3 Investment habits of the elderly to follow and the ones to discard

3 Investment habits of the elderly to follow and the ones to discard

Have you ever had conflicting emotions regarding the same issue?  It seems to happen quite often to me when I look at the ways in which senior citizens handle their money. At times I feel, I wish I could be as well planned and involved with my own finances.  At other times I roll my eyes and make myself a promise never to end up like them when I grow older.  I guess its only natural that there are somethings which you envy and some which you absolutely detest and don’t want to emulate ever.

This my attempt to list down 3 things I would love to work on with the older generation as an inspiration and 3 things I would want to do differently than them for sure.


Pl read our latest article, published on Moneycontrol

 

https://www.moneycontrol.com/news/business/personal-finance/3-investment-habits-of-the-elderly-to-follow-and-the-ones-to-discard-5731961.html

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Image credit: Moneycontrol

 

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8 timeless money lessons reiterated during the pandemic

8 timeless money lessons reiterated during the pandemic

For most people, the last few months has been a never-before experience. Whether it is about finding out how secure is your financial position in this crisis, or about understanding what is really important for you versus isn’t, or about looking for new opportunities in an otherwise generally hopeless time, it has been a period of discovery.

 

For me, this period has reiterated a few money lessons which I have learnt and personally tried to follow over the last few years. If anything, this crisis has confirmed to me that the path towards financial, in fact, overall well-being lies along successfully practicing these lessons.

 



Read about them in our latest article, published on Moneycontrol.

 

https://www.moneycontrol.com/news/business/personal-finance/8-timeless-money-lessons-reiterated-during-the-pandemic-5696081.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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Loans for Goals: 5 steps to use leverage for your financial well-being

Loans for Goals: 5 steps to use leverage for your financial well-being

A few months back, I met a friend of mine who was down from the US on a holiday. This is someone who had done quite well for himself over the last nearly 20 years in the US, and has built a fairly large investment portfolio. As part of it, he has also successfully built a real estate portfolio over the years in the US. Discussions veered towards that, and he said something that made me sit up.

 

His words were “I love Leverage”.

 

The use of the word “Leverage” instead of “Debt” somehow made all the difference for me to look at it in a new light. Yes, loans are bad, and one should be debt-free in one’s pursuit of financial well-being. That said, I have since also realized that Debt is not as one-dimensional as one thinks it is.

 

Coming back to the original question, let’s look at Debt differently and build some simple rules around it, which can be generally followed, towards one’s financial well-being.

 

Read our latest article below, published on Moneycontrol.

 

https://www.moneycontrol.com/news/business/personal-finance/loans-for-goals-5-steps-to-use-leverage-for-your-financial-well-being-5549181.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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Finwise Person Sketch – Start Early, Learn from Experience and Stay the Course – basic ingredients for a financial fairy tale!

Finwise Person Sketch – Start Early, Learn from Experience and Stay the Course – basic ingredients for a financial fairy tale!

In the last couple of years, we have featured a few people in our Finwise Person series on International Women’s Day, giving you a sneak-peek into their approach to money. As part of our financial planning practice and even otherwise, we have had deep conversations with quite a few people on how they manage their finances. What stands out from our experiences is two things.

 

One, while many have managed to put themselves in line for a financially-secure future, only a few were necessarily financially aware or savvy from the word go. Most of them learnt along the way, from parents, peers or other personal experiences, to craft a path towards a financially-secure future for themselves.

 

Second, while many have got on this path, by design or by default, most are still playing catch-up, and only some have managed to get ahead in the journey towards financial security. Through adequate and diligent planning, they have secured their futures, outsourced their risks, and made provisions for estate planning too.

 

Our featured Finwise People have generally managed to clear both the above filters – gaining awareness as well as taking necessary actions to secure their futures. It is also interesting to understand how they traversed this journey, and our previous story on Mrs M did just that.

 

We are today featuring a detailed sketch on another Finwise person, and it is only a coincidence that this is also a woman, it could also be a Finwise man or a family, hopefully soon. This time we feature Uma Vinay Gathani,  an entrepreneur, who is 58 years old. She is financially savvy and has managed to secure her future as well as generously support her kith and kin who have not been as fortunate or well planned.

