It is an era where you can outsource many things. Financial planning, investing are no exceptions. When it comes to financial planning, most people want someone else to do it for them.
You want your money to grow while you sleep.
The primary reason for you not to take up that responsibility is your inertia. The word ‘finance’ brings a picture of complexity with it.
As this column has often argued, financial planning and investing need your participation.
No matter the level of competency of your financial advisor or the stockbroker, you need to contribute to the process.
Last week, a social media post by The Motley Fool, a US-based investment website, suggested three things you need to do.
The first one is living below your means.
The second is to be an optimist, and the third is to be patient. That is all you need to create a better financial future for yourself.
Living below your means
Your future investing and wealth creation depends on your ability to live below your means.
Your choices of spending will determine the money you end up when you hang up your boots.
A monthly surplus is a must to create a basis for your future goals. If you cannot save money, you cannot invest.
Living below your means is not easy.
A lot of your spending is based on factors like convenience, and that comes easily. Everything you can buy is now available at your fingertips.
No matter the wealth you possess, you can spend it all with the help of your smartphone.
Your spending is primarily linked to the level of your financial awareness.
If you are reading this article, you are probably financially aware.
However, many may not prioritise things like financial goals and the planning needed to achieve them.
When young, you rarely think about financial goals like retirement, childcare, dream home and future medical expenses. You want to have a good life.
A lot of you derive that sense of happiness and satisfaction by spending on worldly goods.
Yours truly is no exception. It has been a life-long struggle to save money. But at some stage, you need to talk to yourself about money.
The pandemic situation opens up an opportunity to set things right. With more people working from home and commuting less, you may want to question cars’ ownership.
If you are into a small business, you may want to look at the need for permanent office space all over again.
The idea is that if you have an income and your expenditure has dropped significantly during the pandemic situation, you may want to maintain it at that level.
Be an optimist
The world lives on hope. The 30-shares BSE Sensex was 100 in 1980, 3000 in 2000 and near 50,000 now. There is no reason for not being an optimist. A young India’s economic growth will continue to drive businesses.
Profits these businesses make would translate into more shareholder wealth over the years. You have to keep that faith and allocate appropriate resources towards equity assets.
You will not create wealth by keeping the money in a savings account or at home. Stock markets are fraught with risks.
Over your lifetime, you may see volatile situations. Appreciating market cycles could be a way forward.
Be patient
A lot of your success in personal finance is based on that. It takes time for your money to grow. It is just like the way you would nurture trees.
Instant gratification is an illusion in investing. There is no other option but to invest regularly and stay invested.
Stock markets cannot just move in one direction.
They have to fall and go through cycles. Many investors talk about valuations getting heady. However, you are not here for the short-term.
Investing successfully means riding through market cycles and staying invested. Valuations of businesses peak around the end of the financial year.
As financial results are announced for the March quarter, estimates are made about the next 18-24 months of financial performance.
As the profitability of businesses grows, market value moves in a line. Your patience and optimism will see you through.
Post-pandemic planning guide
With more people working from home and commuting less, you may want to question cars’ ownership. If you have an income and your expenditure has dropped now, you may want to maintain it at that level.
(The author is the editor-in-chief at www.moneyminute.in)