospital coverage. You need to ensure that whatever health insurance you have is expected in the hospitals tells us to you and in your neighborhood in emergency situations, every minute counts and you're likely to be rushed in the nearest hospital in your area. If the health insurance is not accepted in those hospitals and paying for your insurance is not really worth it. Finally, make sure that your health insurance covers for existing illness. If you're suffering from any ailment. Mentioned that to your insurance provider and they will incorporate that in the health insurance policy statement. Insurances that do not go and existing and lenses require out of pocket expenses to be paid for their treatment. Something which you took the insurance to avoid in the first place. With this, we come to the end of this class. Before we leave. Let's summarize what we have learned so far. We began this chapter by understanding the importance of insurance. We learned that insurance is not an investment and as a means to transfer risk. We then moved on to understand the various types of insurance products that exist today. And finally, we learned about the key points to pay attention to when selecting a life and health insurance product for yourself. Other chapters in this course, this class also has an exercise for you. I want you to calculate how much cover for both the life insurance as well as health insurance you require, then try to find premiums for these kind of policies available to you. You can use any website service to find this information for your region. Finally, incorporate and make an insurance plan for yourself and your family. In the next chapter, we'll talk about credit scores, what they are, and how they can help you. I'll see you in the next chapter. 8. Credit Scores: Welcome to your next chapter. This chapter we'll introduce you to credit scores. We will begin the chapter by understanding what credit scores are, why they are important, how to build them for free. And finally, how you can leverage your credit score to your advantage in securing cheaper loans. Let's get started with the first topic. What our credit scores, credit score is basically a ranking of credit worthiness of an individual. Your credit score will tell a bank how trustworthy you are for it. To extend that loan to you. Banks and other financial institutions use a credit score to judge the risk involved in underwriting the loan. If you have a low credit score, it means that you are at high risk of defaulting and not paying back the loan to the bank, because there's more risk involved, a bank will charge you a higher interest rate compared to someone who has a good credit score. Your credit scores are decided based on your past credit history. Most of us, when we start our lives, do not have a credit history. And sometimes aversion to using credit and taking load means we do not have a credit history at all until our late 30s. This means that when you do go to take out a loan for the first time, you will likely get a higher interest rate just because you do not have any credit history. Credit scores are important to maintain because they act as a historical record for all your credit activities. Since they focus on how worthy you are to be lent money to a good credit score can help you use this to your advantage. Having a high credit score will mean that you can borrow money at very cheap rates. And the more you borrow and return, the better your credit score where you gain a very good credit score, also lets you borrow money cheaply around the world and not just in your own country of residence. So having a good credit score has a lot of advantages and a bad one has a lot of disadvantage. This is why it's so important. Now let's talk about how to build these credit scores for free. To build a credit score, you need a credit history, but to take loans and pay them is a cumbersome task. So here is an easy way for you to build a credit history. Use a credit card. Every credit card has a duty. If you pay off your entire bill before the due date, you essentially get an interest-free loan for that duration. This also helps you build a very good and clean credit history for yourself. Paying off the credit card bill in full every month is what credit card companies do not want you to do, however, is in your best interest to do that. Okay? Because I have one of the highest interest rates on any financial product in the world. Do not ever pay interest on a credit card. You will end up paying many times more than what you use the card for. Later in this course, we'll talk about how to use credit cards the right way and to their fullest advantage. Once you have built a good enough credit score, Let's see how you can leverage it to your advantage. The first thing you want to log with a good credit score is that you get cheaper loans. A high credit score means that the bank trust you and we'll happily extend a loan to you at very favorable rates simply because there is less risk of you defaulting on the loop. The second advantage you and look is to have multiple options available to you to pick and choose from. Good credit score means several banks want to extend loans to, you know, bank wants a higher risk, low credit score customer and everyone wants a low risk, high credit score customer. The reality is such customers are very few. So having a high credit score puts you in top 1% of oil customers that reached out to the bank for a loan. Since you are a customer in high demand, you have multiple options to choose from and also unlock the third advantage. Negotiate the terms. If your loan size is big enough and if your risk profile is low, the bank will happily negotiate. So with you, you can pick and choose what you want and negotiate the elements you do not like as part of the loan. This is a luxury available to very few people in the world. This brings us to the end of this chapter. Let's now summarize what we have learned so far. We began this chapter by learning what credit scores are and what is their importance. How a good credit score helps in personal finance, and how you can build a good credit score for yourself by using credit cards. And finally, how you can leverage a high credit score to your advantage. And your classic size for this class is a very easy one. I want you to find your credit score. Google search options to find credit scores in your region. And you will find an online service that can tell you the credit score details. If your credit score is low, you now know how to improve it and how to work to make it better. The next chapter, we'll talk about some of the common financial pitfalls and how to avoid them. I'll see you in the next chapter. 