The Finwise Couple series – In celebration of International Women’s Day – 3

The Finwise Couple series – In celebration of International Women’s Day – 3

Our third couple are equals in every sense. Amish & Trupti Jasapara are doctors and both are in corporate practice. Amish is Senior Consultant at Fortis Hospitals and Trupti is Senior Consultant at SR Mehta & Sir KP Cardiac Institute. And in their personal lives, both take turns – whether it is in managing the various expenses of their family or in funding for their goals of the future.

 

As Amish says, “As doctors who face the same challenges every day, there was no way we could have been anything but equals. Trupti has single-handedly managed the family and has taken decisions without hesitation, when I took a sabbatical to study in Germany. She is a prudent investor and her involvement has meant that we have not added unnecessarily to our lifestyle and have saved before we spent. We both ensure we are on the same page before we embark upon any new investment/expenditure.”

 

On being asked about when they discovered the need for professional advice, Trupti had this to say “As doctors, if there is one thing which is in short supply, it has got be time. Lack of proper knowledge of investments, some losses incurred and shortage of time directed us towards getting professional help for our investments. Finwise through their systematic analysis helped us understand that healthy financial goals are a reality.

 

Their being professionals themselves, they didn’t have to hesitate when it came to seeking professionals when planning for their future goals, including their retirement. Having done that, they are now able to spare valuable time on other aspects of their personal life – scaling further heights in their professional careers and enjoying the small pleasures in their present, without having to feel guilty about it.

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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Dear woman, don’t be risk-averse in choosing your investments

Dear woman, don’t be risk-averse in choosing your investments

Last week, I did a financial well-being session at a well-known corporate, the participants being predominantly women in their 30s. While they were all keen on taking charge of their finances and made for an attentive audience, most of them were extremely risk-averse.

 

This was startling, since women, usually, are not in a hurry. They are very patient, and once they understand the way a product is built and have realistic expectations of the short-term as well as long-term performance, they wait out the turbulent times patiently and truly stay put for the long term.

 

Given this fact, it was surprising to see that most of the women mentioned earlier were shying away from equity since they perceived the volatility in the short term as risk. There are several compelling reasons for women to take more interest and understand the best options available to them when it comes to investing. Here are three big ones.

 

Read our latest article, published on Moneycontrol.

 

https://www.moneycontrol.com/news/business/personal-finance/dear-woman-dont-be-risk-averse-in-choosing-your-investments-4981251.html

 

Image credit: Moneycontrol

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For advice, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

6 reasons why you still haven’t given time to manage your finances and 1 reason why you should

6 reasons why you still haven’t given time to manage your finances and 1 reason why you should

So, what gets people to have a serious look at their finances and take some concrete steps towards assessing their financial position and formulating a plan for their financial security?

 

Of course, there are some people who are “born” meticulous and organized and hence have their plans all chalked out. But for most of us (based on our experiences), it usually doesn’t happen gradually, rather needs a trigger of some sort in our lives. The trigger could be some sort of personal experience or something that has happened with someone close, or even the sudden unpleasant remembrance of some childhood memory.

 

But until this happens, managing your own money takes a back-seat, while prioritizing work, family, current needs, perceived emergencies and in the absence of all this, pure lethargy. So, here are six reasons why many still haven’t got around to putting their finances in order, and one reason why some have.

 

 

 

 

 

  1. “Whats the hurry? My goals are far away, I have enough time on my side” – THE CAREFREE

Some of us typically think we have a lot of time, and many a times mistake urgent for important. We avoid contemplating the future, thinking that it has a way of sorting itself out. We usually need some unpleasant shock to make us realize that the future is something that doesn’t just happen, but needs to be planned for.

 

 

 

  1. “I know I have to save, but I don’t have any savings left after I pay my EMIs!” THE OVERSTRETCHED

Some of us love running after material acquisitions. We hanker after the latest gadgets. We usually also end up having a lot of unsecured debt (either a personal loan or revolving debt on our credit cards) because we keep running into sudden cash-flow issues. For us, planning horizons are not long.

