Home / Finance / Investment and Finance basics for every John Doe – Part – 1 – The Intro

Investment and Finance basics for every John Doe – Part – 1 – The Intro

We all try to earn for ourselves don’t we?

Some people are lazy like me who tend to try less, while there are some people who hardly even get some sleep to stay in the game of money.

But is it enough?

Every now and then we hear commercials stating that mutual funds are good and you should indeed invest your funds to keep them growing. However, most of the times we face the challenge of being unknown to the jargon and concepts of investments.

In this new series of blog, we try to introduce the concepts in most laymen sense.

“A luxury car with a chauffeur and a beautiful house by the lake view.” – A dream we all tend to wish for at one or the other point of our lives.

But is it just a dream? Is it even necessary?

I have been investing 70% of my earnings in some or the other way for more than 7 years in a row now. I know it is nothing. In fact I know that I am no Investment Guru for you, but one thing I can surely tell you is – you need to know the cost you have to pay against what ever you are wishing for.

Through out the series of the on coming posts, I will be discussing different methods of investments you can exploit based on your risk taking abilities, available time and end goal. However, this particular first post is not about investing, but about selective expending.

The dream we saw above, is beautiful but it comes with two different set of assets.

Right! I just said “Asset”. I did say I am no Guru, but I have to stick to the asset and liability theory if I want to keep my head in the game.

So the thing is when it comes to money and people, in both the cases we need to choose between assets and liabilities.

What is a liability?

In simple words – Anything that comes with unusually high maintenance cost, as compared to its initial value.

What is an asset?

In simple words – Anything that tends to have a higher or at least same valuation, as compared to its initial value of purchase.

Here value and cost, are not just money but even your time and mental stability.

Asset – An expensive recliner that helps me to calm my mind so that I can work for an additional hour and think well, thereby helping me earn more.

Liability – A low cost printer I bought to save my money, but it ends up printing at slower speeds, jamming the sheets every now and then and even over spilling the cartridge ink.

Asset – A childhood friend who has not been in touch because of being in different city but comes right away when you need someone to talk to.

Liability – A work colleague whom you are attracted to but only gets to talk to when he/she wants something work-related to be done immediately.

John Doe  – “So Utkarsh, I bought a house on mortgage. They are making me pay interest too. So I ended up with a liability?”

– “No John, it is still an asset, because down the line the value of your property will be more than you paid for. And at that moment your asset valuation would be more than it has costed you!”

John Doe – ” Great, so I will also purchase a Convertible Audi TT and add it to my asset list!”

– “Well John, you are partially correct. It won’t be your liability. But will it have the same value when you would go to sell it again in the market?”

So John above got the concept of assets right. However, there are somethings called depreciating assets – the assets that tend to lose value over the time. Cars, Computer and electronic gadgets come under this category. People argue that real estate does come in this category too – but not if you purchase the right location and sell at the right time.

So the idea behind maximizing your funds at hand is to invest in assets, reduce the expenses on liabilities and depreciating assets.

We will be looking deeper as we proceed one post to another. Also since I am from India, most references would be relative to India, but we can discuss any specific cases if you just drop a query.

And as I said earlier, I am no Finance Guru and I don’t intend to be one either. The complete planned series of posts is intended for people who want to invest but tend to procrastinate due to lack of sufficient knowledge,

About Utkarsh Kaushik

Take an avid reader, implement the concepts of programming and git init the repository of software engineering. Merge the branches of application development, data science and data modelling to the master. Now push the commits related to product management and project architecture. Pour some love for comics. Finally sprinkle the entrepreneurial and intrapreneurial snippets with some ambitions and attitude. Bake for 20 minutes. Then take another 15 minutes to prepare some espresso with enough steamed milk and milk foam. The resultant delicious and extravagant cake along with superb latte is what you would know as Utkarsh Kaushik! Read more about me @ utkarsh-kaushik.com

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