Ok, so this is not another ‘how to do financial planning’ blog post. This is just a page from my life, and I am jotting it down here hoping it would help youngsters in some way. So here goes:
I turned forty seven this year. And I admit it – in my forty seven years of life, I have never really planned my finances.
Colours have always fascinated me more than numbers (not a statement one would expect from an Engineer, I know), and that is probably why I had had a happy-go-lucky approach when it came to financial planning.
Get a stable job, work till you no longer can, and save a bit of money every month for retirement – was the main concept that most of us in my generation lived by. We also did purchase a few LIC policies that various uncles, aunties and neighbours sold us.
And then I got a bit adventurous when I turned 34. I decided to resign from my job to try my hand at entrepreneurship.
However, I did not a serious thought to serious financial planning even at that stage before I took the plunge! I had about 4 years’ worth of cash to live by, apart from 20 lakh rupees in equity investments. To me, the 4 years’ worth of cash was a long enough runway to make my startup successful.
And a lot happened in 4 years. But since this is not a post about my adventures in entrepreneurship, I will skip over those details and come directly to the point about finances.
We sold our product to another company, and I got a decent exit from the company. Using this money, I spun off another startup. In another 3 years, I found myself in a position where the company was not generating enough cash to make a decent living off it.
Financially, I was down to the nest egg I had saved in stocks (remember the 20 lakhs I mentioned earlier?). I didn’t want to dig into that since it would risk my family’s future. Hence, I got back into the job market and got employed again.
So, what is the point of this post again? I wanted to use my own life experiences to highlight the importance of financial planning from a young age.
And it is not rocket science. In the most simplistic terms, here’s all one needs to do:
- Start saving and investing early in life. Consistency is key.
- Use a portion of the money you actively earn to buy assets that can generate passive income later
- Clearly understand the difference between assets and liabilities
- Invest in financial instruments that can give good returns (Equities, Bonds, Mutual funds and such) and use the power of compounding. (When it comes to investing, remember that Time in the market beats timing the market – so start early)
Today, we have enough material available on the internet about financial planning and investing. Ideally, some of these important topics should be taught in school – I hope our curriculum will evolve to include topics that will help a child evolve into a social being who knows how to live responsibly and well.
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Back to my story. After I got knocked down, it was now time to get back up. Setting up my finances for success was the first thing I worked on. I got a handle on my expenses and planned out my budgets and revenue streams. I will write a detailed post about the journey some time in future. For now, I am listing down some of the new-age options that I have used, and are available for us to invest, below. Given the rapid pace at which Fintech is evolving, there are of course many other options, and channels for investment – so consider these as only an intro piece that can lead you to other products:
When it comes to stock market investing, the best new-age brokerages in India that offer superior service at competitive brokerages are UpStox (backed by Ratan Tata), and Zerodha. One of the best sources for learning the basics of stock market trading is Zerodha University.
An experimental investment that my friend Smiling Buddha and I have done is in a Small case (Capitalmind Momentum). We started with a 4L investment, which in the past 6 months has appreciated by as much as 45%. Smallcase offers you the capability to do theme-based investments – do check it out.
Investing in bonds – I had never seriously looked at investing in bonds; I had done it once to save on capital tax. There are good options that can give more than 13% on your investments. Check out the GoldenPi app.
Investing in Mutual funds: Well, nothing new about this. Check out Scripbox to identify the investments that are right for you.
Zerodha’s Coin is another great option for investing in Mutual fund and bonds.
You could also explore trading in the US stocks using apps like indmoney and Vested.
Though risky, it is useful to try your hand at trading in cryptocurrencies with a small sum, so you can try to understand how it works, and also participate in its growth if and when it becomes mainstream in India (Currently it is neither illegal nor legal to trade in cryptocurrencies in India – a status that is not black and white). Check out Cryptocurrency exchanges like Vauld, Coinswitch, and Wazirx. There are numerous videos available on YouTube detailing how you could start with any of these.
Check out my Store page to see some of the books that have helped me in my personal finance journey. I will keep giving frequent updates as we go along.
Do you have any financial tips and techniques that have worked for you? I would love to hear from you.