 

 

 

  1. “I know it’s important, but am too caught up right now, will do it as soon as I can” THE ALWAYS-ON-THE-TREADMILL

Many of realize the importance of putting our finances in order, but somehow never seem to think it important enough to be top of the list. We would be putting in 12 hours at work and still think that’s not enough to meet our commitments. Somehow, crises have a way of finding us and keeping us always in fire-fighting mode.

 

 

 

  1. “I have checked with my friend, colleague as well as online, I just don’t know whose advice is right!” THE CONFUSED

Then there are some of us who will ask, then validate, then re-validate and then re-re-validate. We will seek inputs from the colleague, the friend, the neighbourhood uncle and maybe then go online to check whether we are missing a point of view. Trusting someone and taking decisions doesn’t come easy to us.

 

 

 

  1. “I am sorted, I have invested my savings in some hot stocks and I also have these 2 apartments” – THE KNOW-IT-ALL

A few are us are those who are both knowledgeable and also proud of our knowledge. We will be clear on why things are and how they are going to unfold. We usually have strong views of our own on money and investments eg. owning multiple houses through leverage since we believe we “understand” real estate, buying some stocks because “they are tipped to do well”, and so on.

 

 

 

  1. “I think this is not the right time, market is too high, it might crash” – THE PERFECTIONIST

And then, there are some of us who understand both the need to keep their finances in order and can see the benefits of doing so, but just are waiting for the “right time”. For us, the market is either “too high” and likely to fall, or “too low” and therefore may not go up in a hurry. Strangely, we don’t have a problem seeing our money idle in the bank while we make up our mind.

 

 

 

  1. “I know time is important, every day lost is lost forever. I am in it for the long haul” – THE MARATHONER

Then, finally there are a few of us who understand the value of time and the benefits of long-term-investing. At the same time, we take our time to ask the right questions, understand the value of financial planning, and then quickly get into action mode. Lastly, we are disciplined, at least about money, and once we make up our mind, we trust our judgement and get on with it. Truly, we are called a “planner’s delight”.

 

 

 

So, do some of these “reasons” seem familiar? Which one is yours? Most people we see have more than one, sometimes even a few of these. But importantly, it is when you put on the last “reasoning hat”, that things start moving for you on the personal finances front. For some its timely, for some late, but as the popular saying goes, better late than never.

 

 

Image credit: Anemone123%, Pixabay

 

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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Why discussing finances is mutually beneficial for spouses

Why discussing finances is mutually beneficial for spouses

I always wonder why it is so difficult to talk about money even with your spouse. You are comfortable talking about almost anything under the sun, but talking about money seem petty and crass. To my surprise some women refuse to do it even when they have a gun to their heads.

 

Why should you wait to be pushed against the wall to have a conversation? Marriages are meant to last a lifetime and it is impossible to traverse this journey without discussing money. At some point of time in a relationship one needs to move from Mine to Ours.

 

Read our latest article, published on Moneycontrol.com

https://www.moneycontrol.com/news/business/personal-finance/money-matters-why-discussing-finances-is-mutually-beneficial-for-spouses-4877221.html

 

Image credit: Moneycontrol.com

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For advice, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

“What problem of mine can you help me solve?”

“What problem of mine can you help me solve?”

It is that time of the year, when everyone seems to be in a bit of a party mode. It is also that time of the year, when increasingly, school/college friends are meeting up for reunions! I was at one such reunion a couple of weeks back, and, as is oft the case, was meeting some friends after many many years. After many hugs and a few jugs of beer, during which time we reminisced about old times, discussions veered towards the serious stuff, including politics, the economy as well as catching up on each of us, both on the personal and professional front.

 

With everyone’s kids around similar age bands, there was some serious collective letting-off of steam about the pressures involved in being parents to children who preparing for their Std X or XII exams (Eg. don’t ever remember studying so much even for an engineering paper in our 3rd year as compared to what kids nowadays have to do for a Std X paper, OR how the current standard of Maths and Science in Std X is akin to what was done in 1st or 2nd year graduate courses in our generation!)

 

Things then moved on to what we were doing on the professional front and how we were coping with the pressures on the job, the state of the economy, and so on. I had left my corporate career to join my spouse in our small personal financial planning and advisory business and when I explained that I was a financial planner, there were the usual reactions – how exciting it must be to be on our own, how courageous we were to have taken such a step, some questions on how I was liking it, etc.