9. Financial Pitfalls: Welcome to your next chapter. In this chapter, we'll talk about the common financial pitfalls and how we can avoid them. I'll also teach you a few ways in which to get out of a debt spiral. And the perfect way to use credit cards, there's gonna be an interesting chapter. Let's get started. It's easy to fall into financial pitfalls, common mistakes, incorrect knowledge or circumstances can push any one of us into a corner. Here are some common financial pitfalls people tend to make and ways to avoid them. The first one is to never take on too much debt. Debt is variable. We owe something to someone else. Taking on too much debt can lead you to a death spiral. Where do you end up paying more interest payments and Yuan. Thank you. We explored in the previous chapter, there are two kinds of tape, a good debt and bad debt. Good debt is something you take to buy an appreciating asset like hubs. Good debt is also very low on interest rates and interest payments on the debt are very less compared to adult income or capital appreciation. Uk. Businesses often take on debt to grow their business as investing in their business often helps them generate a higher income than the interest rate on the door. Similarly, bad debt is something one takes to buy a depreciating asset, like a car, the value of a car decreases with time, and as such, you end up paying more for losing asset in interest costs. Bad debt is also where one is significant percentage of a person's network. This is in the form of debt. We learned about network in an earlier chapter in this course. If your liabilities are higher than your assets, then you have a negative network and keys too much debt. Debt with the high interest rate also falls under the category of bad debt. If you observe car loans are always more expensive than home loans. The reason behind that is that with the car door, you're purchasing a depreciating asset, while the house loan, you're purchasing and appreciating asset. The second pitfall to avoid is to not spend more than what you want. Many people tried to chase a lifestyle that they cannot afford and a search fall into a trap of ever competing difference and family to update their lifestyle over those. This is unhealthy and it's not checked, will eventually lead someone to go bankrupt. Always tried to live a lifestyle below your means. There's a quote by Elder, we can't, which states that people who live far below their means and joy, freedom, that people busy upgrading their lifestyles cannot fathom. And he's right by freedom in this code is referring to peace of mind. Those who live in lifestyle below their means have secured this peace of mind which others have not. Upgrading your lifestyle is a never-ending task. There will always be a little higher that you can achieve. And someone more wealthy than you, driving a more expensive car or living a more flamboyant lifestyle do not fall under this strap. Third pitfall to avoid is to beat inflation. Inflation is ever present and has the power to slowly eat away your purchasing power. The whole idea behind investments is to beat inflation and ensure that purchasing power of money remains intact. Most to not invest with the idea of beating inflation. The moment you start realizing about inflation and investing better to ensure you're beating it, you will be on track for healthy financial life. Most ultra safe investments are not designed to beat inflation. Make sure you're not investing in those. Consult a financial planner and make a plan for yourself to grow your money. Now that we know the three most common financial pitfalls to avoid, let's talk about how to get out of a dead spider. A debt spiral refers to a condition where one has too much debt and literally income. The interest payments on the debt cannot be fulfilled just from the person's income. So he's forced to take on more debt to pay the previous one. Continuing this process a few times. And suddenly you have a situation that is out of control and on the part to bankruptcy, if you're ever into such a situation, here are a few steps that you can take to get out of it. Step 1, pay off any high interest debts, like credit cards. You want to minimize your interests bill as much as possible. Credit cards have the highest interest rate of any product. Step two, if you do not have enough income to pay off all high interest rate debt and seek to refinance your debt. This will enable you to take on a lower interest rate loans to pay off these high-interest loans. This way, you will be able to reduce your interests bill every month. Step 3, on the remaining loan amount, you want to be as aggressive as you can to pay more than what the minimum is required. Again, the idea here is to bring down your interest payments to a level that you are comfortable with. By paying more aggressively, you're reducing the principle of the loan amount and in turn, reducing the interest that you pay on that loan. Step 4. Once your interest payments have reached a label that you're comfortable with, you can now begin. To save again and build your financial help from the ground up. The final topic in this class teaches you how to use a credit card. To get the maximum advantage from a credit card, you should be following BCE four simple steps. First one is to pay off your credit card bill in full every month. Do not pay just the minimum deal. That's the trick credit card companies use to get you to pay interests on the rest of the bill. Interest rates on credit cards are the highest in the world. And if you pay the minimum due every month, you end up paying a very high amount, has these payments will quickly add up to automate payments. Throughout this course, we have talked about automation in a variety of ways and the need to reduce prediction from the process here to