Financial Planning – Start early
My key learnings
The early bird always catches the worm. Early to bed and early to rise makes a man healthy, wealthy and wise. The 5 am club member always gets the extra hour which others don’t. Compounding is the 8th wonder of the world.
The more time you give for compounding, the more the amount will be. It’s a no brainer that one should plan his finances to meet for the rainy day and that should begin as early as possible.
The pandemic exposed the frailties of modern-day risk and the fact that one could lose his livelihood anytime and anywhere. Financial planning thus assumes utmost importance and the younger you commence it, the better you would be placed.
Unfortunately, I have always learnt it the hard way, quite late in life. Its better late than never and experience is the best teacher.
So, let me share my experience and my learnings from it.
My father was a businessman & whatever he used to earn was re-invested back in business. All eggs in one basket without diversification (a strict No-No) into any other mode of investment. He had his ups but his lows also which was a bit of hardship as nothing was in contingency savings.
I completed my CA at age 21 and immediately, due to my father’s ill health had to join the family. My first task was to get our house in order and repay old debts. I restructured my business, also studying law by the side and slowly over the next few years we were in a comfortable situation.
I got married at the age of 26 and it was this time when my father re-joined the business and took over the helms. We had differences of opinion on the style of functioning as I was a structured finance professional analyzing risks and planning in advance.
My father used to do things by instinct and gut only without any information to back decisions. The differences increased and I quit the business to start my own consulting practice.
My CA and Law qualification came of help and I started taking professional assignments and started independent earnings. Education is never wasted and a professional degree to back your knowledge is a bonus.
I was still staying with my parents in his house. I became a father at 27 and it was then I realized the responsibility I had and the fact that I had no house of my own nor any fallback savings in case of emergencies.
The first thing I did was taking Medical and Life Insurance. This is a must.
I cut down frivolous expenses and started saving a part of my Income. Being young and no expenses on food, stay and not contributing much to my father helped me save which I invested in Fixed Deposits, Provident Fund and partly in Equity Shares.
Over a period of time, I had saved enough to pay the margin for buying a flat and took loans for the balance for an amount which I could afford to carve out from my earnings.
My wife was a professional and her additional income was saved for future use.
A combination of Bank Deposits for liquidity, Gold and now Gold Bonds, Blue chip Equities was my Investments in the initial stages. With time and systematic monthly investments, the amounts increased slowly and steadily.
Situations have changed and everyone’s situation, the background is different. What was relevant 20 years back may not be relevant now bit some basic principles still remain the same.
My key learnings from my experience are -
1) Budget – Do not spend discriminately especially on a Credit Card. Pay those bills on time and do not rollover at a heavy interest. Necessity spends are a must, comfort good to have and luxuries to be indulged gradually with increase in income.
Do not fall in the temptation of taking loans for discretionary spends.
2) Insure – Insurance is mandatory and the earlier you take it, the lesser the premium. Term Insurance is pure and ideal.
3) Invest- Don’t just save and let savings idle in your bank account. Invest judiciously. Diversify and Churn, staying patient and avoiding greed.
Do not fall in get rich quick temptation, to speculate in stock market on tips.
4) Upgrade - Invest on up-skilling your knowledge. A certain proportion of income should be allocated to education. Be in proximity of quality masterminds.
Have a mentor and when in doubt seek advice and ask for help. Financial awareness is a must irrespective of your stream of study.
5) Give - Share your experiences and stories to benefit the world. Create win-win situations. Integrity, Gratitude, Empathy, Kindness, Transparency matters a lot.
Money is a by-product of your CCTV. Competency, Credibility, Talent and Values(s). Don’t chase it. Have an abundance mindset, backing your capabilities staying patient and persistent.
Always HURT MAD – Helpful -Useful, Relevant with Trust to Make a Difference.