 

Of course, there were some who also wanted to know what exactly financial planning was, and what exactly it was that I do, which again is something that I am (by now) used to. I then (as usual, passionately) launched into a description of what we do as financial planners, how it helps people, and what our typical assignments are. Things took an interesting twist, when one of them asked a very interesting question – “What problem of mine can you help me solve?”

 

While I of course answered the question and the follow-ups that came post that, it set me thinking. As I have discovered over the past many months, over various interactions with customers and others, financial planning means different things to different people. Importantly, it actually is “solving different problems” for different people, as long as the problems related to money. In fact, it actually doesn’t matter what I say I do as a financial planner, as long as people, including my customers see that I am helping them solve some money problem of theirs, which for them becomes “their understanding” of financial planning.

 

So, what “money problems” can a good financial planner-adviser help you solve?

 

 

The “LIVING BEYOND MEANS” problem

A few people we meet are earning well and spending even better. No, it doesn’t mean that they don’t have any savings or assets, just that they underestimate the needs of the future while getting hooked onto today’s pleasures. For such a person, a financial planner acts as a quick wake-up call, who puts things in perspective, and is a catalyst for habit changes.

 

 

The “TOO BUSY TO GIVE TIME” problem

Quite a few people we see are financially prudent, but are successful individuals, so caught up in their day-to-day work and life that they are simply are unable to spend quality time on growing their money. Their investment decisions therefore are impulsive, driven by products that get sold to them or event-driven eg. taxation insurance. They end up collecting a disparate set of investments, lacking purpose and inefficient in performance. In such cases, a good financial planner can help become both the filter to weed out wrongly-sold or ill-intended products as well as the channel to invest their money in vehicles that are both risk-appropriate and goal-appropriate.

 

 

The “INCORRECT ASSET MIX” problem

Many customers in the middle years bracket (age 40-50, double incomes, good jobs) are reasonably secure on the wealth creation and savings front. Like most of their generation, they own multiple houses, and while these were popular investment avenues, they are not necessarily the right asset-mix for future goals like children’s education and retirement, due to their illiquidity, as well as the current question-mark on long-term appreciation prospects. For such customers, a good financial planner helps them restructure their portfolio, keeping their risk profile and goal horizons in mind.

 

 

The “WHERE TO INVEST” problem

Some customers we meet are both personal finance savvy and investment-aware, meaning they have a good handle on their financial position as well as understand most investment asset classes and their risk features. That said, they lack the time as well as inclination to identify the right products, which will give them the right performance metrics while keeping in mind their interests and their risk appetite. In such situations, a good financial advisor helps provide the right mix of adequately diversified high-quality products to meet their needs.

 

 

The “NEED PEACE OF MIND” problem

Lastly, a few are completely sorted and only need a bouncing board to help validate their approach as well as decisions. Some may be good on the financial investments front but are inadequately prepared to face unplanned challenges in their life in case of unforeseen events. For such people, a good financial planner provides peace of mind and a tangible improvement in quality of life by allowing them to outsource their worrying nature as well as the outside chances of having uncovered risks.

 

 

Whichever it is, suffice it to say that a good financial planner/advisor’s primary role is to “solve money problems”. So, rather than try and understand from prospective financial advisors what they do, ask them – “What problem of mine can you help solve?”

 

Credit: M, a good friend from college whose pertinent question not only made me pen this, but also helped hone our customer propositions.

 

Image credit: Mohd. Hasan, Pxhere

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For advice, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

What role does your Financial Advisor play in your life?

What role does your Financial Advisor play in your life?

If you were asked to describe a good financial advisor, what would your response be? Based on our experiences over the years, let me go out on a limb here and say that the most popular responses are likely to be from among the below.

  • Someone who is trust-worthy, whom I can trust with my money
  • Someone who is available to me for advice when I need and has my interests at heart
  • Someone who will make my money grow at a decent pace while also ensuring that it is safe

 

Of course, there could be other responses, do add them in the comments section below. That said, if I am right till here, let me turn around and tell you that these expectations are rather basic and should describe any financial advisor worth his or her salt. I fact, these above “virtues” should be basic minimum expectations for anyone to qualify as a financial advisor. After all, why would you even consider using the services of someone who is not trustworthy or not available when you need or not competent?