automating monthly credit card bills and shows that you are paying the bill in full every month without delay and never have to pay a late payment fee or carry over the bill to the next month and incur interest costs. Three, maximize rewards. Credit card rewards incentivizes you to span. Use this to your leverage. I personally have a credit card that gives me 5 percent of all Amazon purchases throughout the year. The other one gives me 5 percent of all the food order bills. I use each of them to transact the respective website and pay it off in full every month. I'm essentially getting the bank discount my spending on both websites. Finally, do not spend beyond your limit. Set a limit that you are comfortable with for each credit card and do not spend beyond that limit. This will ensure that you stay within your budget and keep a track of all your spending while earning rewards. Credit card company device, each customer into two categories. Transact up. Under Ebola, you want to be a transact 0 and not a revolver, while a credit card company wants you to be a removable. Another than a transaction. A transaction someone who pays the bill in full every month and uses the car to maximize the rewards without paying any fee or interests courts on it, or a revolver, on the other hand, pays only the minimum required amount every month. Doesn't use the card well enough to unrewarded points and ends up making a lot of C and interest payments. If you're using a credit card, always and always be a transact. Oh, it's the best deal you will ever get. With this. We have completed this chapter. Let's summarize what we have learned so far. We started this class to understand the three most common pitfalls and how to avoid them. We then talked about debt spirals and how to get out of them if you ever find yourself in one. Finally, we learned about the best way to use credit cards and the two types of credit card users and how you want to be a transact to always and never reversible when it comes to credit cards. This brings us to the end of this chapter. In the next chapter, we will explore the most fascinating concept, something which Albert Einstein referred to as the eighth wonder of the world. Yes, I'm talking about compound interests. I'll see you in the next chapter. 10. Magic of Compounding: Welcome to your next chapter. In this chapter, I'll show you how the magic of compounding works. Compounding is one of the greatest forces out there. And if turn right, even small amounts of investment over long periods can generate enough to become financially independent. This class is divided into three parts. First, I'll tell you about two monsters, inflation in depreciation and how they're eating away over. Then I'll introduce you to a superhero called compounding that fights away these monsters. I'll throw example, show you how the proof behind compounding works and how astonishingly it helps you to generate wealth over long durations. Finally, I'll introduce you to a few metrics that can help you understand compounding and big down the entire process into a few simple steps. Let's get started. The first monster you should be aware about is the silent killer known as inflation. Inflation exists perpetuity. It's always around and slowly eating away your purchasing power without you realizing it over time. If you do not invest wisely, then you're actually growing poor. Even though you may be earning more, not being aware about inflation and the fact one loses money eventually is the main reason why many people do not retire. Well, let me demonstrate this with an example. Here's the purchasing power of US dollar in the last a 100 years in $1901, could purchase items what, $26.14 today. So essentially, if you have just kept cash and never invested it, you have lost almost all your wealth in the last a 100 years. And this fact plays out for every country from India to China to Canada over the entire word, inflation is part of an economy and how it grows. The only way to beat the monster of inflation is to invest. Second Monson is group of two is called depreciation. And depreciation over time reduces the value of your assets. Just what inflation does to your wilt depreciation, does it to everything you own. Remember, we learned earlier about depreciating assets like cars and electronics. Those kinds of assets tend to lose their value over time. Here's an example of a car. As soon as you purchase a car and take it out of the showroom, you lose 10 percent of your value. And this value will keep reducing over time till it reaches close to 0, after which, you can only sell the car was scrapped, value grabbed before you shows how a 25, $1 thousand car, but each has less than a $100 in value over 12 years. The only way to be depreciation and inflation is why I compounding. Compounding is a superhero in this story that helps us free from the evils of inflation in depreciation. If you're not investing in engaging in long-term compounding, you're losing money to the forces of depreciation and integration. Let me demonstrate this also with an example. You will take the example of two friends, Jack and Jill. Jack start to invest at the age of 25. He invests $20 thousand every year for the next ten years. Well, He's 34 years old. On his 35th birthday, Jack stops investing, but doesn't withdraw his original investment for the next 30 years until he's 65 years of age. His friend Jill, on the other hand, starts investing only at the age of 35. And just like Jack puts in $20 thousand every year, unlike Jack DO was stopped investing. Jill keeps on investing for the next 30 years and withdraws everything at the age of 65 along with Jack. As you can see in the chart, Jack has more money than Jill, even though jack only invested for 10 years while Jill invest it for 30. Why did this happen? There are two reasons for it. First one is that compounding works on exponential growth. The latest stages of compounding are more important than the starting one. And if left untouched, exponential growth can deliver mind-boggling returns. The second reason is that in compounding, time matters more than money. Duration of investment has more value in compounding, then the amount invested, even if you start with small amounts and let it run for many