 

If you are thinking many people would tick these boxes, think again. While the number of people who do so are few, they are significant, and we would love to cover all of them. We understand though that not everyone is comfortable discussing their journey with unknown people, and we are very grateful to Mrs M and Uma who agreed to share their personal stories. The purpose of sharing these journeys is to encourage and motivate more people to take active interest in their finances and embark on their journey towards financial fulfilment.

 

We go back to the beginning to understand what Uma’s earliest experiences were.  We have noticed this could have a significant influence in the way we deal with money in our lives. She is the youngest among 5 daughters and was born and brought up in a well-to-do family. Her father was money wise and took it upon himself to provide financial security for all his daughters.

 

When she was young, she gathered that while her father did reasonably well for himself, he had many obligations and too many people to think of and hence was not very good with investing his money and prioritizing his own future needs. As a child she remembers her house was always filled with guests, some close relatives and some acquaintances. Her father was generous and took it upon himself to help people as much as he could and her mother was a warm, kind, and hospitable person making every visitor feel totally at home. She does not remember even one instance where her parents expressed any regret for not having any male child or dissuaded either her or her sisters from doing anything due to their gender.

 

When she was all of 17, she was pursuing her graduation and her college timings left her with a lot of free time. When an opportunity came her way to take up a job, from 11 to 5 (she was done with college by 10 am), her parents gave her their blessing and were happy that she was occupied doing something productive. Her first job meant she had a salary and she could do exactly as she pleased with her money. She spent most of her money on eating outside and some small indulgences on top of it. Her mother encouraged her to travel comfortably and even paid for first class train tickets. The job was never about income for her or her parents.  

 

Her earliest experience with savings was a local reputed chit fund, enrolled by her father in her name, and when she eventually completed her graduation and took up a job which paid better, she decided to start contributing towards the same. She did not have any pressing need to start saving, her only objective was to fend for herself and not become another responsibility for her father who already had plenty of people to worry about. While she started small, she was consistent with her savings right from when she started earning.  

 

She married into a Gujarati family young and was fortunate to have supportive in-laws who encouraged her to continue to pursue her career after her marriage. When she had a daughter, she was able to continue her career without a break, thanks largely to her mother and mother-in-law who supported her by taking care of her daughter in her absence. With new responsibilities, she started an RD and invested in FDs whenever she had a surplus, while she continued with her chit fund.   

 

Her first foray into building assets was buying a house, which came naturally to her as she had seen her father attach a lot of importance to real estate as an asset. She was clear in pointing out that she did not have any plan, and never thought of retirement or savings. She believed in enjoying her now, and in her early days would often deplete her entire financial savings to splurge on a vacation or something which took her fancy.  She also said that earlier she had no concept of emergency fund or saving up for daughter etc. When quizzed if she would do things differently were she given a chance to live her life again she said and instantaneous, emphatic “No”,  her retort was “we made some beautiful memories and if I were to do it all over again, I would do the same”.  That said, she strongly feels that savings should begin early, and one should be consistent to be able to enjoy one’s sunset years with-out any stress.

 

Her only form of savings was real estate since she purchased her parental home from her mother and since she was busy paying it off, she did not have much to invest in any other asset. When she realized she had to move beyond real estate, she decided to diversify by investing in stocks. Unlike now, nothing was digital, and she had to depend on a broker, she realised that she would have to outsource this to someone else since she did not have the knowledge, the time or inclination to manage investing on her own.

 

Some of her initial experiences were bad and she lost a large sum, when she trusted someone to handle her stock portfolio, and leave aside appreciation, she lost even the entire capital invested. That is when she decided to stick to simpler products which she understood. She started out with mutual funds by making a small beginning around 10 years back. She kept investing consistently and was able to diversify her portfolio.

 

While she is not a great believer in having a plan and sticking to it, she has a nose to sniff out risks and stays out of complicated products. She is able to sleep sound at night knowing that she is doing her best to ensure her lifestyle is not compromised post retirement. When asked why she was generous in helping others, she said it is the dual effect of genetics inherited from her father and a husband who believed that money is only a means not an end.