 

So, what then actually makes a good, rather “really good” financial advisor? In my view, a truly good financial advisor will have the qualities of these professionals as well!

 

 

 

 

 

 

  1. Doctor

A doctor diagnoses ailments basis visible symptoms, necessary reports and probing, identifies them as chronic, acute or placebic (imaginary), and treats accordingly.

Similarly, a good financial advisor should be able to unpeel your personal finance onion layer by layer to identify your money problems so that the right approaches can be used to put them in order.

 

  1. Accountant

Just as an accountant helps you put and keep your books in order, as well as plan and stick to a budget, a financial advisor helps you understand your personal financial balance sheet and profit-loss statement, co-creates a plan with you to nurse them back to health and helps you execute a budget for your household.

 

  1. Designer-Architect

A designer-architect understands your personal desires and aspirations and helps you accordingly build a home that feels like yours and only yours.

In the same way, a financial advisor understands your personal financial goals, helps you prioritize them and works with you to construct your own castles.

 

  1. Policeman

A financial advisor is your personal money police and helps you stay on the right side of your plan and budget, while also reading you the riot act once in a while when you step out of line!

A financial advisor also is the person who you will run to in case of any doubtful or poor experience with your money, to seek advice on damage control as well as salvage.

 

  1. Lawyer

A lawyer helps you interpret the rules or the laws specific to your problem and finds a way to solve your problem for you within the available space to your best advantage.

Just like a good lawyer, a financial advisor always has your interests as paramount and protects them at all costs, even if you are at times being criminal with your money! Though at times she (or he) may not be civil about it!

 

  1. Psychologist

A psychologist studies people, their thoughts, feelings and behaviors, in an effort to understand the “why” behind people’s actions so that they can help plan appropriate corrective measures.

Likewise, a financial advisor understands you as a person, your relationship with money and your deeper motivations so that his advice is tailored to suit you as a person. At times he also gently corrects you when you are making common behavioral mistakes with your money.

 

  1. Teacher

Last but never the least, a teacher is someone who imparts knowledge and wisdom to her students, feels pride at their successes and then selflessly moves on to the next batch, ready to start the journey all over again.

A financial advisor too helps you move along the path of “personal financial wisdom” from safety to security to freedom, is there with you to celebrate your small wins at every step and when finally, your financial goals get achieved, feels proud to have helped make it happen.

 

So, if you have a financial advisor, how many of the above qualities does he or she have? And if you don’t have one as yet, use the above as benchmarks to set your expectations so that you select the right one!

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For advice, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

 

Image credit: foreside.com

 

Many a times, the battle is lost for the want of a horseshoe!

Many a times, the battle is lost for the want of a horseshoe!

For the want of a nail the shoe was lost,

For the want of a shoe the horse was lost,

For the want of a horse the rider was lost,

For the want of a rider the battle was lost,

For the want of a battle the kingdom was lost,

And all for the want of a horseshoe-nail.”

 

― Benjamin Franklin

 

 

It may not sound nice to the ear, but as Indians, we are, in general, poor at DIY (Do It Yourself). As such, we are not brought up in a DIY culture and this perpetuates. Even now, we are used to having help at home for the smallest of things, and as a result, an average middle-class Indian is hugely lacking in basic life-skills as compared to his counterparts in most developed economies.

 

To make things worse, we place a premium on DIY when it comes to knowledge-skills. It could be that it gives bragging rights that you could manage something by yourself, when many others found the need to engage with a professional to get ahead.

 

For example, we resort to self-medication because the symptoms seem “similar to what she had” or worse, we googled it up. Similarly, planning and managing your personal finances often is a DIY activity. While this may work at times, what many people don’t see is the many risks that one may encounter due to this.

 

In the hundreds of interactions with numerous customers over the past few years in my financial planning practice, I have seen many such mistakes committed. I have tried to list a few commonly encountered ones to help you avoid the DIY trap.

