This weekend we are going to celebrate our 70th Independence Day. India has grown amidst all the stress it has been through the past. Speaking of coming of age we also need to free ourselves in terms of our finances and adapt new methods in our personal finance. Data shows that only handful of Indians have proper financial protection for their families and a very dismal exposure to the growing markets.
But there are things which can cause or already are causing financial stress and hurting your money flow. These habits need to be changed and one should gain total control on their cash flows. Let us discuss some habits or methods from which you need to be free from and take this Independence Day as an opportunity to take action on it.
1) FREEDOM FROM NON-SENSICAL PURCHASES
Every festive season retails market have their tails up and offer numerous offers. All they need is to use the power of digital marketing and big newspaper advertisements to get you onboard with their discounted products. What one forgets is that there is a huge gap between the availability and the need. This makes us buy things which we don’t need but still end up taking one because it was on discount. Let us be free from this habit and make sure not to overshoot the credit card balance or empty your bank balance to first create unnecessary needs and then fulfill them.
Independence Day Pledge 1: I pledge I will always stick to my budget and not fall in the trap of offers, both online and offline.
2) FREEDOM FROM “FREE ADVISORS”
We are repeat offenders when it comes to taking free advice from people who themselves need advice on how to manage their money. Every now and then we have a friend who is a Chartered Accountant giving advice on Personal Finance and investments. At other times it’s an uncle who is a former banker asking you to invest in certain instruments or a distant cousin who happens to be an insurance agent whose sole objective is to sell you an insurance policy. Well, we don’t work hard and earn money just to oblige the targets of others, so better not to ask them on what to do with our money.
Independence Day Pledge 2: I pledge I will get rid of FREE ADVISORS from my life.
3) FREEDOM FROM BEING “BROKE” ON EMERGENCIES
Whenever there is an emergency, we often tend to ask a loan from friends, family and relatives and often use loans and credit card to fill the gap for the amount of funds required. Despite being a savings friendly country, we are always short of liquidity when we need it the most. We usually plan for retirement or a home purchase in next 5 years but often fail to plan for an emergency which can probably take out all the money which you saved for future goals.
Independence Day Pledge 2: I pledge I will create an emergency fund which will be at least 3-6 months of my monthly income.
4) FREEDOM FROM BEING “UNDER-INSURED”
Insurance evolved from being a pure protection product to an investment cum insurance product which itself is a problem. For a brief tenure these products are looked as an effective investment option and still being followed for the same reason. But in this evolution of insurance, the very basic objective has been defeated i.e. pure protection cover. A premium of 25,000 for a policy of 5 Lakhs giving a return of 6% in 20 years may end up in a future where you have just a handful of cash with a coverage not exceeding your annual income.
Independence Day Pledge 4: I pledge that I will never blend investments and insurance. I will ensure I will be free from these obsolete non performing insurance plans and properly insuring ourselves and family against any misfortune.
5) FREEDOM FROM OUR “FEARS”
This happens with most of us. We fear losing money while investing in markets. Well, history suggests that it has happened when markets crashed, people lost money and some even went bankrupt. Blaming markets won’t help stopping money being lost. This volatility often creates a fear in a new investor’s mind. But the problem becomes more complex when your money needs to beat inflation and should grow well enough to fulfill the Financial Goals. There is no other alternative left than to invest in markets .They are risky but a right mix of different asset classes can easily convert the fear to confidence. One also needs to be patient enough to see the markets growing and then take the benefits.
Independence Day Pledge 5: I pledge that I will not try to time the markets, rather I would invest in a disciplined way irrespective of how the markets perform. I understand that long term vision and discipline are the only ways to accumulate wealth. I also pledge not to watch market performance on TV.