 

When we look back at her journey what strikes me is even though she may not have had a written-down plan which she followed meticulously, she was mindful of the fact that there will be a tomorrow where she may not be able to generate an income, and she was diligent in stashing away something for the future.

 

Her choice of assets have evolved with time, and it is smart to start with something you are familiar with and then look out for other options. She quickly realised that having all eggs in one basket, in this case real estate, was not desirable and hence diversified into financial assets.

 

Importantly, most people would be deterred by an initial setback, but she was able to look it in the eye and continue on her financial savings and wealth-building journey, by ensuring that now she relied on someone dependable but continuing with the process of investing.

 

She has also been prudent to ensure her risks were outsourced and she had sufficient insurance to cover any contingency. And despite having an only child with clear succession, she has embarked upon making a will and tying all the loose ends together.

 

All in all, this insight into the life of someone who has managed to take active interest in her financial wellbeing, recognise her limitations, persevere even when she was let down  and make best use of the resources available to her, makes for fascinating reading, as well as inspiration for others who are traversing the same path, towards financial security and well-being.

 

And this can also be comforting for someone who has not yet given a serious thought to getting his or her financial life sorted. Because, it is never too late, and a few years of consistent savings and focus can make a world of difference.

 

 

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.

3 ways to quickly check if you need a financial planner

3 ways to quickly check if you need a financial planner

Personal finance and investments related advice is omnipresent today. Open any regular newspaper and they have a daily page devoted to personal finance. Surf the TV and even normal entertainment and mainline news channels have programs which “help” customers on their personal finances and give product-related advice. On most infotainment portals, Personal Finance is a separate section and every few articles, one on personal finance advice pops up.

 

This surfeit of information has created a not-so-desirable impact for us though – easy access and availability of so much information makes us think that we now “know enough” and can even “do it ourselves”. That said, there is an information overdose even on the products side, so how does one be sure? That’s where financial planners and advisors come in. In our experience, hiring a financial planner is usually a big decision for people to make, and hence they end up delaying both this decision as well as their investment decisions, doing themselves more financial harm in the process.

 

So, how can you decide if you need a financial planner to help you with your personal finances? I am sharing below 3 simple thumb-rules which can help you decide. If your answer to even one of these is a NO, then you surely need one.

 

 

 

RULE 1 – THE SAVINGS RULE – Save at least “your Age %” of post-tax income

 

What – At age 25, you should be saving at least 25% of your post-tax income, and as you grow older, this % should increase beyond your age. Eg. at age 35 should be 40-45% and at age 45 should be 50-60%.

 

Why – Remember, for every year you work, you will live a year, possibly even more, post-retirement. Now, even assuming that your needs in retirement are more spartan than when you are young, unless you save an average of 40% of your income across your working life span, you may end up not having enough to fund your retirement.

 

 

RULE 2 – THE NET WORTH RULE – Your NW should be at least “(your Age * Pre-tax annual Income) / 10”

 

What – Your Net Worth is defined as your Assets minus your Liabilities. Do not include the house that you stay in, unless you are willing to liquidate it and move into a smaller one.

 

Why – This rule helps you assess 2 things – how much your savings have transformed into assets and how over-leveraged you are in terms of liabilities. Also, this is a “minimum” rule, to check whether you have “enough”. To understand whether you are “wealthy”, multiply this by 2 (or more). Eg. If you are 40 and your pre-tax income is Rs. 50 lakhs per year, then your minimum Net Worth should be (40 * 50 lakh) / 10 = Rs 2 Cr. Remember this is net of your liabilities and the house you are staying in.

 

 

RULE 3 – THE ROI (RETURN ON INVESTMENTS) RULE – Your investments should grow at minimum your country’s nominal GDP rate

 

What – Return on Investments is the rate at which your investments are growing on an annualized basis. Nominal GDP is Inflation + Real GDP. Your investments include both real and financial assets (excluding the house where you stay).

(NOTE: An easy rule to calculate your current ROI is the Rule of 72 – Divide 72 by the number of years it took you to double the value of your investments. Eg. If your investments were Rs 2 Cr in 2012 and today their value is Rs 4 Cr, ie. took approx. 7 years to double in value, the approx. ROI you have generated is 72/7 ~ 10%).