years without interruption, those small amounts can add up and turn into large sums of money, just like we saw in the example of chat, compounding is truly magical. And I do encourage all of you to try and learn more about this fascinating concept in more detail. A lot has been written about it. So please do your research and learn more. Let me now introduce to the Rule of 72 to demonstrate the example of compounding fertile Rule of 72 states that if you divide 72 with the amount of return you seed, the result you get is the number of years required to w or investment. So for example, if you divide 72 by six, you get 12. This means that if you get 6% annual return for 12 years, your investment will double in value and this return grows exponentially over long durations. Here's an example of a 29 year old who invested 5000 and various return rates from 40 percent, 8% and 12 percent at 4% per year. 5000 dollars we'll multiply four times and turn into $20 thousand by the time the 65 years of age similarly had 8%, the $5 thousand will multiply 16 times and turn into 80 thousand by the time he 65 years of age. Finally at 12 percent, the 5000 dollars will multiply an astonishing 64 times by the time he's 65 years of age. In each of the case, do observe how bulk of the earnings came in last one or two years. This is exponential growth in compounding. I was referring to. Now that we have understood the concept of exponential growth. And in one case of compounding, Let's understand how to take advantage of compounding. I've broken down the entire process of compounding into five simple steps. The first step is to start small. You do not need to have big sums of money to invest. Even a small investment done regularly can generate astronomical returns, as we have witnessed in the earlier example, the second step is to give it time. Compounding only works over long-duration. As we saw in our example earlier, bulk of the earnings came in last one or two years. You have to be patient with compounding to work in your favor and help you. The third step is to aim low. Do not try and generate 30 percent returns immediately. Even a steady 8% return over 20 years will do wonders for your investment and help you generate enough wealth for yourself. The fourth step is to step it up. As your income increases throughout life, makes sure your investment increase along the same base. This will help you turbocharged, you're compounding and investments. Finally, last step is to have patients do not interrupt compounding. It only works well when it is not disturb, disturb it and you will lose the magic of a half patients and do not let your emotions where your judgment about him, long-term, uninterrupted compounding is the secret kept by welding. With this, we have come to the end of this chapter. Before we leave, let's summarize what we have learned so far. We started this chapter with an introduction to the forces of inflation, depreciation and compounding. We then explored with examples as to how compounding works. We also explored a few metrics related to compounding, like the Rule of 72, and then finally learned how to enable compounding in a live through five simple steps. In the next chapter, I'll introduce you to investments and everything you need to know about them. I'll see you in the next chapter. 11. All About Investing: Welcome to your final chapter. In this chapter, we learn everything related to investment. This class is structured as follows. We'll first learn about what is risk and return. Then move on to evaluating your risk profile. Then learn about your return requirements. Learn about various types of investment. And finally, learn bought is coal-based investing. Let's talk about the first topic, risk versus return. So what is risk and return? Well, these are intertwined parts of an investment. Without taking risk, you cannot get returned. And in cases of no risk, there's usually negligible return available. What is meant by this scale? Every investment carries some level of risk. Risk means the possibility of losing capital due to various reasons. These can be in the form of a company going bankrupt, economic issues, fire and destruction of a company property, et cetera. They don't, on the other hand, is the compensation provided to you for your investment? Just like every investment caries risk, it also carries return. Riskier investments require higher levels of return to compensate the investor for undertaking high risk. And investments with lower risk require lower levels of return. Our job as an investor is to generate high returns for the least amount of risk possible. Without risk, there is no return. But with proper investing, we can generate higher return for lower amount of risk. This in the investing world is known as Alpha. Now that we have a basic understanding of risk and return, Let's understand what is meant by risk profile. Every individual has a level of risk comfort. You can probably take on more risk than I do. Or maybe it's the reverse. I can probably take more risks than you do. The idea is capacity to take risk is unique to each individual. This capacity is called risk profile. Higher capacity to take risk means that you seek higher returns. While lower capacity for risk means you seek lower and more stable returns. Your capacity to take risk also depends on a variety of factors like psychology, family setup, age, current network goals, etc. All of these combined referred to your risk profile. If you're young, have no dependence and have long-term goals, your capacity to take risk is far higher than someone who's aged, wants to retire, has many dependence and requires a regular income from their investment. Let's now also understand how to assess our return requirement. Just like your risk profile is depending on a variety of factors. Your return requirement is also depending on other factors. The tenure of your investment determines how much return you should expect from it. Short-term investments generate lower return than long-term investments. Second factor that affect your return requirement, the nature of your goals. If your goals are aggressive, many return requirement will also be aggressive. You cannot achieve aggressive returns without taking on more risk. Finally, your