 

Investing too little

This is something we see often. There is a lot of media noise around mutual funds, and listening to the ‘mutual fund sahi hai’ campaign on a constant basis, people feel the need to be a part of the success story. They decide that setting aside some money is required and start with some small amount. A person whose monthly expenditure is Rs 1 lakh starts saving Rs 10000 per month in MFs and is very happy that he is putting something away for the future. For a low-income family, whose monthly expenses are Rs 25000, being able to save Rs 10000 per month consistently truly deserves a pat on the back, since the family is saving a substantial part of their income and may well on its way to financial freedom. But in the above example the Rs 10000 investment in mutual funds is not going to help you save anything substantial and is a mere tick-mark activity which lulls you into believing you are saving, thereby allowing you to indulge guilt free.

 

Not assigning any goals

In almost all cases when money is invested there is never a purpose to it. When you invest without a purpose it is mentally extremely easy to redeem. The next iPhone upgrade or the long-dreamt-of trip to New Zealand seems like an emergency, when you have sufficient money invested. Imagine if the savings were given a name, say Child Higher Education Fund. What are the chances that you would withdraw from it, to fund your trip to New Zealand?

 

Trying to time the market

When you are sitting on the fence, it never seems like the right time to start investing. One month you are worried that the markets are creating new highs every day, second month you are worried that the political situation may spell dooms day to your investments and the third month you are worried about recession. If you are investing with a horizon of 7 to 10 years what happens in this month or the next is not going to have much of an impact on the outcome. What is important is to get off the fence and get into the field of play.

 

Investing in schemes based purely on recent performance

Most investments are based on past performance, and even star ratings of Mutual Funds are largely based on past performance. One should keep in mind the recent performance has a huge bearing on the 1-year, 3-year and even 5-year returns. It is also important to understand the reasons for the outperformance or underperformance before deciding. Make sure that your investment advisor has a proper framework for selection is important.

 

Discontinuing investments during down times

Markets are by nature turbulent, and you are going to have to accept your share of this, if you are in for the long haul. It is important to have conviction in your choices and stay put. However, there is a lot of noise in the media and Whatsapp forwards from well-meaning friends proclaiming that doomsday is around the corner. The immediate instinct in such situations is to stop any further investments. However, that would be a very bad strategy since you are getting an opportunity to accumulate at lower prices. Unfortunately, this awakening will come in hindsight.

 

Not bothering to understand tax implication

Many a times we see people have invested without understanding the tax implications. Just because the dividend which is given to you is tax free does not mean there is no tax applicable on it. It is paid out after tax is paid by the AMC. There have been cases were people have invested in dividend pay-out option for years when they had no use for the dividend and had no clue what they did with dividends. They would have been better of in growth option where the capital would have appreciated substantially given the long tenure of investment. In other cases, we have seen people in 10% slab investing in dividend option of Debt fund where the tax is much higher. Investing in NPS without checking the taxability on exit. Buying ULIPs purely for the taxability. The list is very long and exhaustive but I guess the point is made.

 

Have a laundry list of investments in the name of diversification

The intention is right, one should not put all eggs in one basket. However, having 25 schemes in the name of diversification is no good. Further there is no thought given to overlap. It would be a good idea to start investing only after you clearly decide how much goes into debt, equity and other assets. Within equity you need to decide percentage allocation to MF, stock, PMS etc and have optimum stocks /schemes and not go over-board with it.

 

Taking your RM at face value

For many clients, the trust they have on the RM is a transfer of the trust they have in the Bank. They truly believe that products suggested by him/her is totally in their interest. I wish this were true, but its not! We encounter customers who have been sold the wrong products – eg. bad performers, high lock-in products with little or no exit options, complete laggards, etc. so often. Remember, there is no free lunch, if someone is giving you a “free” recommendation in your interest, it may make sense to understand how he is compensated for his time and effort.

 

Herd Mentality

Last but not the least is following the crowd. The crowd is always excited when markets are touching new highs every day. They don’t want to be left behind and hence jump in when markets have already gone up. However as soon as they see some down side they want to jump the boat. Where-as caution is in order when markets are going up and one should invest more if possible when markets are going down. However, to do this you require conviction and belief.

 

 

As the title says, it makes little sense to learn by making mistakes with your own money rather than engaging with a professional at a fraction of that sum. They could guide you to take better decisions and keep you safe from your impulses.

 

After all, Benjamin Graham did say ‘The investor’s chief problem – and even his worst enemy – is likely to be himself.” Think about it!