 

Why – In an Indian context, the nominal GDP over the next couple of decades can be conservatively estimated to be around 10% (4% Inflation + 6% real GDP growth). Preferably, add 1-2% to this, since lifestyle inflation is usually higher, and investment returns can be much more volatile than national Inflation/GDP, hence some buffers are needed so that you don’t fall short as you near financial goal horizons. So, a good number to plan for is 12%.

 

 

BONUS RULE – THE “PEACE OF MIND, NOT PIECE OF MIND” RULE

Benjamin Graham once said “The investor’s chief problem – and even his worst enemy – is likely to be himself”. And as if on cue, Jack Bogle said “An advisor serves as an emotional circuit-breaker, so you don’t abandon a well-thought-out plan”.

Frequent, sometimes even addictive perusal of “information” ends up making us over-reactive and take wrong decisions in the short-term, apart from stressing us out. A good financial planner allows you to forget about your money worries and gives you peace of mind, while also acting as a safety-net to prevent you from taking wrong money decisions.

 

 

So, use the above 3 rules to quickly check whether you need a financial planner to help you manage your finances. And use the bonus rule to assess whether your money is worrying you, rather than working for you.

 

 

Image Credit: TheDigitalWay, Pixabay

 

Rule 2 Credit: While the other 2 rules are commonly used thumb rule, Rule 2 is formulated by the authors of the book “The Millionaire Next Door”

 

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.

To receive our articles through email, pl subscribe here.

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

Women must develop the right money mindset for a fruitful post-retirement life

Women must develop the right money mindset for a fruitful post-retirement life

When we are still working, we make so many plans of things to do once we retire. And as we get onto the home stretch in the last few years, the excitement begins to build, of course, with a few butterflies in the stomach as well. So many places to see, so many people to meet, so many suppressed aspirations to fulfil, all of course, while juggling one’s hard-earned wealth and believing that there is enough, not only for ourselves but also to bequeath.

 

But retirement is not always as rosy as you imagined it to be. The transition to retired life is sudden, and there is a vacuum of time, that has to be fruitfully filled. That vacant space has to be occupied with activities that need to be created, not only to feel gainfully employed, but also to feel good about oneself. The actual retirement, therefore starts with a whole lot of unexpected dilemmas and mental adjustments.

 

What are those scenarios that one must adapt and adjust to?

 

Read our latest article, recently published on Moneycontrol.com (link given below).

 

https://www.moneycontrol.com/news/business/personal-finance/women-must-develop-the-right-money-mindset-for-a-fruitful-post-retirement-life-4479141.html

 

In retirement, the role of money is to allow one to fulfil our bucket list of desires, while ensuring that there is enough to take care of our balance life-times, including exigencies. Nothing more, nothing less. Hence, as a retiree, use money to bring you happiness and add meaning to your life, while taking care that it is safely working for you as well. 

 

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.

To receive our articles through email, pl subscribe here.

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

 

 

 

 

 

My Equity Portfolio is down 20%! Have I made a mistake? What should I do now?

My Equity Portfolio is down 20%! Have I made a mistake? What should I do now?

The last 18 months have not been kind to investors in the stock markets. Depending on which period you are looking at, there have been severe corrections, across all market-caps. When mid and small-cap indices fell severely from their Jan 2018 highs, large-cap indices still held on and posted marginal gains. But post the budget presented in July 2019, they too have thrown in the towel.

 

So, how badly has equities done, and how much has it actually impacted investors? To put things in perspective, a diversified multi-cap index portfolio has fallen approximately 12%, both from the market peak in January 2018 (approx. 18 months back) as well as from the recovery peak in August 2018 (approx. 12 months back). The below table gives the details.

 

Of course, this varies across market capitalizations, with large-caps still managing to hold on, losing only between 4-9%, mid-caps dropping 18-22% and small-caps plummeting as much as 28-40%.

 

So, in such a situation, what should one do? Is the market likely to drop further, and if yes, should one exit one’s portfolios? Are equities not the right asset class to invest now?