investment returns that depending on your risk profile, like we discussed earlier, if your earnings profile is low, you cannot expect to make higher returns. As low-risk investment will tend to generate lower returns. Different types of investment have different types of risk. There are many types of investment. Let's understand all of them. All types of investment can be divided into six broad categories. These include very short-term investments. These tend to be made for less than a day to less than six months. Money market investments and overnight investments fall under this category. Such investments are usually very liquid, possess a very low risk, and have very low returns. Second type of investment is short-term. These investments are made for less than ideal. They possess low risk, generally compensate with a loaded on your bank deposits at an example of short-term returns. Third type is known as no-risk investments. These investments are usually backed by a sovereign government with the promise of return and are considered very safe. Hardly any returns in this segment are typical example of such an investment is the US Treasury note. Four type of investment are known as state-based. These are investments and do various debt types of a company or a government. There's a whole market for them, which is bigger than even the equity market. Debt based investments have a spectrum of complexity, ranging from a simple bank deposit to very complex and solvents like mortgage backed securities. Fifth type of investment fall under the category called high risk. These are usually your stocks for high growth companies. If your investment horizon is long enough, your probability of loss in these segments introduces as the investment time V8 increases. Finally, the last type of investment I've known as guaranteed returns. These are very low risk and very low return on investments, where it turns a guarantee to you. Bank fixed deposits fall under this category of investment. Let's now explore the topic of coal-based investing. So what is coal-based investing? Goal? Vc investing is a consistent personal finance. Investments are made based on individual goals. We all have various goals in life. And all these goals have to become published in different timeframes. You may have some short-term goal and a few long-term goals. Everything you want to accomplish doesn't need to happen the very next day. Investing based on time-frame of these goals known as Google Base investing. So how do you identify investment goals for yourself? Well, you can do that in three parts. First step is to write down all your goals. These can be anything from going on a vacation in the next three months to a more longer-term goal like buying a house in the next five years. Second step is to divide these goals into short versus long term. Not all goals are the same. And like we discussed earlier, some need to be accomplished earlier than others. Final step is to identify investments related to these quotes. Your short-term goals will require investments that have shorter investment horizon and thus lower risk. With longer-term goals, you can take on more risk and have a longer-term investment horizon. Knowing how to allocate based on these goals also comes in handy. Your short-term goals needs to be allocated to assets, the least possible risk and lower return requirement and high liquidity. Medium-term goals should be allocated to assets with low to medium risk and medium return. While we longer-term goals, you can allocate to assets that generally generate higher return for you. Wire the magic of compounding, start small with these goals and build them on your way up. Apart from your goals, are asset allocation should also be based on our risk appetite, our risk profile and I psychology. Here are a few of the factors you should consider while deciding your asset allocation. The first is your risk appetite. How much risk are you willing to take for an investment has a lot of weight in deciding where to invest. If you take on too much risk and lose sleep over an investment, you will not be able to live peacefully and we'll ever be anxious about the investment's performance. The second factor to consider are your goals, like we have discussed a few minutes earlier. The third factor is your psychology. If you're someone who's naturally this conscious, you will not be able to invest in high risk assets as they will impact your ability to hold these investments during times of distress. And investor psychology plays a big role in their investment. Fourth factor is your age. If you're young without any independence, you have a higher risk taking capacity and can invest towards more inequities as you have a long runway ahead of you compared to someone who's 65 and heading for retirement. Final factor is your responsibilities. If you have a lot of dependence and are the sole owner for those dependence, then your risk tolerance is low. And that's search. Your asset allocation should be more towards investment than exhibit lower risk. With this, we have come to the end of this chapter. Before we leave, let's summarize what we have learned so far. We started this chapter with a basic introduction on the concept of risk versus return. We then moved on to explore how to determine and build a risk profile for ourselves. We then learned how to establish return requirements based on a variety of factors and discussed a brief of various types of investment that exist. And finally, learn what is goal based investing and how to allocate based on your goals. With this, we have come to the end of this course. Congratulations on completing this. I hope with the knowledge and tools you have learned throughout this course, you will be able to make healthy financial decisions for yourself and be on the path towards living a financially healthy life. I have employed all these tools and they have served me really well throughout my life. If you like this course, please leave a comment and review. It goes a long way in helping me on this platform. Please do also consider sharing this class with your friends and family. My mission is to teach these tools to as many people as I can. Thank you once again and wish you many years a great compounding head.