You must have heard this before “Your saving ratio is the MOST important number in your life”. I am tweaking it to say “Your investment ratio is the MOST imp no. in your life”.

What is savings? why is it important?

If you were doing a business would you want to earn a Profit? well as long as you are not Nehru, profit is a good word. It is the excess of sales over costs.

In case of a job what is the profit? well if you earn Rs. 20000 a month and spend Rs. 15000 a month, Rs. 5000 is the profit (savings). So when you think of savings START CALLING it profits. The word Profits gets you pepped up but the word savings gets you into a negative ‘scrounging’ kind of a mental picture.

How can a business run successfully without making profits? Exactly. What is the use of working and earning money if you are not saving enough?

Now saving of course is a great thing. However for you to have a comfortable life you need to keep on increasing income and reducing expenses. THUS YOU GET MORE PROFITABLE. Now the saved amount has to be INVESTED. Why invested? So that the amount can earn returns and make the SAVINGS grow. So on the one side you should try to get more profitable (increase income, reduce expenses) and put that SAVINGS to good use. Invest that amount well.

IN MY HEAD THE INVESTING RATIO IS THE MOST IMPORTANT RATIO IN YOUR LIFE. The savings ratio is of course important, but constantly pushing that saving to investment accounts is necessary!!

The greater the gap between your Earning and Spending, greater your savings. Smarter managing of savings is transferring it to investing. This continuous process will increase your Net Worth. Increasing your Net Worth should be your ultimate aim – because when you hit a good NW number you can be financially Free.

So keep track of your savings ratio. Is it 30% or 40% or 50%?

How fast do you convert that savings into investments?

What is your asset allocation ratio? how well do you invest in equities?

How fast is your net worth increasing?

Do you have a clear goal and are you happy with all the above ratios?

If the answer is yes, you are on your way to a good financial life…