 

In the short-term Equity is volatile. In the long-term, Equity builds wealth!

There are enough and more market news and views answering the above questions, with necessarily no improvement in clarity post reading them. I do not intend to add more to this confusion by also pitching in. Rather, in my view, the best thing to do in such situations is to go back to the “wise men” and learn from them on how to handle such situations. So, let’s see what five such wise men have to say.

 

 

You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you are not ready, you won’t do well in the markets – Peter Lynch

 

The first lesson is about having the right attitude to invest in equity. Be prepared to travel the roller-coaster ride that it will take in the short term and to be unpleasantly surprised despite precautions. Building the temperament needed to invest in the stock markets takes time, so invest only what you can bear and slowly increase it over time as you get comfortable.

 

 

The stock market is filled with individuals who know the price of everything but the value of nothing – Benjamin Graham

 

Markets gyrate excessively, basis the laws of demand and supply, which in turn are driven by sentiment, fueled by a continuous dose of “news”. If you have the temperament and the knowledge, volatility can be an opportunity. That said, timing the market is tough and not advised and for the average retail investor, these are the times when your SIPs and STPs MUST continue, and if possible, topped-up, to take advantage of rupee-cost averaging.

 

 

Only when the tide goes out do you discover who has been swimming naked – Warren Buffett

 

When markets take a dive, the natural response from a retail investor, even some of the experienced ones, is to sell the stocks (or funds) that are holding on while retaining the stocks that have crashed, since they want to “wait for it come back up”.

 

It is pertinent though to remember that in good markets, even the mediocre performers get “swept up by the tide”. It is when markets go down that these average performers get called out. Also remember, every growth cycle has a different set of dominant contributors. So, use downturns to get rid of your not-so-good stocks while retaining the ones that are still good, thereby building a future-ready portfolio. While the urge to wait for markets to come back up is high, remember, that the good stocks by then would have run up even more.

 

 

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 – Charlie Munger

 

Building a good, long-term, high-quality portfolio takes time and requires pain-staking effort. Make sure you are taking advice from a qualified investment advisor, whose interests are aligned to yours. But once done, sit back and enjoy the view. The key to benefiting from good equity investments is allowing them time to grow and compound. So, stay the course, and don’t take recourse to stupidity, such as exiting perfectly good portfolios just because the prices are down.

 

 

If you don’t know who you are, the stock market is an expensive place to find out – George J W Goodman

 

Lastly, investing in equity without having sight of what you are hoping to achieve, and over what time-frame, is fraught with risk. The danger is that since you do not know either, you will tend to over-track and get impacted by short-term volatility and performance. Anchor your investments to a goal, and you will suddenly see the big picture, and will not get swayed by what happens during the journey. A good financial planner will help you identify the right investments for your goals and will also help you course-correct over time, and ensure that your portfolio is always future-prepared, thereby allowing you to have peace-of-mind and enjoy the present.

 

In summary, use the below 5 inferences as guard-rails to both smoothen as well as make safe your equity investing ride.

 

1.     Build the temperament to invest in equity, by gradually increasing your investments

2.     Volatility is good. Ride it out, and if anything, use it in your favour through your SIPs

3.     Use downturns to clean up your portfolio and make it future-prepared

4.     Once you have a future-ready portfolio, stay the course, and avoid short-term decisions

5.     Finally, know why you are investing. Anchor your investments to your goals

 

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.

To receive our articles through email, pl subscribe here.

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

 

Image by Mediamodifier from Pixabay

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.


How close are you to FIRE?

How close are you to FIRE?

The term FIRE has gained popularity in recent times. For those of you who haven’t heard it before, it stands for – Financially Independent, Retire Early. Many articles are being published on what it means and what one should do to be part of this “elite” community. Speaking to a few millennials made me realize that it definitely has caught that generation’s imagination.

At the core, FIRE is about becoming financially free. I have written about becoming financially free before (here is the link), hence wont go into it again. Suffice it to say that becoming FIRE is not an event or an end-point in itself. In fact, beyond a certain stage in your personal financial life-cycle (having successfully planned for all financial goals and still having money to spare), it is an enabler to a different way of life. Let me explain.