 

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For advice, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

 

Image by Steve Buissinne from Pixabay

“No Pain, No Gain” is as true for your finances as it is for your fitness!

“No Pain, No Gain” is as true for your finances as it is for your fitness!

The year seems to have flown by quickly, with less than 4 months left for it to end. As I look back at the things I planned to achieve, one stands out – getting fit! This has been on the list for nearly a decade and this year, I finally managed to get somewhere close. This journey of mine towards fitness, has many parallels with people trying to get financially independent and this has helped me understand and empathize with customers better, by looking at the need for financial planning, being in their shoes.

 

Phase 1 – It’s a breeze, I can do it myself. I don’t need a trainer

When I decided I wanted to get fit, I thought it would be a breeze, and now that I had decided, all I had to do was do a bit of exercise and eat smart. I could not understand why people engaged with a nutritionist and trainer. What a waste of money and time, to do something as basic as getting in shape, I thought.

 

Armed with the newfound motivation to get fit, I did a bit of walking, changed my eating habits very slightly and looked at the weighing machine with hope every few days. It just refused to move. This whole phase lasted a few years. There was no consistency in my effort, and though the intent to do it right was very much present, it always kept getting pushed to “tomorrow”, which obviously never came.

 

I see many parallels to this in the journey of people trying to achieve financial independence. Many of them start out saying this is common sense, just save every month and very soon you will have a good corpus. The amount they save has no correlation to the goal they are trying to achieve. The investments are dipped into at the slightest of provocations. The newly launched phone, a lavish birthday planned, are all legitimate reasons to put the savings on hold.

 

I often tell people – don’t kid yourself by starting an SIP for a miniscule amount, its only a tick mark activity, and unlikely to ever take you anywhere on your path to financial freedom.

 

Phase 2 – I need a bit of motivation and help, nothing personalised, let me join a group

It took me a few years to wake up to the fact that my walking and working out on an irregular basis was not going to deliver at all and I did need some help. I decided to be smart and achieve the target by joining a running group. It was of course better than phase 1, and since I had paid up, I did manage to train 3 times a week and made some fabulous friends. It was also a good point of discussion in many social gatherings on how I trained for marathons. Yes, I did manage to do a few marathons. Neither did my timing improve nor did I lose any weight or inches. I can now honestly say that I was nowhere near my definition of fitness.

 

Again, in their financial independence journey, I see that most DIY people at some stage, sufficiently alarmed by the years passing by and the savings pot not growing in tandem, move to seeking advice from some form of website or robo-advisor or even “tips from knowledgeable friends” where they get advice instantly on where to invest and how much. There is a sense of achievement on being more systematic with investments. There again, they may end up saving more than they did previously but are they really taking their entire unique situation into consideration and moving comfortably towards their financial independence, is something they need to ponder on.

              

Phase 3 – I need proper personalised guidance to help me get on track and stay there, let me engage with a professional

 

I finally realised that if I seriously wanted to get fit, I would need to engage with a professional who knew his job and so, I enrolled with a personal trainer. I now realised the difference between what I was doing in the name of exercise and what it really meant to exercise. I was consistent and trained 3 days a week without fail. I started to lose inches and feel more energetic. The weight wouldn’t budge. I realised that I would not only need to exercise but also ensure that my nutrition was right if I were to get anywhere close to being future-fit from a health point of view. I then visited a naturopath to get rid of some of my niggling health issues. My stated objective was to get rid of allergies, my secret hope was to lose weight. Major lifestyle changes were suggested by her, give up on sugar, no processed food and a lot of other changes. I followed advice strictly. The initial few weeks were very difficult. Despite giving up my favourite food, there was no improvement. It took few months for the changes to be seen. And a few more for people to comment on it.

 

A journey towards financial security and independence is similar, your situation, goals and aspirations are unique and hence advice that is personalized keeping those in mind will hold you in good stead. Similar to the above story, just concentrating on one thing, investments, is not going to be sufficient to get you to your destination. Apart from investments, you would also need to look at your spending and income. Like with my weight, you may secretly aspire for a certain return. You may peg it to the best return you have got over a life-time and evaluate your investments against your benchmark. Your planner will not even be aware of what you are anchoring your expectation to.

