Cash22 - A personal finance blog

The time vs money conundrum. This does sound like a jargon, albiet an intuitive one. In its most basic form, it's a question; what is more important to you, time or money? You will hear honest answers and dishonest answers from all kinds of people. But have you ever wondered how it applies in your life? Not in a finance class test, not while discussing earnings potential with your fellow investment bankers during Thursday drinks, but in your day to day life? I used to earn 20,000 INR (≈ $250/month) 10 years ago. I was a happy go lucky person, rarely thought about saving, but thought very much about being seen using the latest fragrance from Bath & Body Works. I used to spend my entire salary on fragrances (think amazing smelling candles and lotions), rent, food and commute. This went on for 3 years. I saved zilch, save for some sad and unused candles. I studied engineering, and nobody had told me the importance of saving money. I now wish there was a basic finance class for eve

It’s been more than a decade since the 2008 recession but a lot of people still don’t know what actually caused it, just like a lot of people do not know what caused the great depression. It’s important to learn and understand these, as they give you insights into what happens when financial instruments are abused and the government may or may not do its part and the importance of economic policies and how they can effectively bring countries out of tough times. What caused the 2008 recession? The US Fed had lowered interest rates after 9/11 to keep the economy going – to ensure that money was available for very cheap to every American. The low interest rates combined with the Fed’s home ownership policy encouraged more people to buy houses at low interest rates. The intentions were not bad. As a consequence, the total mortgage debt was as its peak by 2008. As more Americans bought homes, the real estate market boomed dramatically in the years between 2002 & 2008. Banks were en

If you took a notebook and pen, and travelled the world, and you wrote down the prices of a pack of 6 locally produced eggs in every supermarket in the world, what would you discover? Apart from the fact that you may have had a lousy trip, you will realize how cheap it is to buy eggs in Bucharest (Romania) and how it is more expensive to by eggs in Dubai (UAE). In a perfectly competitive world, all eggs everywhere would cost the same after factoring in the exchange rate. Same goes for Crude oil. Or for a Mattel toy car. Or for a Lego toy box. These should cost the same everywhere in the world. Except it is not the case. The PPP theory states that, over a long period of time, the cost of similar goods in 2 countries would be the same if you converted the currencies at the prevailing exchange rates. However, this rarely happens. Due to a host of reasons; transaction costs, government interventions, tariffs & duties, non-competitive prices or even sticky prices (wherein even with chan

The great depression is the period known to us right after the Oct 29th stock market crash of 1929 almost until the end of WW2, in fact – the depression started right in the middle of the interwar period. It is the worst economic phase in the 19th century according to economists and here is a brief summary about what really happened.  (I will talk about it briefly first, but since there are many things about economics the depression can actually teach us, I will cover them separately after the summary) The US experienced a huge boom in the stock market in the 1920s, wherein there was almost a growth of 20% each year in the 5-6 years leading up to the 1929 crash. On September 3rd 1929, the DJIA - Dow Jones Industrial Average - was at 381 – margin trading (financial invention at that time) giving way to excess liquidity, led to a lot of people heavily investing in the markets without their own money and there was an overall boom in confidence. However in 1929, fueled by a huge over valu

 This is said so often, ever so often. We've learnt it in high school - remember all those simple interest and compound interest rate formulas? It's amazing - the simplicity of the math. What does compounding mean? Why is it used so often in conjunction with wealth creation? Well, let's dive right into it. The amount that you are going to invest in your first year - say on 1st of January, that's the principal amount. Let's say you just received your year end bonus of 1 lakh; and you decide to place this entire sum in a Fixed Deposit (FD) in your regular bank; which gives you 6.5% interest per annum. Let's see what happens to your money. Your money (1 lakh @ 6.5% per year) grows to 1 lakh and 6.5k in exactly one year. But the magic starts in the second year. Your new starting point is now 1,06,500 which @ 6.5% - becomes 1,13,423 by January 1, 2021 - i.e. after 2 years. In the table below, you can see how the money grows year on year (Y-O-Y). But the beauty is und

My mum loves sending me articles of how other 30-40 years old manage their finances. Recently, she shared with me an article that talked about how retired millionaires under 40 navigated the corona virus situation. But to be honest, I was not worried how they navigated the complete collapse in economies globally. I mean don't get me wrong, it is important - something I will cover in a later post. But I was more intrigued about the first part. How on earth were they able to retire as millionaires under 40!! Upon doing some online digging, I came to read about the concept of FIRE, again. I have heard this before. Have you? Or are you completely clueless - the way I was, the first time my colleague mentioned it to me? FIRE - as the title explains - refers to individuals that have gained financial independence and are now able to retire early - as they have reached the point where they don't have to work for money anymore. They can now do something they love, not having to sell awa