Here is the complete transcript of the podcast
It’s difficult recording today’s podcast hard. Because every time I turn the microphone on, I have a set agenda, usually a question from someone, maybe some discussion I had with someone. In fact, I had a discussion with a friend of mine last night, in which I wanted to talk about, which is dominant in my mind. But then as I turned the microphone on, the thought is not leaving my mind and had not left my mind since 21 years. And I remember the day this day, 21 years ago, when my dear dear friend, and now even closer friend, called me up around 930 Pacific Time, and said, Srini, I’m sorry, what happened? And I’m like, I said, I don’t. What are you talking about? Well, he says, You don’t know what’s happening. I said, No, I remember his words. Man, the world had changed. How are you? Where are you? Like, his thoughts? His thing? Where are you remember that the world had changed? And I’m like, no, no idea. Because I was sleeping. I was sleeping, my wife was sleeping. And I was going through a very difficult time. 21 years ago, so I was going through a tough time with my business. And I was new to the business. And I was struggling to get the business up and running. And I had some setbacks.
So it was tough. So I was negative on credit cards, and my financial levels were broken. And he tells me that the twin towers have collapsed. And yeah, and he doesn’t say that he says, go turn on your TV. And I turn the TV on, I’ll tell you never experienced anything. as deep and as hard. You know, I remember those bills, I remember those, those videos and the and all that so, so hard, and has never left a memory and will never leave the memory. So I wanted to pause and I kind of took my mind there. As I pressed the record button. And, you know, if you lost a loved one or somebody who you knew, my heart reaches out to you my heartfelt feelings and condolences to everyone who asked I think this goes to all of everyone, everyone. I think all of us have suffered. So at some level from that, we will continue to keep it in our hearts. Just dialing into that conversation. I had my friend yesterday, we were talking about finances. We’re talking about money yesterday. And I will spell my friend about a simple financial plan that my grandmother had, which my mother told me about very late in life.
And it’s interesting that when 911 happened, I was going through a very tough time, financially. And that’s why my goal, the only thing I was doing back then was just I had so much debt. And I was so broken running a business, that I had no idea what to do and how to come out of it. So I used to eat and sleep and the economy was already gone. Anyway, by the time you know it, the.com economy in Silicon Valley was gone. And it was a tough time to be in business. And post 911 Everything went away anyway, it took a long time before everything recovered. It’s seen NASDAQ go from 5400 5500 to 1600. Something’s 16 something. I’ve seen the crash I’ve seen, you know, the emotions, the moods, and everything during the time I experienced that firsthand. So it’s talking to my friend we were talking about. I was telling the story about my grandmother which I think I have talked about here already in one of the podcasts. But if you are new to this podcast, you’re listening or maybe you did not listen to that episode.
Then this is the plan my grandmother had with money which my mother told me very late. So I asked my mom I said Was there any discussion on money growing up? Like how did you manage the house and also there was I remember the discussion all the also the day I was actually driving my mother to my to one of her infusions you know, she was taking the chemo and I was taking her to our pet scan at PET scan. I was taking her to scan and while driving, I was talking to her, No, I was going through another episode of her going through cancer and me trying to juggle my business while see going through her trouble here. So the monthly discussion of money came up. So she shared, this thing with me. And, and which I think she did share also before so, this was a continued discussion that started many years ago, but kind of, she said, your grandmother had a very simple formula for money. Now, she said, there were 16 members in the family. And the household income was 56 rupees, which was technically $50 if you can take it back in those days. So I’m referring to a discussion from 1954 and 1956, that was the timeline 54 To 5054 to 60 That was the timeline, my father was making 56 rupees a month in Indian rupees salary.
And my grandmother was running the house of 16 members. And she had a plan and this is the plan, the plan is simple 25% of that income was going towards the house 25% was going towards the food 25% was going to miscellaneous expenses, whatever missed, there were some expenses because so many kids in the house and, and all that. And patients also some, you know, older members in the family who were sick, that was a joint family then and then 25% towards gold. Because gold was a necessity not to save money or not to possess gold. But gold was required because as the girls in the house grew up, and when their marriages are going to happen, eventually they’ll be married off. At that point, doubt, gold has given us dowry that was my grandmother’s, you know, thinking. And she used that thinking in the 1930s 1920s 1930s 1940s.