 

Financial planning requires you to see much beyond returns and wait patiently without losing faith during turbulent times. At least in the above case of my health, results started showing in a few months post engaging the right professionals. In case of your finances, it may take a few years for you to see meaningful results. In the interim there is only pain, since you will need to cut down on unnecessary expenses, ensure you invest smartly and stick to it even when you see you are getting unsatisfactory, maybe even negative returns.

 

Again, unlike the fitness story, there is no before- and after- picture to flaunt, all you will have is peace of mind that you are well prepared for your future. No one is going to compliment you on your financial health, unlike your weight. What you will see though, is that you are inching closer to your life’s goals, sometimes because of your returns and sometimes despite your returns. Either ways, having someone who has your back through the journey and motivates you to stay the course and steer you clear of some impulsive emotional actions can be invaluable!

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For advice, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

 

Image by 5132824 from Pixabay

Millennials – 7 mistakes to avoid in your wealth creation journey

Millennials – 7 mistakes to avoid in your wealth creation journey

For people in their middle-years, what would have been their biggest or deepest aspiration during their early working years? If I were to hazard a guess, I would think that for most people it would be “being wealthy”. The reasons for wanting to become wealthy may vary, since every person’s needs and wants are different, but it would be fair to say that for most people, their significant aspirations in life would be around money and what they could do with it.

 

A lot of young people think that wealth creation is something that requires tremendous smarts. That it requires access to knowledge not easily available to most, as well as huge skills that help apply the knowledge and convert it successfully into wealth. And that it requires some “big ideas” that will help one break out of the rat-pack. It may gladden you to know that not having access to all of the above can still make you wealthy.

 

Actually, the fail-safe way to having enough wealth to take care of all your (including your family’s) aspirations for your entire lifetime is in not doing a few basic things in life wrong, and in case you already have, correcting them as soon as you can. So, let me put down 7 mistakes that you should not make in order to build adequate wealth in your lifetime.



 

  1. Not having a check on your discretionary spending

For most young people, the first few years earnings are spent fulfilling their pent-up aspirations, without necessarily caring about keeping something aside. While some of it is understandable, the danger is if it continues without a check. The first principle of building wealth is to save first and then spend. So, keep aside something as soon as you start earning, and then spend on your material needs.

 

 

  1. Over-leveraging yourself early in life to buy “assets”

Another thing many people do early in life is take “big decisions”, the most common of which is buying a house. The power of money compounding over long periods of time is magical and early savings can multiply manifold if invested effectively. Unfortunately, these savings instead get locked into EMIs for repaying loans that leave a young earner barely any space to save or invest for most of his early years. In an “uberized” world, having a home as a personal asset is no longer a necessity. And even if it is, you should consider it much later, when it is a smaller part of a diversified portfolio.

 

 

  1. Upgrading ever so often to “keep up with the Joneses”

Nearly every device that comes into the house (or driveway) turns old, if not obsolete, in a couple of years. And getting into a constant upgrade cycle, whether it is your mobile phone, cars, smart TV or household appliance, can be quite draining on your finances. It is important to have aspirations and fulfil them, but just make sure that you aren’t doing to it to “keep up” and importantly, that your finances can afford it.

 

 

  1. Investing based on “tips from friends” or even worse, your “private banking RM”

This is the easiest way to lose money, and at an early stage in life, can form experiences which impact decisions throughout your life. A basic principle behind taking investment advice is making sure that the person who gives the advice has incentives that are aligned to your needs. If you lack the discipline (most fall in this category), find an adviser who you can trust, and who represents you, not the products on offer.

 

 

  1. Confusing investments with tax-planning

For many young people, investing equals tax planning. And hence their quest for investments begins in tax season. And in the hurry, wrong decisions are taken basis faulty advice. Remember, the tax you pay is a miniscule part of the overall wealth you have today and in the future, and hence basing your investment decisions on your tax needs is plain wrong. A good adviser will also help you take care of your tax-related investments.

 

 

  1. Not having goals and time horizons for your investments

An investment by itself is incomplete, if it doesn’t have a goal. And depending on the nature or priority of the goal and it’s time horizon, the savings need to be channelized into the right investment. Not having goals in place means that your investments don’t have direction and hence decisions regarding them will get made ad-hoc, basis the vagaries of the market. So, while you deploy your savings into investments, make sure you have a goal in mind, and the investment is appropriate to the goal, basis its time-horizon and your risk appetite.