Becoming FIRE is not at all about having a target pot of money and spending all one’s energies saving, investing and managing it. That would defeat the purpose of attaining that status. It is about identifying what one wants to actually do and how much minimum money does one need to move on to actually living one’s life the way one wants to.

Hence importantly its about 2 things –

  1. Stripping and clarifying your finances to a level where one is clear what is a must and what is not, so that it keeps you happy, while not dependent on money.
  2. Being clear about what one wants to do in one’s life. Everyone has their passions, secret desires that one would life to fulfil. Dare I say, every one of us has our own stories about “what I would do if I had enough money”.


The starting point to becoming FIRE is to actually know what one wants to do and where one wants to be financially to achieve that purpose. Everyone’s needs and wants are different and everyone therefore needs a different amount of money to reach FIRE status. One only needs to remember that the purpose at the core should be something that gives you immense happiness, and beyond a point, “there are many things in life that money still can’t buy”.


Also read this nice article by Mrin Agarwal in Mint about some of the checks and safeguards that people in FIRE status also need to have, while living their life.
https://www.livemint.com/money/personal-finance/opinion-financially-independent-can-retire-early-without-feeling-irrelevant-1556722367309.html

Image by Jill Wellington from Pixabay

Dont just plan to invest, Invest to a Plan

Dont just plan to invest, Invest to a Plan

“If you don’t know where you are going, you will probably end up somewhere else” – Laurence J. Peter

There are two reasons why people don’t achieve financial independence, despite being able to. I have earlier written about one reason, which is the importance of “understanding (as against underestimating) the long-term”. Today, let us talk about another, which I have termed (a bit simplistically) as “lack of direction”. Lack of direction here pertains to 2 important aspects of our personal financial “kundli”, which is unique to each one of us.

While it is good to enjoy the journey, its important to know where you are going!

The first is about knowing how good (or bad) is our financial situation with respect to the quality of life that we are leading currently. As a people, we are savers, and most people we meet usually show fair diligence in terms of managing their personal “fiscal” situation. A few times though, we do come across clients who need help in managing their “personal budgets”. Where this goes awry usually is in terms of either having excessive debt, especially of the wrong kind (to fuel a lifestyle which threatens to become unsustainable) or being prone to impulse big-ticket purchases – either for unplanned holidays or gifts or expensive goods to add to their home.

Such situations are relatively simpler to address, since all it requires is enabling people to “allocate” their incomes to different “wallets” and to have the discipline to do this consistently, month after month. There are easy tools that do this such as maintaining separate accounts for incomes and expenses, using pre-set sweep-outs to ensure regularity, maintaining the savings in a not-so-accessible demat account, and having a monthly income-vs-expenses check.

The second aspect is about how well are we preparing to face our future financial needs. While most people have a handle on their present financial situation, when it comes to knowing how prepared they are for their future, most are fairly unprepared. Here, what’s interesting to note is that while we are good savers, we aren’t necessarily good investors. This could be because our investing decisions are usually ad-hoc, driven by what friends and acquaintances tell us or to meet our aspirations.

Quite a few clients we meet don’t necessarily know what they are investing for (except that it seems to be a “good” avenue for “returns”) and what is the “outcome” that they desire from this investment. A key “minimum qualification” to become a good investor is to know what one’s financial goals are, which part of one’s investment portfolio addresses which goal, and with what compatibility.

An easy tool for this is what is simply called a “personal financial plan” which maps your savings and future investments to your goals, and also recommends the best investments to achieve the goals in the most effective and optimum-risk manner. A good financial plan ensures the right mix of asset classes to provide both liquidity as well as stability, the right priorities in terms of goal-funding and the right amount of risk taken to generate the best return, depending on the time-frame of the investment and the risk-profile of the investor.

Achieving financial freedom (or even getting on the road to it with an even chance of getting there) requires you to know what your future financial goals are, and put in place a good plan to fund them from your savings today, thereby giving you the peace of mind that you are not compromising your tomorrow. A good financial planner, whose interests are aligned to yours, can help you put this together for a reasonable fee, while taking the load off you entirely in terms of monitoring and course-correcting, allowing you to live your life fully in the present.

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.

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