It’s an interesting formula that my mother told me, I said, you know why not some other percentages? No, that’s how it is because the Indian rupee 25, per se, not 100% makes one rupee. So 25 per se is a small little coin and backed somehow, somehow four of them make one be. So that’s how they divide mentally. I don’t know how, why that is that way. But that’s how they divide mentally. Now, fast forward, to the year 2022. Here we are. And we’re dealing with some extreme data when it comes to money, and how we plan how we invest how we analyze markets and opportunities, and investments, thanks to AI, a lot is happening in the space. So that was, you know, but the basics are the same. I was drawing a very simple, you know, the battle between what was the 1930s and 40s and 50s. In India, growing up to now living here and just looking at how the markets work and how the economy works. Even today, a good financial plan is that 25% of your net income goes towards your house. Very simple. So 25%, towards your mortgage, property taxes, and all that everything collected hospital here percent, and 25% goes to food. And maybe, you know, some level of entertainment. I don’t know, maybe utilities, something along those lines. But say utilities, food, and utilities, I would actually categorize food and utilities separately, but let’s say for the sake of this discussion, food, and utilities are 20% Then entertainment, transportation, and all that is 25%. And then the last 20% goes towards building emergency funds and maybe investments out of savings. Simple. So the formula still applies interestingly, like if you go back in time by maybe two 300 500 years. The same principle applies because if you look at any budget, there are four things you have food, you have utilities, you have shelter, you have transportation, and the budgeting doesn’t show how to build emergency funds and doesn’t talk about how to favor to save where to invest? None. But those four have been around for a long, long time. So the discussion yesterday was how do you deal with inflation? How do you deal with structure, you know, your expenses and all? And I was like a simple thing. Now, this 25% formula worked back then and works back.
Now, today also provided that you do two things. Number one, your budget, you budget all everything. Number two, make sure that your expenses are less than your income, simple. Two things, if you do the two things, then the 25% formula works. And a simple plan, there is no need for a financial planner to really do this. In fact, I was also I also ended up making a statement to my friend yesterday, saying, You know, you not only invest when you make money, or you save when you make money, but you also save and you’re not making money. Like everything else you’re doing you are you have your food for which you’re spending, you have utilities, you’re spending, you’re spending for your transportation you’re spending for your shelter and all that. Hence, if those things are true, then a certain part of that money should also be going towards saving.
Now, he said, If I’m borrowing money to make my living, while I’m waiting for my income to kick in, should I still be saved? Of course, if you are borrowing on credit cards, or you’re taking personal loans, or your use still should be saving, even though you could be borrowing at 23%. And you if you say then we’ll put that in a money market account, you probably get what a one or 1.5%, whatever that is, even then you should save. Because it’s a habit. It’s a pattern, you fall into it. So a certain percentage of your money as it is coming in, it’s leaving should leave from the top into a savings account. For example, you might have had 401, K’s or you have 401, K’s where money is going in already pre-tax, then post-backs also some money should go in and post expenses. Some money should also go out into investments or savings. So the money goes out pre-tax, and money goes out post-tax. And then money also goes out post expenses so as this pattern is there, it doesn’t matter where the money is coming from. But this pattern has to be played.
Now, you can’t have a pre-tax and post-tax setup when you are borrowing money. But then it’s not seen as income. But it’s a loan. But even as you take a loan, you spend money, and a part of that money should also go into savings. It just establishes and habits and it creates your life more meaningful.
That habit is going to sustain long after you know when you start making big money. And you’ll that behavior is going to be there. As simple as that. So I was sharing this principle with my friend and we got into a big debate on this, but I hope you agree with me. Okay, the idea the reason behind me talking about that here today on the podcast is to see whether you agree with me. And also that this is a way how this is one of the ways how I recovered from my post 911 pre 911 debacle, business debacle. So yeah, so that is the two different reasons behind today’s podcast episode. Hopefully, this is helpful. I still have a lot of questions and more questions are coming in as a result of my radio shows every week now. So I’m going to catch up with those questions over the next few weeks. And over the next few days, not a few weeks, but a few days because I think we’re pretty close. But we’ll see. That’s all for now. So wherever you are, be safe, and I’ll catch up with you as early as tomorrow. Stay tuned.