 

 

  1. Not planning adequately for the unexpected

Lastly, while the going is good, not making the above mistakes can put you on the right path to financial security. But over a lifetime of a few decades, there will be a few mishaps. Making sure that you have the resilience (both financial and otherwise) to overcome them will mean the difference between being wealthy and not, at the end of it. Hence, make sure that the unexpected is not unplanned. Take care of not only your insurances (life, health, assets) and contingencies, make sure you are nurturing your biggest source of wealth – your skills, by upskilling yourself periodically, and in time.

 

 

So, as I said before, building wealth over a lifetime, is more about not making big mistakes, rather than about getting everything right. For those who are already on the path, use the above rules to review your financial health and for those who are just setting out, make these your cornerstones for your wealth creation journey. As Charlie Munger said, “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”

 

 

Finwise is a personal finance solutions firm that helps individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For consultations, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

 

 

Image Credit: Free To Use Sounds, Unsplash

Do you know your “Finish Line”?

Do you know your “Finish Line”?


Over the last few weeks, Std X and Std XII results across various boards have been announced. As usual students all over have done very well, with many students scoring a full 100% as well, and 95-96% almost seeming like an underperformance!

At the risk of sounding a bit geriatric, it seems to me that while our times were reasonably high-scoring too (if am not wrong, my school topper in Std X got around 88-89%, and I was very happy to be in the same decile), in this generation, this scoring business has gone a bit too far. I would like to think that, beyond a certain point, how much you score doesn’t actually determine success in later life, and vice-versa. Also, this extreme focus on scoring in academics in the early years takes away from valuable life-skills and competencies that should be learnt or built, that, I can say, from experience, are likely to hold our children in greater stead in the later years.

But as is said, life is a race, and you have to run it, like it or not. It’s just that no one tells you what kind of race it is! And hence, despite our best efforts both during education and work, we aren’t adequately prepared for it!

 Life in school and junior college seems like a 100-meters sprint, with everyone (well, it seems like nearly everyone nowadays!) scoring in the top few percentages (just like in a 100 mts race, where every finisher is within a few milli-seconds of each other).

 

And hence when we reach “real life”, ie. higher and post-education years, we are still prepared for a sprint and we get a rude shock when it starts resembling something completely different!

 My take on this is that Life is actually a special kind of long-distance race because of the following two reasons.

 One, like a steeple-chase, there are some reasonably-heighted thresholds that one needs to get past. Beyond a point, how high you jump doesn’t matter, as long as you cross the thresholds.

 These thresholds are personal performance as well as personal skills related, ie. making sure that you do reasonably well in your education and initial corporate life, including learning the necessary life-skills. Eg. good performance in your major exams, landing a good job, getting the right breaks at work, building the right professional skill-sets, etc.

 Like in a race, success is about making sure that one doesn’t trip on these thresholds. Else, the race in future can have various handicaps.

 Two, like in a long-distance race, while all are running, each is running at a different pace, and after a time not running together at all. The race also has a bit of trail thrown in, where one can get lost for a while, in search of directions! Importantly, after a point, each one is running his or her own race, trying to do as best as possible.

Like all races, this one too is a success only if you finish it. The unique thing about this race is that one can determine where is the “finish line” and plan for it. In a way, everyone has his or her own finish line, which they have the freedom of deciding, and which then, they have to reach.

 Reaching your finish line successfully means that you have gained financial independence and have the freedom to retire, to do what you love with your time, to follow your passions.

 The key to winning your own race is to identify your finish line well in time, having a plan to run this race well, including for any unplanned detours on the trail, and reaching your finish line in good shape, feeling happy that you could actually run a couple of miles more!

 So, do you know your finish line? What and where is it? If you do, then do you have a plan to reach it in good shape? And if you still have a good bit of the race to go, are you prepared for the thresholds that will come your way?

 Photo by Jenny Hill on Unsplash.com

Finwise is a personal finance solutions firm that helps individuals and families plan for their financial goals, follow their passions and achieve financial independence. For consultations, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.