A Strong Portfolio Spells F*I*N*A*N*C*I*A*L F*R*E*E*D*O*M

You’ve heard the usual spiel about growing your money by investing it – jot a bucket list, put your eggs in various baskets, stay invested (until those eggs hatch), and the magic (or just math, Einstein) of Compounding. But that does little to have you start acting upon your new-found financial literacy. You see, the difference between literacy, and education, is enquiry and analysis. As an intelligent woman in control of her life, her wealth, and her future, you ought to start answering a few stark questions for yourself as you take the giant leap of investment.

“I’ll Start When I Have More”

Speaking of hyperbolic leaps, have you ever wondered how much you actually need to start investing? It could be as little as INR 5000 each month. And yes, every month! Just as you distributed the cost of that new iPhone over easy monthly instalments, you can apply the same principle to investing too.

Plus, you actually earn instead of losing more in interest. Investing too much, on the other hand, is also a reality for some people. The fear of being broke after retirement can drive you into a corner, driving you into an almost-paranoia of saving and investing all expendable income to the last paisa.

First of all, take a deep breath. Then, start putting in some amount each month into an emergency corpus for unforeseen eventualities.

Now don’t start panicking again!

It’s ok to reward and take care of yourself every once in a while. It’s great to want to look and feel fabulous. But even if you’ll think we’re being flippant, don’t become overzealous with your needs! It is, of course, pertinent to spend where absolutely required – rent, house-help, electricity, commute, healthcare, food, etc. are all necessary. But negotiate on the security deposit when checking out a rented place.

Don’t try to preempt electricity bills or cab fares for the month and block out necessary in-hand cash in e-wallets. Transferring back the amount into your bank account entails charges that are totally unnecessary! And for god’s sake, if you live alone, you don’t need to store 5kg red rice at once.

Not only will it spoil, but you’ll have thrown away precious grocery money for mould, fungus, and tiny insects to thrive on.

“I’ll Buy It On EMI”

The prospect of being able to upgrade your lifestyle at a fraction of the cost is tempting, but paying back slowly is an expensive affair. An even bigger folly we commit is to think our credit card shields our bank account.

If you’re going to end up not having enough in your savings account to pay off your credit card, there are two situations that could ensue:

1. The credit card company comes knocking at your door and threatens to penalise and even sue you.
2. You pay off one credit card charge with another credit card.

Guess where that will take you. Start covering the distance on your debt by stacking the highest interest loan at the top, and paying them off. In the order of priority, if you’ve borrowed student loans, then those come first. Credit Cards are a close second. An automobile loan should be cleared quickly too, and only then should you start considering buying a home. Buying a home, at different stages in life, may mean different things for your financial situation. When you’re younger and not too stable in your career, the pressure of having to pay the monthly EMI on a home loan can be cause of a lot of stress. At the same time, you buy at a relatively lower cost to the future value of real estate, and will become debt free sooner. You’ll also have established an asset for yourself. But consider this: do you have the wherewithal to spend on the costs that come with buying property? On the other hand, it may be a better idea to put off buying until your mid-career years and invest to gather a considerable corpus for a higher down-payment, therefore a better pad to come home to!

“Money Can’t Buy Me Love”

Sure, but it does buy safety and security. And that’s not such a bad thing to get on a bargain. Don’t be sucked into the promises of mansplaining insurance agents who will sell you high-premium endowment and unit linked insurance plans in the name of high returns apart from an assured amount. Compare the returns with the amount you pay as premium as well as the costs attached, and the ratio will leave you aghast. Insurance is meant to come in handy in time of an unexpected accident to you or your precious possessions. Leave it at that. Don’t expect much more. Much like your ex-boyfriends, they will be grave disappointments. Get adequate cover for your dependents, and explore dedicated investment instruments instead.

“Make Me An Offer I Cannot Refuse”

Bring out the calculator because neither your bank account nor your insurance is an investment instrument. Did you know that the government assigns much higher weightage to food and food products as opposed to lifestyle expenses while calculating the year on year inflation rate? No wonder you’re happy to think it’s just 4.97%, whereas your home itself, household expenses, electronics, furniture, and other expenses all amount to a much higher rate (~10%)! So you see, inflation is not the same as relevant inflation. To top, it charges you a tax on practically everything you spend on! Taxes can’t be evaded, but they can be avoided to some extent.

Each time you consider making an investment, ask yourself two questions:

1. Am I saving tax?
2. Is the tax I’m saving greater than the return I’ll get? “I Don’t Know Where My Salary Went” Don’t be caught unawares when it comes to your money.

Financial management is as simple as Warren Buffet’s formula:

Expenses = Income – Savings Aim to earn more always.

As a millennial woman born in a country as brimming with opportunities as India, a higher pay is waiting for your asking. The next step is then to be able to save more, and therefore have a proportionately higher expendable amount for your happy hours, weekend getaways, and the never-ending bucket list. Money management is no more the job of a specialist or gender. Just as you ensure your kids have basic life skills – paying bills, cooking, swimming or driving, managing your own money is a life skill you must acquire. If there are other avenues of life that you explore with a high degree of confidence and awareness, why not this?